Funding for early education in Louisiana doesn’t appear to be in jeopardy this year, but advocates want last year’s cuts to be reversed.

“We say thank you, and,” Libbie Sonnier, with the Louisiana Policy Institute for Children, said at a press conference on Tuesday.

The proposed budget maintains funding for the state’s largest child care program at $77 million, down from $87.8 million two years ago under then-Gov. John Bel Edwards, a Democrat.

Last spring, the Senate cut $24 million from early childhood programs, but later restored $15 million after advocates like Sonnier pushed back.

Ahead of the state’s revenue estimating committee meeting on Wednesday, Sonnier asked lawmakers to restore the missing $9 million if funding is available.

Dozens of early education advocates joined Sonnier in Baton Rouge for an event organized by the Ready Louisiana Coalition, a bipartisan group of over 180 organizations, including local chambers of commerce.

Advocates also want lawmakers to protect funding specifically for 4-year-olds and invest $30 million in the state’s early childhood education fund.

The fund provides a dollar-for-dollar match when parishes put their own money toward child care, encouraging them to invest. Sonnier said the money in the fund is expected to run out within the next two years.

In a video message welcoming them to the Capitol, Gov. Jeff Landry noted the long-term positive effects of high-quality early education on children. No lawmakers spoke at Tuesday’s event.

“Working together, I’m confident that we can continue to grow and support Louisiana’s childhood education,” Landry said in the video.

The state is trying to reduce its spending and has proposed cutting costs by about $440 million. House lawmakers recently added money to the budget for another one-time stipend for teachers and cut $30 million for student tutoring.

The plan, which passed the full House last week, includes $93 million for Landry’s LA GATOR program, which gives families tax dollars for private homeschooling and tuition costs.

That cost is higher than lawmakers initially agreed to, and some state senators have said they’ll oppose the spending when the budget gets to them.

The Child Care Assistance Program, known as CCAP, helps low-income parents pay for child care if they are working or in school.

The program serves a small fraction of eligible families and was at capacity before funding was cut last year, which eliminated 720 seats, Sonnier said. More than 4,500 children were on the program’s wait list in March.

“This setback deepened an already urgent crisis,” the Ready Louisiana Coalition said in a press release. “Nearly 100,000 children in Louisiana who need high-quality, affordable early learning still cannot access it. Without further investment, too many Louisiana families will not have access to affordable, quality child care, and too many children will arrive at kindergarten behind.”

Sonnier said child care isn’t simply a convenience for families, but an “economic necessity,” not just for them, but the state.

Two-thirds of kids in Louisiana don’t have someone at home to watch them, she said, adding that child care is often a family’s single-highest expense.

“They’re having to juggle, ‘Can I afford food? Can I afford clothing? Can I afford a roof over our head?”

For months, child care providers have voiced concerns, not just about the impact the cuts have had on families, but also on their businesses.

Shannon Jones, the owner of Cenla Christian Childcare Centers in Rapides Parish, said the drop in funding has impacted childcare centers, including hers. She has families waiting for CCAP spots to open so they can enroll their kids, she said.

“My margins are so tight that one broken air conditioner can feel like a crisis,” Jones said.

Jones and other advocates stressed that child care is the backbone of the workforce, and without it, “everything else is at risk.”

The state’s top education official, Cade Brumley, spoke to advocates in person. He said early education and kindergarten readiness remain a top priority for the state board of education.

Brumley said that while conversations around the number of seats available to families are important, so is the quality of care and education.

“That’s something we’re getting right,” he said, adding that child care providers have shown a willingness to improve and work with the state.

He credited early educators for their role in the state’s recent growth in reading and math scores, which have outpaced much of the rest of the country.

About a dozen 4-year-olds from a nearby child care center also took the mic at Tuesday’s press conference to tell the audience they were ready for kindergarten.

“Now it’s time for me to fly,” one girl said with her classmates shouting the last word in unison, as they all flapped their arms.

Then they sang “Mr. Sun,” by Raffi.

Before advocates headed out to talk to lawmakers, one used the song’s lyrics as a rallying cry. “Mr. Sun, shine on us,” she said, adding her own lyrics, “and bring us the gold.”

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“This is the moment for New York to do something big,” said Judith Enck, founder of Beyond Plastics. She’s among those pushing state lawmakers to pass the Packaging Reduction and Recycling Infrastructure Act before the session ends in June, despite significant corporate lobbying against the bill.

Plastic products will make up a projected 30 percent of New York’s packaging waste in 2025, one report says—roughly 1.1 million tons. (Photo by Adi Talwar)

When a New Yorker goes to the grocery store they aren’t just buying food—they’re also buying waste. That’s because most products come in a package that eventually ends up in the trash.

This year alone the state will generate almost 3.8 million tons of packaging waste, a weight that is roughly equivalent to 10 Empire State Buildings, according to the non-profit Beyond Plastics.

Before the legislative session ends in June, lawmakers are making a final push to pass a bill known as the Packaging Reduction and Recycling Infrastructure Act (PRRIA) that aims to slash the amount of packaging waste New York produces by 30 percent over the next 12 years.

The efforts come after big ticket items championed by New York’s environmental groups were left out of the state’s final budget, and as climate protections are being rolled back on the federal level.

“This is the moment for New York to do something big, like passing PRRIA,” said Judith Enck, founder of Beyond Plastics and a former regional administrator in the U.S. Environmental Protection Agency (EPA). “It would signal that New York is still interested in protecting the environment.”

The budget falls short

While the state approved a budget for the 2026 fiscal year on May 8 that includes some climate wins, environmental advocates say it’s not enough.

The budget does set aside $2 million for a pilot program that will help homeowners do the repairs needed to participate in energy efficiency and weatherization programs.

And there is a larger $1 billion sum allocated for what Gov. Kathy Hochul calls a Sustainable Future Fund, which would mostly be used to reduce greenhouse gas emissions from buildings and help New York’s transportation fleet go electric.

“The investment will create good-paying jobs, improve long-term affordability for families, and significantly reduce harmful pollution,” said Gov. Hochul’s deputy communications director, Paul DeMichele.

“We’re prioritizing a greener economy by expanding access to green transportation and charging infrastructure, making our buildings more energy-efficient, and ultimately saving people money,” he added.

While the administration calls it “the largest climate investment in New York’s history,” the amount represents only a sliver of the state’s $254 billion budget. And it won’t provide the steadier stream of funding that programs left out of the budget sought to secure, advocates say.

“$1 billion over the course of the year is good. But we need to make sure that there’s continuous funding to address climate and reduce people’s energy bills and protect their health,” said Liz Moran, New York policy advocate for Earthjustice.

Environmental advocates at a rally for passage of the NY Heat Act in 2023, which one supporter called “the most important energy affordability bill of the session.” It still hasn’t passed. (Alliance for a Green Economy)

A Cap-and-Invest program that would put a price on carbon pollution to raise billions annually for climate initiatives failed to come to fruition again, despite the governor releasing an outline for the program two years ago. NY Heat Act, another item championed by environmentalists which would curb the expansion of gas infrastructure and save ratepayers money, didn’t make it into this year’s budget either.

Passing these and other pro-climate legislation like PRRIA by the end of session could counteract some of the climate setbacks happening on the federal level, environmentalists argue.

The Trump administration has already promised to end dozens of Biden-era environmental regulations. These include limits on climate pollution emitted by power plants, as well as regulating emissions for light, medium, and heavy-duty vehicles. Federal intervention is also stalling the advancement of projects to generate clean energy from wind in New York.

“We really need to make sure that New York State is standing up as a beacon for other states to look towards and follow while the federal government decimates environmental protections,” Moran said.

Mounting opposition

But in passing legislation like PRRIA, “our major problem is just the army of lobbyists that are opposing it,” said Enck.

At least 41 companies and fossil fuel industry groups signed up this year to lobby against the bill. That includes big companies like L’oreal and Coca-Cola to oil giants like ExxonMobil and the American Chemistry Council, a trade group for the chemical industry that has vehemently opposed the bill.

It would require such companies to redesign the products they sell in New York to make them recyclable. It would also prevent them from using the 17 worst toxic chemicals in packaging like lead, mercury and long lasting chemicals known as PFAS.

“It will impact the way they do business. You know, this bill is designed to change behavior and they just don’t want to do it,” said the bill’s sponsor in the Senate, Peter Harckham.

It would also charge companies a fee for the packaging they use so proceeds could be funneled back to local governments.

The Business Council of New York called the bill, “overly-aggressive legislation will lead to increased consumer costs and reduced consumer choices, in addition to its direct cost-impact on businesses.”

A mountain of plastic waste at the Sims Municipal Recycling in Sunset Park, Brooklyn. (Michael Appleton/Mayoral Photography Office)

As it stands, taxpayers foot the bill for discarded packaging to make its way to landfills. Supporters say the bill would cut back on the amount of waste discarded and shift the burden for waste management costs to the companies generating the trash. New York City alone is estimated to save $818 million over the first decade if PRRIA were enacted, according to a report by Beyond Plastics.

Meanwhile, the chemical industry rakes in massive profits from making discardable plastic products, which will make up a projected 30 percent of New York’s packaging waste in 2025, the report says. The lucrative plastics industry generates over $371 billion a year in profits.

The American Chemistry Council spent more than $930,000 last year to lobby against the legislation in Albany, which is nearly double what it spent in 2022, NY Focus reported last week.

Still lawmakers are hopeful the bill will make it across the finish line before the session ends in June.

Last year PRRIA got the stamp of approval from the Senate but failed to come up for a vote in the Assembly. And while it’s still making its way through the necessary committees in both chambers, Assembly Speaker Carl Heastie indicated that the bill will come to the floor for a vote this time around.

And the bill’s sponsors made changes since last year that address concerns raised by the industry, including cutting back on the amount of packaging waste the bill sought to reduce from 50 to 30 percent. This year’s version also allows companies to apply for a waiver if they can’t meet the criteria.

“We’ve got a good bill that incorporates strong environmental and public health protections and yet makes it workable for industry,” Harckham said.

To reach the reporter behind this story, contact Mariana@citylimits.org. To reach the editor, contact [email protected]

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Introduction

Governor Gavin Newsom released a summary of the May Revision to his proposed 2025-26 California state budget on May 14, proposing nearly $12 billion in budget actions to close an estimated 2025-26 deficit ($7.5 billion) and build up the state’s discretionary reserve ($4.5 billion). In contrast, the governor’s January proposal projected a small positive balance after two years of state deficits. The governor’s proposal reflects increased uncertainty as a result of federal policy changes and proposals that are destabilizing economic conditions, resulting in a more negative fiscal outlook for the state.

The $226.4 billion General Fund spending plan would protect some investments made in prior years, but notably proposes $5 billion in harmful cuts, primarily to Medi-Cal, the state’s Medicaid program that provides health care coverage to over 14 million Californians. Those cuts include a series of proposals targeting adult Californians who are undocumented, such as freezing access to Medi-Cal, instituting $100 per month premiums for those currently enrolled, and removing access to long-term care and dental benefits, among other proposals. Other proposed cuts target older adults, people with disabilities, and foster youth — communities, like Californians who are undocumented, that are among the most vulnerable in our state.

The governor’s revised budget also fails to propose any major tax policy changes to increase state revenues to address the shortfall, avoid cuts, and buffer against emerging federal threats, even while federal leaders are preparing to give away more than $4 trillion in tax cuts to high-income households and corporations.

While many of the details are forthcoming, the governor also proposes to partially close the budget gap through borrowing and fund transfers. The governor also proposes future cuts for programs supporting vulnerable Californians including food assistance and support for foster care in 2026-27 if revenues are not adequate.

The governor’s proposal continues to call for drawing down just $7.1 billion in reserves and projects total state reserves at $15.7 billion by the close of 2025-26 to guard against future revenue decline or threats to the state’s fiscal condition.

The governor also maintains his proposed changes to the state’s reserve policies to exempt rainy day fund deposits from the state’s spending cap, commonly known as the Gann Limit, and allow the rainy day fund to grow to 20% of General Fund revenues (up from the current 10% cap). These changes, which would need voter approval, would allow the state to set aside a larger portion of state revenues in the rainy day fund during periods of strong revenue growth.

Even as the governor’s proposal would cut access to health care, it would commit the state to new spending to expand the film tax credit for film studios, growing the credit from $330 million to $750 million annually.

WHat is the May Revision? The May Revision is an update to the governor’s proposed state budget, released by May 14 each year. It includes new estimates for the state’s economy and revenues, updates proposed spending based on the latest information, and may revise, add, or remove policy proposals from the January budget.

The governor’s spending plan protects and maintains some of the progress made in prior budget years to help improve economic security and opportunities for Californians with low incomes and Californians of color, including policy advances in behavioral health, cash assistance (refundable tax credits, CalWORKs, and SSI/SSP), and universal school meals. The proposal also maintains prior commitments to child care, but delays making additional commitments to expanding the system. The governor’s plan leaves out funding to address homelessness and abandons funding for housing programs for Californians with low incomes and affordable housing production as the state faces a growing housing crisis.

Changes to the state’s revenue outlook result in slightly lower estimates for the Prop. 98 minimum funding guarantee for K-12 schools and community colleges compared to January. The governor’s proposal continues to fully fund the completed rollout of universal transitional kindergarten (T-K). In a notable shift from January, the May Revision reduces proposed cuts to CSU and UC from 8% to 3%.

The administration projects that the state prison population will moderately increase in the near term due to the passage of Prop. 36 in November 2024, which increased penalties for certain drug and theft offenses, including by reversing some of Prop. 47’s (2014) sentencing reforms. However, the administration projects that the prison population will resume its long-term decline due to other justice system reforms that remain in effect. As a result, the governor proposes to close one additional state prison by late 2026.

Overall, while the governor’s proposed spending plan protects some of the progress made in earlier years, cutting access to health care and other supports for adult Californians who are undocumented, seniors, and people with disabilities, failing to advance more equitable tax policies, and misguided expansion of tax credits for film studios would weaken the state’s capacity to better help Californians manage our state’s high cost of living and meet basic needs.

With federal leaders poised to extend and expand tax cuts that primarily benefit big corporations and high-income households, offset in part by unprecedented cuts to health care, food assistance, and other vital public supports, state leaders have a responsibility to make our state’s tax system more equitable, protect the economic security and well-being of all Californians, and present a starkly different vision than federal leaders.

This First Look report outlines key pieces of the May Revision and outlines the governor’s priorities in balancing the budget to address a projected shortfall.

Contents

Budget Overview

Health

Housing & Homelessness

Economic Security

Education

Justice System

Climate Change

Wildfire Relief and Recovery: Budget Maintains Funding for Wildfire Relief and Recovery

Webinar Budget Center experts unpack key insights from the May Revision, including the governor’s broken promise to undocumented Californians, revenue options, and continued federal threats. Join us for this free, virtual event on May 22 at 1 p.m. Register today!

Budget Overview

Economic Outlook Deteriorates, Reflecting Federal Policies and Uncertainty

The administration’s economic outlook projects trends in major economic indicators that affect state tax collections and revenues in the budget. The administration downgrades the state’s economic outlook in the revised budget based on recent federal policies, most notably, the imposition of significant tariffs, including on California’s major trading partners. The administration estimates that California’s average tariff rate has increased from 2.4% last year to 27% as of mid-April and notes that this will have “immediate and broad-reaching impacts affecting nearly all the state’s $500 billion worth of imported goods as of 2024, nearly 12% of its economic output.” As a result, the revised budget:

Significantly downgrades its projections of US economic growth, particularly in 2025 when real Gross Domestic Product is expected to increase by just 1.3% — well below the pre-pandemic average growth rate of 2.6%.

Significantly revises up its projection of inflation in the US and California, as the cost of tariffs is largely expected to be passed on to consumers in the form of higher prices. The administration expects the California Consumer Price Index to increase by 3.8% in 2025, followed by another 3.5% increase in 2026.

Revises down its projection for job growth, now expecting the state to add just 6,000 jobs per month in 2025 and 3,000 per month in 2026 — substantially below the pre-pandemic average of around 30,000 jobs added per month.

Expects the state’s unemployment rate to increase by 0.1 percentage point to 5.4% in 2025 and then to 5.5% in 2026 and 2027.

Downgrades its forecast for inflation-adjusted wage and personal income growth in the state.

The revised budget notes that this forecast is based on policies in place as of mid-April and that federal policy uncertainty remains the biggest downside risk to the forecast. In other words, if federal policy choices over the coming weeks and months further weaken the economy, the state’s economic outlook will further deteriorate.

Weakened Outlook and Federal Policies Threaten Californians’ Well-Being

While the administration’s outlook is useful for understanding how economic conditions might impact budget revenues, it’s also important to consider how economic conditions are affecting Californians, who count on programs and services funded by federal and state budgets. Although California is now the fourth largest economy in the world, millions of Californians aren’t sharing in our state’s prosperity. More than 7 million state residents lack the resources to meet basic needs, over half of renters have unaffordable housing costs, and more than 1 in 5 households experience food hardship. Black, Latinx, and other Californians of color disproportionately face these challenges due to centuries of structural racism and long-standing inequities in opportunity that have been structured into budget policies, past and present.

Compounding these challenges, policies being pursued by the Trump Administration and Republicans in Congress will further drive up costs, making it even harder for families and individuals to make ends meet. For example, the Trump Administration’s sweeping tariff policy will add to the economic challenges facing people with lower incomes because tariffs are essentially regressive taxes. Plus, economists have warned that the drastic and chaotic nature of these tariffs could plunge the economy into a recession, exacerbating the economic challenges facing families, workers, and businesses. On top of this, the budget package currently advancing through Congress would slash federal funding for health care, food assistance, and other vital services, jeopardizing the health and well-being of millions of Californians. This includes:

Massive cuts to funding for Medi-Cal and efforts to repeal or undermine the Affordable Care Act that would cause Californians to lose health coverage, have fewer benefits, face higher health care costs, and experience more difficulty getting care;

The largest cut to SNAP food assistance (CalFresh in California) in history that would put low-income families and individuals at greater risk of hunger by taking away some or all of their food benefits; and

Terminating many immigrants’ access to vital programs, including denying Medicare to lawful permanent residents who have worked and paid taxes to support the program, denying SNAP to refugees, asylees, and other humanitarian immigrants, and denying the Child Tax Credit to US citizen children in mixed status families.

Revised Revenue Estimates Downgraded by $5.2 Billion for Three-Year Budget Window

While actual revenue collections for the current (2024-25) and previous (2023-24) fiscal years have been stronger than expected since the January budget proposal, the administration now projects revenues for the upcoming 2025-26 budget year to be $10.5 billion lower relative to the January projections, primarily due to economic and stock market uncertainty stemming from federal actions including President Trump’s tariff policies. This includes downgrades in the projected revenues across all three of the state’s “Big Three” revenue sources — personal income taxes, corporate taxes, and sales taxes.

Across the three-year budget window, state General Fund revenues are now projected to be $5.2 billion lower than the January budget projection, as the improved collections for 2023-24 and 2024-25 offset some of the downgrade in the 2025-26 forecast. This estimate is of a similar magnitude as recent revenue projections from the Legislative Analyst’s Office. Because this estimate only takes into account state-level General Fund revenues, it does not factor in any potential impacts of proposed reductions in funding from the federal government currently being considered in Congress.

The continuing uncertainty in the economic outlook — related to inconsistent tariff policies, deep cuts to the federal workforce, and threats of mass deportations — poses additional risks to the revenue forecast. While the May Revision does not assume an economic recession during the budget window, the administration estimates that if a mild recession were to occur, the “Big Three” revenue sources could end up being around $14 billion lower across the three-year budget window than the primary estimate.

Governor Maintains January Tax Policy Proposals and Proposes No New Revenue

The Governor’s proposal comes at a time when millions of Californians could be harmed by proposed deep federal cuts to health care, food assistance, and other critical basic needs in order to pay for tax cuts that primarily benefit high-income households and corporations. State leaders have the responsibility to maintain core state services and protect vulnerable Californians who will be most impacted by federal cuts. Policymakers can achieve this by significantly increasing state revenues and ending or reforming inequitable tax breaks that benefit profitable corporations and wealthy people.

However, the governor’s revised budget contains no new revenue proposals. He maintains the tax policy proposals included in the January budget proposal, including expanding the tax break for the film industry by more than doubling the annual film credit allocation from $330 million to $750 million — even while proposing to make cuts to health care and other services for Californians with low incomes (see sections on Health Coverage, Affordability, and Access and Californians with Disabilities and Older Adults).

The administration continues to estimate that the governor’s tax proposals as a whole will increase state General Fund revenues by $186 million in 2025-26. This revenue increase is related to a proposed change to the way banks and other financial institutions are taxed. However, this modest increase may be offset in upcoming years by revenue decreases due to the film credit expansion.

As the details of the harmful federal funding and service cuts become more clear, Californians will be looking to state leaders to protect community members who will be deeply impacted by those policies. Closely scrutinizing state tax breaks and equitably raising state revenue should be part of the solution to mitigate the suffering caused by destructive federal actions without reversing commitments already made to promote health and well-being for Californians.

Governor’s May Revision Maintains Proposal to Withdraw Reserve Funds and Change Reserves Policies

California has a number of state reserve accounts that set aside funds intended to be used for a “rainy day” when economic conditions worsen and state revenues decline. Some reserves are established in the state’s Constitution to require deposits and restrict withdrawals, and some are at the discretion of state policymakers.

California voters approved Proposition 2 in November 2014, amending the California Constitution to revise the rules for the state’s Budget Stabilization Account (BSA), commonly referred to as the rainy day fund. Prop. 2 requires an annual set-aside equal to 1.5% of estimated General Fund revenues. An additional set-aside is required when capital gains revenues in a given year exceed 8% of General Fund tax revenues. For 15 years — from 2015-16 to 2029-30 — half of these funds must be deposited into the rainy day fund, and the other half is to be used to reduce certain state liabilities (also known as “budgetary debt”).

Prop. 2 also established a new state budget reserve for K-12 schools and community colleges called the Public School System Stabilization Account (PSSSA). The PSSSA requires that when certain conditions are met, the state must deposit a portion of General Fund revenues into this reserve as part of California’s Prop. 98 funding guarantee (see section on Prop. 98).

In order to access the funds in the BSA and PSSSA, the governor must declare a budget emergency — an action that was taken in the enacted current-year (2024-25) budget in response to the state’s projected budget deficit.

The BSA and the PSSSA are not California’s only reserve funds. The 2018-19 budget agreement created the Safety Net Reserve Fund, which is intended to hold funds to be used to maintain benefits and services for CalWORKs and Medi-Cal participants in the event of an economic downturn. Additionally, the state has a Special Fund for Economic Uncertainties (SFEU) — a reserve fund that accounts for unallocated General Fund dollars and that gives state leaders total discretion as to when and how they can use the available funds.

The governor’s May Revision projects $15.7 billion in reserves at the end of 2025-26. Specifically, the proposal:

Includes a $7.1 billion withdrawal from the BSA and, due to other required adjustments, leaves the remaining BSA balance at $11.2 billion. (This withdrawal was assumed as part of the 2024-25 state budget package.)

Projects the PSSSA will have a zero balance, down from an estimated $1.5 billion in the governor’s January proposal due to a reduction in required deposits and a mandatory withdrawal.

Leaves the Safety Net Reserve with a zero balance. (The 2024-25 state budget drained all funds from this reserve.)

Projects an SFEU balance of $4.5 billion.

Administration maintains January plan to change reserve policies

The administration also maintains its January proposal to revise the state’s reserve policies under Prop. 2 (2014) and Prop. 4 (1979), which created an arbitrary spending cap known as the Gann Limit. The administration contends that these changes are needed in order to ensure the state can adequately build up reserves during periods of strong revenue growth to offset years of revenue decline.

Under Prop. 2, deposits into any reserve, including the BSA, are counted as expenditures under the spending cap. This means that savings for future budget needs are treated as spending in the year the deposit is made. As a result, in years when revenues are strong, the required deposit into the BSA could put the state at risk of exceeding the spending cap since the deposit is counted as part of the state’s overall expenditures. In order to address this situation, the governor proposes to exempt annual BSA deposits from the spending cap so that they no longer count as spending.

Proposition 2 also set a maximum size of the BSA at 10% of state General Fund revenue. The governor proposes to increase the maximum BSA deposit from 10% to 20% of General Fund revenues to allow state leaders to grow reserves to higher levels during periods when revenues are strong.

State Budget Reserves Explained See our report, California’s State Budget Reserves Explained, to learn more about the savings accounts policymakers can use to support Californians in times of budget shortfalls.

Health

May Revision Harms Californians’ Health and Access to Care

Access to health care is necessary for everyone to be healthy and thrive. Medi-Cal, California’s Medicaid program, provides free or low-cost health care to over one-third of the state’s population. This program covers a wide range of services to Californians with modest incomes, and many children, seniors, people with disabilities, and pregnant individuals rely on it.

Cuts to Medi-Cal

The governor’s revised spending plan proposes sweeping cuts to Medi-Cal that reverse years of progress toward a more inclusive, equitable health system. These cuts particularly harm undocumented Californians, but also impact low-income individuals across the state, reducing access to essential services, prescription drugs, and health care providers. This marks a major shift away from the state’s commitment to expanding health care access, especially for immigrant communities, seniors, and people with disabilities.

The revised budget includes harmful cuts specifically targeting undocumented Californians, mostly adults ages 19 and older. Some of these cuts may also affect all individuals who are federally ineligible for Medicaid, such as lawful permanent residents during a federal five-year waiting period. Despite the serious consequences of these proposals, the administration failed to clearly define who is included in these categories. When people’s health care is on the line, vague language and ambiguity are not just irresponsible. They are harmful.

The May Revision proposes the following cuts that would primarily impact undocumented Californians ages 19 and older:

Freeze Medi-Cal enrollment beginning January 2026.

Impose a $100 monthly Medi-Cal premium.

Eliminate long-term care benefits.

Eliminate dental benefits.

Eliminate In-Home Supportive Services (IHSS) for undocumented adults beginning January 2026.

Reduce funding for Federally Qualified Health Centers (FQHCs) and rural health clinics.

Implement a pharmacy rebate aggregator. Freeze Medi-Cal enrollment beginning January 2026. Under this policy change, income-eligible undocumented adults who are not enrolled by that date would be barred from entering the program. It would also block re-enrollment for those who lose coverage — even temporarily — due to changes in income, paperwork issues, or life circumstances. As a result, individuals who are otherwise eligible could permanently lose coverage. This change would reduce General Fund spending by $86.5 million in 2025-26, increasing to $3.3 billion by 2028-29. Impose a $100 monthly Medi-Cal premium. Effective January 2027, undocumented adults would be required to pay $100 per month to keep their Medi-Cal coverage — a cost that would not apply to other Medi-Cal members. For many low-income Californians, this would make coverage unaffordable and lead to disenrollment. This change would reduce General Fund spending by $1.1 billion in 2026-27 and $2.1 billion by 2028-29. Eliminate long-term care benefits. The revised budget ends long-term care coverage for undocumented adults, effective January 1, 2026. This would strip access to services that allow people with serious medical needs to live safely and with dignity. This change would reduce General Fund spending by $333 million in 2025-26 and $800 million in 2026-27 and ongoing. Eliminate dental benefits. The May Revise eliminates full-scope dental coverage for undocumented adults effective July 1, 2026. These adults will continue to have access to restricted-scope emergency dental coverage. This reduces access to basic health services and could lead to serious, untreated dental conditions. This change would reduce General Fund spending by $308 million in 2026-27 and $336 million in 2028-29 and ongoing. Eliminate In-Home Supportive Services (IHSS) for undocumented adults beginning January 2026. These services help Californians with low incomes who are over the age of 65, blind, and/or disabled live with dignity in their own homes. This proposal is both harmful and xenophobic, potentially pushing immigrant families deeper into poverty. These cuts could also lead to increased state spending on nursing home care in the long run. This change would reduce General Fund spending by $158.8 million and ongoing. Reduce funding for Federally Qualified Health Centers (FQHCs) and rural health clinics. Specifically, the May Revise eliminates Prospective Payment System rates to clinics for services provided to undocumented Californians. Clinics serving undocumented populations would no longer receive enhanced reimbursement for care, straining the financial viability of safety-net providers. This change would reduce General Fund spending by $452.5 million in 2025-26 and $1.1 billion in 2026-27 and ongoing. Implement a pharmacy rebate aggregator. Implement a pharmacy rebate aggregator, a system that helps the state collect money back from drug companies after medications are provided to Medi-Cal patients. Estimated General Fund savings are $300 million in 2025-26 and $362 million ongoing. In addition, the May Revision reflects new savings from establishing a minimum rebate for certain high-cost drugs used to treat HIV/AIDS and cancer. These additional changes are estimated to save the General Fund $75 million in 2025-26 and $150 million ongoing. However, a rebate-driven system may unintentionally restrict access to certain medications or prioritize savings over clinical value for immigrants who are impacted.

The governor’s revised budget also includes broader cuts that would affect all Medi-Cal enrollees, including seniors, people with disabilities, and individuals managing chronic health conditions. Specifically, the May Revision proposes to:

Reinstate Medi-Cal asset limits.

Make multiple cuts to In-Home Supportive Services (IHSS).

Eliminate acupuncture as a Medi-Cal benefit Reinstate Medi-Cal asset limits. Reinstate Medi-Cal asset limits, which were eliminated in January 2024 and would return in January 2026. This policy change would require seniors and people with disabilities to limit their assets to $2,000 for individuals and $3,000 for couples. The asset test weakens a household’s financial stability and discourages savings as people may be compelled to spend down in order to qualify for Medi-Cal. This change would reduce General Fund spending by $94 million in 2025-26, $540 million in 2026-27, and $791 million ongoing, inclusive of In-Home Supportive Services impacts. Make multiple cuts to In-Home Supportive Services (IHSS). Make multiple cuts to In-Home Supportive Services (IHSS), a program that helps Californians with low incomes who are over the age of 65, blind, and/or disabled live with dignity in their own homes. These include capping provider overtime and travel hours at 50 hours per week beginning July 2025, aligning IHSS Residual Program coverage with the timing of Medi-Cal eligibility, and cutting funding for county costs related to Community First Choice Option late reassessment penalties. These changes would reduce support for both IHSS recipients and the workers who provide essential in-home care. Combined, these proposals would reduce General Fund spending by about $900 million in 2025-26 and $707.5 million ongoing. Eliminate acupuncture as a Medi-Cal benefit Eliminate acupuncture as a Medi-Cal benefit, a service that many enrollees rely on to manage pain and other chronic conditions. This cut limits patient choice and may increase reliance on less effective or more expensive treatments, such as prescription medications or emergency care. This change would reduce General Fund spending by $5.4 million in 2025-26 and $13.1 million ongoing.

The revised budget also includes provider payment reductions and cuts to health care infrastructure that could destabilize the health care system, which already faced a provider shortage. Specifically, the May Revision proposes to:

Eliminate Proposition 56 supplemental payments.

Suspend the Proposition 56 loan repayment program.

Cut support for skilled nursing facilities.

Impose prior authorization for hospice care.

Cap payments to PACE providers (Program of All-Inclusive Care of the Elderly) Eliminate Proposition 56 supplemental payments. These payments help sustain providers delivering dental care, family planning, and women’s health services — often in communities with limited provider options. Eliminating this funding will likely result in fewer clinics accepting Medi-Cal patients and exacerbate existing disparities in access to reproductive and preventive care. It also undermines state goals to improve maternal health outcomes and oral health equity. This change would reduce General Fund spending by $504 million in 2025-26 and $550 million ongoing. Suspend the Proposition 56 loan repayment program. Suspend the Proposition 56 loan repayment program, which has been critical for recruiting and retaining health care professionals in underserved areas by helping repay student loans for providers who commit to serving Medi-Cal populations. Suspending the final cohort reduces the state’s ability to build a diverse and culturally competent workforce, particularly in rural and low-income communities. Without this incentive, fewer providers may choose to work in Medi-Cal, deepening workforce shortages. This change would reduce General Fund spending by $26 million in 2025-26. Cut support for skilled nursing facilities. The revised budget would eliminate the Workforce and Quality Incentive Program (WQIP), which incentivizes improvements in staffing, training, and patient care outcomes. It would also suspend the requirement for facilities to maintain backup power systems capable of lasting at least 96 hours — a critical safeguard during wildfires, power outages, and heatwaves. These cuts jeopardize the safety and well-being of some of the state’s most medically vulnerable residents. This change would reduce General Fund spending by $168.2 million in 2025-26 and $140 million ongoing. Impose prior authorization for hospice care. This policy change would require providers to obtain prior authorization before delivering hospice services. These administrative barriers could limit timely access to pain relief and supportive services. This change would reduce General Fund spending by $25 million in 2025-26 and $50 million ongoing. Cap payments to PACE providers (Program of All-Inclusive Care of the Elderly) Cap payments to PACE providers (Program of All-Inclusive Care of the Elderly), which provides comprehensive, community-based care to seniors with complex health and social needs. This may make it more difficult for providers to meet individualized care needs or expand services. This change would reduce General Fund spending by $13 million in 2025-26 and $30 million ongoing.

The revised budget also proposes a series of changes to Medi-Cal’s pharmacy benefits that would affect millions of enrollees. These proposals would undermine access to timely, effective, and affordable treatment. Specifically, the May Revision proposes to:

End coverage for GLP-1 drugs (e.g., Ozempic and Wegovy).

Imposes step therapy protocols.

Imposes prior authorization for continuation of drug therapy.

Imposes prescription drug utilization management.

Eliminate over-the-counter drug coverage. End coverage for GLP-1 drugs (e.g., Ozempic and Wegovy). End coverage for GLP-1 drugs (e.g., Ozempic and Wegovy) effective January 2026. Originally developed to treat diabetes, GLP-1 medications have also proven effective for weight loss and the management of obesity-related conditions. Under this proposal, Medi-Cal would no longer cover these drugs, resulting in reduced General Fund spending of $85 million in 2025-26, with the reduction growing to $680 million by 2028-29 and ongoing. This proposal overlooks the potential long-term health and economic benefits of reducing obesity rates, such as lower rates of heart disease and other chronic conditions. Imposes step therapy protocols. Imposes step therapy protocols, which would require Medi-Cal members to try less expensive medications before accessing more costly or preferred treatments. While this can reduce short-term costs, it may interfere with timely, clinically appropriate care. This change would reduce General Fund spending by $87.5 million in 2025-26 and $175 million ongoing. Imposes prior authorization for continuation of drug therapy. Imposes prior authorization for continuation of drug therapy effective January 2026. Medi-Cal currently allows beneficiaries to continue receiving certain drugs even after they’re removed from the contracted drug list if they had previously been approved. The proposed policy would eliminate this “continuing care” status and instead require members to seek new prior authorizations. This could disrupt treatment for people with chronic conditions who rely on medication stability. This change would reduce General Fund spending by $62.5 million in 2025-26 and $125 million in 2026-27 and ongoing. Imposes prescription drug utilization management. Under this proposal, the state would expand prior authorization protocols across more drug classes. These changes are intended to manage costs but may delay treatment access and increase administrative burden for providers and patients. This change would reduce General Fund spending by $25 million in 2025-26 and $50 million in 2026-27 and ongoing. Eliminate over-the-counter drug coverage. The May Revise ends pharmacy coverage of certain drug classes including COVID-19 antigen tests, vitamins, and certain antihistamines including dry eye products. This could burden low-income individuals with additional out-of-pocket costs for managing everyday health needs. This change would reduce General Fund spending by $3 million in 2025-26 and $6 million in 2026-27 and ongoing.

Federal Threats to Health Care Access

The harmful cuts proposed in the May Revision come at a time when California’s health care system faces serious threats from the federal level. Congressional Republicans are advancing a federal budget proposal that prioritizes tax breaks for corporations and the wealthy while slashing investments in health care. This includes deep cuts to Medicaid and efforts to undermine the Affordable Care Act (ACA), both of which could severely jeopardize access to care for millions of Californians.

Medi-Cal, which provides health coverage to nearly 15 million people and accounts for almost two-thirds (64.4%) of all federal funding flowing through California’s state budget, is particularly at risk. Reduced federal funding would lead to a significant budget shortfall, leaving state leaders with critical decisions about how to protect Medi-Cal and the Californians who depend on it.

In the face of these threats, California leaders should pursue policy solutions that protect and strengthen health care access. This includes reforming the state’s tax system to ensure profitable corporations pay their fair share and eliminating tax breaks that overwhelmingly benefit the wealthiest Californians. These steps would raise the revenue to help support vital health care programs (see tax policy section) and allow California to protect its progress — and its people — from harmful federal actions.

Federal Policy The federal government plays a major role in shaping California’s budget, economy, and the well-being of its people. Learn how federal policies shape California’s budget, economy, and vital programs — and how state leaders can respond to protect and support Californians. Explore Federal Resources

Revised Spending Plan Adjusts MCO Tax Spending

Proposition 35, which voters approved in November 2024, significantly changed how state policymakers can use revenue from the Managed Care Organization (MCO) tax. State leaders have historically relied on much of this revenue to reduce or offset General Fund spending on Medi-Cal. While Prop. 35 allows policymakers to continue using a portion of this funding for that purpose, the amount has been reduced and will decrease further starting in 2027.

The revised budget reflects the following MCO tax revenue to offset General Fund spending to support existing Medi-Cal services:

$9 billion in 2024-25

$4.2 billion in 2025-26

$2.8 billion in 2026-27

Compared to the Governor’s January proposal, this is an increase of $1.1 billion in 2024-25 and decreases of $200 million in 2025-26 and $400 million in 2026-27.

The May Revision reflects $804 million in 2024-25, $2.8 billion in 2025-26, and $2.4 billion in 2026-27 for the MCO Tax and Proposition 35 expenditure plan. This includes $1.6 billion across 2025-26 and 2026-27 to support increases in managed care base rates relative to calendar year 2024 for primary care, specialty care, ground emergency medical transportation, and hospital outpatient procedures.

Federal Threats to MCO Tax Revenue

The long-term stability of the MCO tax remains uncertain. Its structure must be periodically approved by the federal government to comply with Medicaid financing rules, and proposed federal changes could severely limit how states use provider taxes to draw down federal funds.

Congressional Republicans are advancing a federal budget proposal that includes deep health care cuts and new limits on provider taxes. These changes could cost California billions in federal funding each year. In addition, the Centers for Medicare & Medicaid Services recently issued a proposed rule that would restrict how states structure provider taxes by targeting a financing mechanism currently used to generate federal Medicaid funds. If finalized, this rule would significantly limit California’s ability to rely on the MCO tax to support Medi-Cal.

These federal policy changes could significantly disrupt California’s ability to generate and allocate MCO tax revenue. These growing risks underscore the need for state leaders to identify more stable, long-term funding sources to protect Medi-Cal and maintain critical health care investments.

Governor’s Revised Budget Sustains Behavioral Health Initiatives

Millions of Californians rely on county services for mental health and substance use treatment, known as behavioral health care. Many of these individuals face housing insecurity, justice system involvement, or child welfare placement. Strengthening the state’s behavioral health system is essential to guaranteeing that every Californian can access the care they need regardless of race, age, gender identity, sexual orientation, or where they live. In recent years, state policymakers have launched various initiatives to transform California’s behavioral health system with the goal of improving access.

Continuing BH-Connect

The governor’s May Revise maintains funding for the launch of California’s Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT), which was announced in his January budget proposal. This multiyear initiative aims to improve access to behavioral health services for Medi-Cal members with significant needs, focusing on children and youth involved in child welfare, people involved in the justice system, and individuals at risk of or experiencing homelessness.

Funding for BH-CONNECT includes $8 billion in state and federal resources over four years. Major components of BH-CONNECT include workforce investments, transitional rent assistance, and support for children and youth in child welfare, among others.

Sustaining Proposition 1 Implementation

Proposition 1, which voters approved in March 2024, is a two-part measure that amended California’s Mental Health Services Act and created a $6.38 billion general obligation bond to fund behavioral health treatment, residential facilities, and supportive housing for veterans and Californians with behavioral health needs.

In 2024, state leaders allocated funding to begin Prop. 1 implementation, including $85 million ($50 million General Fund) for 2024-25 for county behavioral health departments, which provide mental health and substance use disorder services to Californians through Medi-Cal and other programs. The administration maintains their January proposal of an additional $93.5 million total funds ($55 million General Fund) for 2025-26 for Prop. 1 implementation at the county level.

Other Behavioral Health Initiatives Sustained

The governor’s revised budget also continues other behavioral health initiatives that were launched in previous budget agreements, including:

California Advancing and Innovating Medi-Cal (CalAIM)

The Children and Youth Behavioral Health Initiative

Community Assistance, Recovery, and Empowerment (CARE) Court California Advancing and Innovating Medi-Cal (CalAIM) A multiyear initiative to transform the Medi-Cal program with the goal of improving health outcomes, particularly for individuals experiencing homelessness, foster youth, and justice-involved individuals. It brings together physical health, mental health, and social services to make care simpler and more focused on patients, while improving support through new ways of paying for and delivering care. The Children and Youth Behavioral Health Initiative A multiyear, multi-department package of investments to improve mental health and wellness supports for children, youth, and families. It focuses on prevention and early intervention, and making services more accessible in schools and community settings. Community Assistance, Recovery, and Empowerment (CARE) Court A plan to establish court-ordered treatment for people experiencing both homelessness and serious behavioral health challenges.

New Behavioral Health Investments

The revised budget also introduces two smaller actions:

CalHOPE Warm Line: $5 million from the Behavioral Health Services Fund (BHSF) to support the continuation of the CalHOPE Warm Line — a 24/7 phone line program that offers free, confidential support to Californians — through 2025-26 and beyond.

$5 million from the Behavioral Health Services Fund (BHSF) to support the continuation of the CalHOPE Warm Line — a 24/7 phone line program that offers free, confidential support to Californians — through 2025-26 and beyond. Trainings for ACEs Providers: $2.9 million in total funds (with $1.46 million from the BHSF and $1.46 million from federal funds) to support trainings for Adverse Childhood Experiences (ACEs) providers.

Federal Threats to Behavioral Health

Congressional Republicans are actively pursuing budget cuts that would severely threaten California’s behavioral health services. Medicaid is the largest payer of behavioral health services in the country and makes up a significant portion of counties’ mental health budgets, so cuts to this program at the federal level undermine the ability of state and local governments to provide behavioral health support. Additionally, programs like CalAIM and BH-CONNECT rely on federal waivers to use Medicaid funding for purposes such as housing navigation, and the federal government could choose to let the waivers expire or rescind them. Any funding cuts at the federal level would devastate the ability of hospitals, community centers, and other behavioral health providers in supporting Californians who desperately need help.

Housing & Homelessness

May Revision Continues to Withhold New Funding for Housing Affordability

California is home to over 6 million renter households, more than half of whom face unaffordable housing costs. This burden falls hardest on low-income families with children, older adults on fixed incomes, and working Californians whose wages don’t keep pace with the cost of living. For these Californians, already stretched thin, the high cost of housing makes other basic needs — like food, child care, gas, and medical care — unreachable. Yet these same Californians are once again being left behind in the name of austerity.

The May Revision upholds the administration’s decision to withhold any new or ongoing state investments in affordable housing. Worse, it proposes deeper state funding cuts to already gutted affordable housing programs, including reverting $31.7 million of unexpended General Fund for the Infill Infrastructure Grant Catalytic Program, the Commercial Property Pilot Program, and the 2021 Infill Infrastructure Grant Program that was appropriated in previous years. The revised budget also calls to restructure the Greenhouse Gas Reduction Fund (GGRF), putting at risk the Affordable Housing and Sustainable Communities Program (AHSC) which it currently supports. This program has funded over 20,000 affordable homes near transit, advancing both housing and climate goals.

The Governor did state his support for two housing development-related bills that would create building exemptions to the California Environmental Quality Act which may encourage housing production in certain instances. He also stated his support for a housing and infrastructure bond. However, even if California voters pass the bond in the upcoming election, funding wouldn’t be available until 2027 — while most affordable housing programs will run out of funds by the end of this year.

Efforts to increase housing production through streamlining and coordination are important, but not enough. Policymakers must pair them with ongoing investments in deeply affordable housing and strong tenant protections — such as anti-price gouging laws and rental assistance—to prevent more people from losing their homes.

This is especially urgent now, as federal housing programs could face deep cuts under the Trump Administration. In California, federal housing programs support over 920,000 people but fall far short of meeting demand, and nearly 15,000 California emergency housing choice vouchers will be lost soon without additional funding. While the May Revision does include an increase of $416.6 million one-time Federal Trust Fund to support recovery from natural disasters in 2023 and 2024, these dollars do not holistically address the state’s ongoing affordable housing crisis (see Climate Change section). As the state pulls back its own investments, this will only cause more Californians to face housing instability and homelessness without intentional, sustained action.

May Revision Abandons Funding to End Homelessness in California

California has both the resources and the responsibility to ensure every resident has a stable, dignified place to call home. Last year alone, homeless service providers served over 350,000 Californians experiencing homelessness — demonstrating both the scale of need and the increased capacity of the state’s response systems. This expanded reach was made possible in part by previous one-time state investments that funded critical homelessness prevention and resolution services. However, most of these funds were temporary and are now approaching critical funding cliffs.

Yet despite record numbers of people being served and housed, the Governor’s revised 2025–26 budget includes no new or ongoing state funds to address homelessness, putting hard-won progress at risk and abandoning the state’s most vulnerable residents and the permanent solutions that will solve homelessness.

Instead, the May Revision proposes $4.2 million ($4 million General Fund) in 2025-26, $6.4 million ($6.2 million General Fund) in 2026-27, and $6.2 million ($6.1 million General Fund) in 2027-28 and ongoing to support the reorganization of the Business, Consumer Services, and Housing Agency, which is set to be dissolved by July 2026. This restructuring will establish a new California Housing and Homelessness Agency aimed at improving alignment across housing and homelessness programs.

The Administration also proposes $200 million in Proposition 35 funds over two years to establish Flexible Housing Pools to support Behavioral Health Services Act reforms and Medi-Cal transitional rent benefits (see Proposition 35 Implementation and Behavioral Health sections). While these funds could help unhoused individuals with serious behavioral health conditions secure housing, they fall far short in addressing the broader statewide housing and homelessness needs. Plus, the additional proposed deep cuts to Medi-Cal and eligibility limitations could harm the same Californians these investments are attempting to serve (see Coverage, Affordability & Access section).

Meanwhile, local governments and service providers are bracing for the possibility of severe federal cuts proposed by the Trump Administration, including a 43% reduction in rental assistance, the elimination of key homelessness grants, and the possible loss of more than 15,000 California emergency housing choice vouchers — threatening to push thousands back into homelessness. Without bold, ongoing state investment, policymakers risk reversing progress and deepening a crisis that demands urgent and sustained action to continue supporting the real solutions needed.

Economic Security

Revised Budget Proposes No Changes to Refundable Tax Credits

California’s three refundable income tax credits — the California Earned Income Tax Credit (CalEITC), Young Child Tax Credit, and Foster Youth Tax Credit — provide financial support to low-income Californians, including undocumented workers who file taxes with an Individual Taxpayer Identification Number (ITIN), helping them pay for essentials like housing and food. These state credits are especially vital because they benefit many Californians who are excluded or receive minimal support from the federal EITC and Child Tax Credit (CTC).

California’s credits may become an even more important source of support for families and individuals if legislation that Congressional Republicans are currently advancing is enacted. This legislation would create onerous new processes that will make it harder for families to claim the federal EITC, likely causing eligible families to lose access to the credit. It also would strip the federal CTC from millions of US citizen and legal resident children living in mixed-status families, including an estimated 910,000 children in California. And while this legislation would increase the CTC for children in families with high incomes, it would provide nothing to children in families with low incomes, including about 2 million children in California. In addition to these threats, a recent unprecedented federal threat to taxpayer privacy protections risks making taxpayers afraid to file their taxes, causing them to lose access to vital state and federal tax credit support.

The Governor’s revised budget proposes no changes to California’s refundable state tax credits and maintains the Administration’s January proposal to provide just $10 million for tax credit outreach, education, and free tax preparation grants. These grants help community based organizations provide on-the-ground and online linguistically and culturally competent services to tax filers. This proposed level of funding is down by half from $20 million provided in 2023-24 and $12 million in 2024-25.

Revised Budget Includes Wins for CalWORKs but Cuts to Multiple Foster Youth Programs

Millions of families across the state struggle to afford basic necessities. The California Work Opportunity and Responsibility to Kids (CalWORKs) and foster youth programs help parents feel supported and ensure children are given the opportunity to succeed. Amidst this budget shortfall, this administration’s revised spending plan includes some wins for CalWORKs, while simultaneously proposing millions of dollars in cuts to programs that support foster youth in California.

The CalWORKs program is a critical component of California’s safety net for families with low incomes that helps over 650,000 children and their families with modest cash grants, employment assistance, and critical supportive services. The proposed budget would strengthen CalWORKs by:

Granting more flexibility in allowable welfare-to-work activities. The proposal would add goal-oriented activities to help better support the needs of individual parents and would also make Job Club, which provides support for resume writing, interviewing, and other job search activities, optional to align with the needs and various trajectories of individuals.

The proposal would add goal-oriented activities to help better support the needs of individual parents and would also make Job Club, which provides support for resume writing, interviewing, and other job search activities, optional to align with the needs and various trajectories of individuals. Reducing the administrative burden on counties by replacing county welfare-to-work reporting requirements with administrative data extracts.

by replacing county welfare-to-work reporting requirements with administrative data extracts. Simplifying the process for families to regain assistance after being sanctioned. Currently, families that are sanctioned can face significant and ongoing penalties that affect their ability to meet their basic needs. Reducing the red tape around sanctions can help more families regain access to their full CalWORKs grant.

However, the May Revision proposes cuts to several programs that support foster youth. The revised budget:

Governor Invests in Fighting Child Hunger, Leaves Out Older Adults

California has led the nation in fighting child hunger as the first state to adopt universal school meals in 2022. The governor’s revision builds on this by investing an additional:

$90.7 million ongoing Proposition 98 to fully fund the universal school meals program and guarantee each child can access breakfast and lunch at school regardless of their family’s income.

to fully fund the universal school meals program and guarantee each child can access breakfast and lunch at school regardless of their family’s income. $21.9 million ongoing Proposition 98 and $57.5 million General Fund to expand state-match dollars and outreach for the Summer Electronic Benefits Transfer (SUN Bucks) program. This program provides families with low incomes $120 for food for each school-aged child over the summer while they cannot access school meals.

However, the governor does not propose any additional funding for other core food assistance programs. Instead, the May Revision:

Walks back commitment to expanding the California Food Assistance Program (CFAP) to undocumented older adults age 55 and over. The revised budget adds language that would make the expansion contingent on available funding in 2027. Furthermore, the administration also has not put forth any plans to end this exclusion for undocumented Californians under age 55, even while 64% of undocumented Californians are living in or near poverty.

to undocumented older adults age 55 and over. The revised budget adds language that would make the expansion contingent on available funding in 2027. Furthermore, the administration also has not put forth any plans to end this exclusion for undocumented Californians under age 55, even while 64% of undocumented Californians are living in or near poverty. Fails to invest in CalFood, allowing the funding expansion to expire, which will take the average annual funding California food banks receive down to $8 million from $60 million. The additional funding to food banks has been key in helping them meet more diverse needs and serve more people in need with California-grown food.

Food assistance benefits are already too low and facing significant threats at the federal level. SNAP — known as CalFresh in California — is set to face up to $300 billion in federal cuts with the possible implementation of harmful proposals like shifting costs onto California and expanding time limits for participants. These cuts could impose billions of dollars worth of costs onto the state not accounted for in the May Revision and reduce benefits for the over 5 million Californians who rely on CalFresh.

Revised Budget Fails to Invest in Older Adults and Californians with Disabilities

All Californians deserve to feel included, supported, and treated with dignity in their communities regardless of their age, ability, race, gender, or economic status. However, Californians with disabilities and older adults face significant barriers, with increasing risks of not meeting their basic needs. The May Revision fails to invest in these communities.

Instead, the revised budget:

Proposes over $1 billion in mostly ongoing cuts to the In-Home Supportive Services (IHSS) Program.

Proposes over $120 million in 2025-26 and over $300 million in 2026-27 in cuts to the Department of Developmental Services (DDS).

Does not reinstate the cost of living adjustment (COLA) for the State Supplementary Payment (SSP) program. Proposes over $1 billion in mostly ongoing cuts to the In-Home Supportive Services (IHSS) Program. These services help Californians with low incomes who are over the age of 65, blind, and/or disabled live with dignity in their own homes. The revised spending plan proposes limiting the pay and hours of home care providers resulting in a reduction of $707.5 million. Additional cuts would come from the many participants who would lose access with the reinstatement of the Medi-Cal asset limit test and the coverage exclusion for adults 19 and older who are undocumented (see Health Coverage section). While the governor’s initial estimates of the cuts totaled over $1 billion, at a recent legislative hearing, the Department of Social Services provided updated estimates totaling approximately $800 million due to anticipated delays in implementing the proposed changes. Proposes over $120 million in 2025-26 and over $300 million in 2026-27 in cuts to the Department of Developmental Services (DDS). This department provides individuals with intellectual and developmental disabilities a variety of services that allow them to achieve their goals. However, these cuts reduce, and in some cases eliminate, funding for organizational trainings and other capacity-building services. Additionally, the proposal would end the rate reform hold harmless policy in February 2026 instead of June 2026. This policy would mean that some providers would be subject to a rate reduction, thereby limiting the reach of programs around the state that serve Californians with developmental disabilities. Does not reinstate the cost of living adjustment (COLA) for the State Supplementary Payment (SSP) program. In recent years, state policymakers have made significant investments to increase SSP grants; however, the total grant levels remain below federal poverty levels. After deep cuts to the program during the Great Recession, grants have not kept up with rising housing costs, making it difficult for low-income people with disabilities to make ends meet.

These cuts and lack of investments coupled with the uncertainty around the California Food Assistance Program (CFAP) expansion to older adults regardless of immigration status (see Food Assistance section) and the devastating cuts to the Medi-Cal program would compound the harm people with disabilities and older adults in California are already experiencing.

Governor’s Revised Budget Fails to Make Clear Progress Toward Rate Reform

California’s child care and development programs administered by the California Department of Social Services (CDSS) are integral for supporting California’s families and child care providers. Despite recent progress (such as increased overall funding, reduced family fees, and new child care provider health and retirement benefits), the child care system is still falling short for both families and child care providers. The number of subsidized child care spaces does not meet demand, meaning that thousands of families face prohibitively high child care costs. Specifically, without access to a child care subsidy, a single mother of an infant and a school-age child in California will spend, on average, 61% of her income on child care. Moreover, California child care provider wages have not kept up with the living wage, pointing to the urgent need for child care provider rate reform. Overall, the May Revision maintains previous commitments but fails to make advancements on provider pay that are needed for an equitable and stable child care system.

The governor’s revised budget:

Includes $7 billion to support current child care and development program commitments.

Maintains plan to add approximately 200,000 new child care slots.

Does not include a new rate structure to pay providers the true cost of care.

Maintains 2024-25 child care provider temporary rate increases. Includes $7 billion to support current child care and development program commitments. Compared to 2024-25, spending is roughly similar. The state reports higher than anticipated caseloads for CalWORKs Stage 2 child care and increased costs associated with prospective pay for providers and the recent redefinition of full-time care to 25 hours. These increases are partially offset by lower than projected caseloads for CalWORKs Stage 3 child care and eliminating the cost-of-living adjustment (COLA). The COLA elimination only applies to providers still paid through the standard reimbursement rate (SRR), equating to a $60.7 million reduction. The majority of providers are paid through the regional market rate (RMR) and do not receive a COLA. Maintains plan to add approximately 200,000 new child care slots. In 2021-22, the governor committed to adding approximately 200,000 new child care slots by 2026-27. Expansion was delayed and paused in 2023-24 and 2024-25; however, the 2024-25 budget did solidify a plan for rolling out the remaining slots. Per this plan, slot expansion remains paused during 2025-26, and costs to maintain slots are reflected in the aforementioned $7 billion. Thus, the 2025-26 revised budget does not include appropriations for slot expansion; the administration remains committed to adding 44,000 slots in 2026-27, 33,000 slots in 2027-28, and any remaining unawarded slots in 2028-29 and ongoing. However, the revised budget does include cuts to the Emergency Child Care Bridge Program (see Family and Child Well-Being section). Does not include a new rate structure to pay providers the true cost of care. The 2024-25 budget included trailer bill language requiring the state to set new reimbursement rates under the alternative methodology by no later than July 1, 2025. The state’s report detailing these new rates also must include estimated costs and timelines associated with the implementation components of the alternative methodology. Child Care Providers United (CCPU) — representing family child care and family, friend, and neighbor providers — is currently in the process of negotiating the new rate structure with the administration as part of the new union contract. In parallel, the state has been working on a new rate structure for center-based providers. While the revised budget acknowledges that the state continues to work toward an alternative methodology, it only includes $91.8 million to support rate reform-related administrative and start-up costs. Key decisions related to the rate structure, funding, and implementation still need to be made. The legislature requested that the state provide a transition plan for implementing a new rate structure by May 14; however, this was not included in the revised budget. This has left child care provider fair pay in a precarious place in advance of the July 1, 2025 federal deadline to finalize a new rate structure. Maintains 2024-25 child care provider temporary rate increases. In light of the limited progress on implementing a new rate structure, it is important to note that 2024-25 trailer bill language prohibited the new reimbursement rates or any temporary reimbursement established by the state as part of a transition timeline from being reduced below their current levels. Thus, the 2025-26 proposed budget includes $699 million to maintain the Cost of Care Plus Rate for child care providers. This is up from the approximately $659 million estimated for 2024-25. CCPU’s current contract expires June 30, 2025.

In light of federal threats, California faces many uncertainties that impact available funding for rate reform. Yet, child care providers face constant worry about their economic stability. Additionally, CCPU shared that in their recent contract negotiations, the state proposed to eliminate their health benefits and cut their retirement plan. Proposed federal cuts to Medi-Cal and CalFresh only exacerbate this proposed cut from the state, underscoring the need to maintain provider benefits and implement a rate structure that pays providers the true cost of care.

Governor Cuts Support for Immigrant Californians

Immigrants and their families are deeply ingrained in the state’s social fabric. They are members of the state’s workforce, pay taxes, attend schools, own businesses, and raise families who invest in local communities. California has the largest share of immigrant residents of any state. Over half of all California workers are immigrants or children of immigrants, and more than 2 million Californians are undocumented, according to estimates. Undocumented immigrants in California make significant contributions to state and federal revenues, contributing $8.5 billion in state and local taxes in 2022, despite their exclusion from most public benefits.

State leaders have made notable progress in recent years working towards a California for all where all people have access to economic opportunity and essential services, regardless of immigration status. In a special session called for by the governor earlier this year, legislators and the governor approved $25 million in funding for legal resources for potential fights with the incoming federal administration plus an additional $25 million to defend immigrants against deportation, detention, and wage theft.

However, the governor’s revised budget marks a significant reversal in working towards a California for all. At a time when the federal government is actively working to dismantle rights and protections for immigrants, it is critical now more than ever that California ensures the safety and well-being of all people, especially undocumented immigrants. Federal deportation policies and restrictions on immigration are not only tearing apart California families, but also threatening the state’s economic vitality, workforce stability, and access to essential services like food, housing, and care.

Instead of providing support to immigrants, the governor’s revised budget does not include any additional funding to protect and support the state’s immigrant communities and instead cuts funding for key programs serving immigrants. Specifically, the 2025-26 revised budget:

Given the actions the federal government has already taken against immigrant communities in California, state leaders should be taking bold action and making investments — not cuts — that ensure all Californians, regardless of immigration status, feel safe and have the resources they need to thrive.

Governor Does Not Provide Needed Support to Domestic and Sexual Violence Survivors

Every Californian deserves to live in a world where they feel safe. However, millions of Californians experience domestic and sexual violence every year — women, transgender, non-binary Californians, and some women of color are most likely to experience this type of violence.

The state receives federal funding through the Victims of Crime Act (VOCA) to help provide essential services to survivors of crime, including survivors of domestic and sexual violence. These funds help provide survivors with critical services like emergency shelter, counseling, and financial assistance.

However, anticipated cuts to VOCA at the federal level would result in a roughly 45% cut to state grants for organizations that support survivors of crime, decimating the funding of many of these organizations who rely entirely on VOCA funding to provide these critical services. Additionally, the US Justice Department has already cut $811 million in grants, which includes cutting funding to programs providing services to domestic violence survivors.

The governor’s May Revision:

Does not provide funding to fill the gap in crime victim services funding.

Eliminates all funding for the cash assistance program for survivors. Does not provide funding to fill the gap in crime victim services funding. In 2024, the state stepped in and provided $103 million in one-time funding to backfill federal VOCA funding gaps. However, even with federal cuts to VOCA anticipated again this year, there is no funding provided in the 2025-26 proposed budget to fill those gaps. Since 2019, funding has fallen far short of levels needed to maintain the services local organizations provide to more than 816,000 victims of crime. At the current funding levels, programs will have experienced a 67% cut in funding since 2019. Eliminates all funding for the cash assistance program for survivors. In 2022-23, the state appropriated $50 million to establish the Flexible Assistance for Survivors (FAS) grant program. These dollars were meant to provide grants to community-based organizations to provide flexible assistance such as relocation, care costs, or other basic needs to survivors of crime. However, the May Revision calls for a reversion of $49.7 million of this funding, meaning all funding appropriated for this program will be returned to the General Fund, eliminating the program and support for survivors of crime when other programs like VOCA are already facing large funding cuts.

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Education

Transitional Kindergarten Continues Planned Expansion

The California Department of Education (CDE) hosts two early learning and care programs: Transitional Kindergarten (TK) and the California State Preschool Program (CSPP). CSPP provides preschool to children ages 3 and 4 for families with low to moderate incomes and temporarily to 2-year-olds until 2027 in both school and community-based settings. TK serves 4-year-olds, and eligibility is based on age alone in public schools and is not dependent on family income. Together, CSPP and TK are cornerstones of CDE’s Universal Preschool plan intended to bring more early learning and care options to 3-and 4-year-olds in California. Moreover, TK and school-based CSPP are funded through the state’s Proposition 98 guarantee (see Proposition 98 section). However, as California strives to create a mixed delivery system that centers the needs of families, the administration has the opportunity to spend resources and implement policies in a way that integrates CSPP and TK with the broader early learning system to best support families with young children.

The governor’s revised budget:

Funds the completed rollout of Universal TK.

Implements new TK ratio guidelines.

Funds English language proficiency screeners and supplementary funding for multilingual learners in TK.

Maintains CSPP program levels but suspends cost of living adjustment (COLA). Funds the completed rollout of Universal TK. The initial year one expansion took effect during the 2022-23 school year and covered children whose fifth birthdays fell between September 2 and February 2 (the previous cut-off was December 2). The year two 2023-24 expansion provided eligibility to children who turn 5 between September 2 and April 2. The year three 2024-25 expansion extended eligibility to children who turn 5 from April 2 to June 2. As a final step, the 2025-26 school year will allow all children who turn 4 by September 1 to enroll in TK. The 2025-26 budget proposal includes $2.1 billion ongoing Proposition 98 dollars for this full implementation. The 2025-26 expansion is estimated to provide TK access to 51,000 additional children (down from the 60,000 estimate provided in January). These amounts are a reduction from the $2.4 billion proposed in January, given revised average daily attendance estimates and a lower cost-of-living adjustment (see K-12 Education section). Implements new TK ratio guidelines. As Universal TK completes expansion in 2025-26, reduced teacher-to-child ratios will take effect. Specifically, TK classroom ratios will reduce from 1:12 to 1:10 in 2025-26. This new ratio was originally planned for 2023-24 but was delayed. The 2025-26 proposed budget includes $1.2 billion ongoing Proposition 98 dollars to support this ratio reduction in every TK classroom. This is a decrease from the $1.5 billion proposed in January, driven by lowered average daily attendance estimates. Funds English language proficiency screeners and supplementary funding for multilingual learners in TK. In 2024-25, the governor signed Assembly Bill 2268 to exempt TK students from the English Language Proficiency Assessment for California (ELPAC) to determine whether new students will be designated English learners, because the ELPAC was considered inadequate for accurately screening multilingual 4-year-olds. This bill went into effect for the 2024-25 school year, meaning that TK students currently do not have an English language proficiency screener. Thus, the January proposed budget included $10 million Proposition 98 dollars for TK classrooms to use new English language proficiency screeners. This proposed appropriation is maintained in the revised budget and may help address the current lack of an English language proficiency screener in TK. Relatedly, the revised budget includes $7.5 million Proposition 98 dollars to address reductions in supplemental and concentration grant funds to local education agencies (LEAs) resulting from the recent exemption of TK students from the ELPAC. Maintains CSPP program levels but suspends cost of living adjustment (COLA). The 2024-25 budget authorized (but did not require) both part-day and full-day CSPP to enroll eligible 2-year-old children until July 1, 2027. The 2025-26 budget for CSPP includes this temporary expansion. Proposed spending for CSPP largely reflects the January proposal, reflecting an increase in funding as compared with 2024-25. However, the revised budget suspends the COLA for CSPP providers, equating to a reduction of $19.3 million ongoing Proposition 98 General Fund and $10.2 million ongoing General Fund. While rate reform is currently being negotiated by Child Care Providers United — representing home-based providers — a new rate structure will also be confirmed and implemented for CSPP. Confirming and implementing this new rate structure has faced the same challenges detailed in the Child Care section and is subject to the July 1, 2025 federal deadline.

Revised Budget Adjusts the Prop. 98 Guarantee Downward

Approved by voters in 1988, Proposition 98 constitutionally guarantees a minimum level of annual funding for K-12 schools, community colleges, and the state preschool program. The Prop. 98 guarantee tends to reflect changes in state General Fund revenues, and revenue estimates consequently update the minimum guarantee funding levels. The 2025-26 revised spending plan reflects downward adjustments in the minimum guarantee estimates and, given changes in revenue, it adjusts required deposits and withdrawals from the Prop. 98 reserve — the state budget reserve for K-12 schools and community colleges. The revised budget also makes changes to the Prop. 98 split between TK-12 and community colleges.

The chart below shows updated projections of the guarantee in the May Revision compared to projections in the January budget proposal and the 2024-25 enacted budget.

Prop. 98 revised estimates and proposed adjustments include the following:

The January proposal projected the 2025-26 Prop. 98 guarantee to be $118.9 billion. However, with declining revenue projections, the May Revision now estimates the 2025-26 minimum guarantee at $114.6 billion. This figure reflects a $4.3 billion decrease from the January estimate and is also $1.1 billion lower than the $115.7 billion estimate in the 2024-25 enacted budget.

While revenue projections grew for 2024-25, the Prop. 98 minimum guarantee estimate of $118.9 in the May Revision is slightly lower than the January projection. However, this $118.9 billion still represents an increase of $3.6 over the estimate in the June budget. Along with these updates, the maintenance factor obligation — a required payment as a result of the suspension in 2023-24 — is also likely to be adjusted. Despite this constitutionally required amount, the governor’s revised spending plan maintains a proposal to fund the guarantee at $117.6 billion in 2024-25, $1.3 billion lower. This approach aims to mitigate potential risks associated with revenue volatility by delaying the required amount until the guarantee’s final calculation for that year.

For the 2023-24 fiscal year, the guarantee’s level is maintained at $98.5. Since the guarantee was suspended with the 2024-25 budget, the 2023-24 level does not change.

The revised spending plan also makes an adjustment to a required deposit into the Public School System Stabilization Account (PSSSA) — also referred to as the Prop. 98 reserve. In 2024-25, the required deposit is $540 million, down from an estimated $1.1 billion deposit in January. Also, given the decline in Prop. 98, there’s now a mandatory withdrawal in 2025-26 of $540 million, fully drawing down this reserve (see Reserves section).

The revised budget also proposes changes to the share of Prop. 98 funds that go to TK-12 schools or the California Community Colleges. This proposal would shift the growth in Prop. 98 for Transitional Kindergarten expansion specifically to TK-12, essentially reducing the Community College’s portion by $492 million.

Revised Spending Plan Largely Maintains TK-12 Programs

The largest share of Proposition 98 funds goes to California’s school districts, charter schools, and county offices of education (COEs), which provide instruction to 5.9 million students in grades kindergarten through 12. Funding flows primarily through the Local Control Funding Formula (LCFF), which provides school districts, charter schools, and COEs a base grant per student, adjusted to reflect the number of students at various grade levels, as well as additional grants for the costs of educating English learners, students from low-income families, and foster youth. Other funds flow through a number of categorical programs such as the Expanded Learning Opportunities Program, special education, and others.

The revised spending plan largely maintains proposals included in the January budget and includes additional one-time and ongoing investments. Specifically, the revised budget:

Revised Budget Scales Back Previously Proposed Initiatives at the Community Colleges

A portion of Proposition 98 funding provides support to the California Community Colleges (CCCs), the largest postsecondary education system in the country, which serves high percentages of students of color and students with low incomes. CCCs prepare more than 1.8 million students to transfer to four-year institutions or to obtain training and employment skills.

The 2025-26 revised spending plan proposes to support a 2.3% cost-of-living adjustment (COLA) and funding for a higher level of enrollment growth; however, it eliminates and reduces funding previously proposed for other CCC initiatives.

Specifically, the revised spending plan:

Revised Budget Maintains Deferrals for the CSU and UC, Reduces Previously Proposed Cuts

California supports two public four-year higher education institutions: the California State University (CSU) and the University of California (UC). The CSU provides undergraduate and graduate education to nearly 454,000 students at 23 campuses, and the UC provides undergraduate, graduate, and professional education to more than 294,000 students across 10 campuses.

The 2025-26 May Revision maintains the planned deferral of funding increases to the UC ($240 million) and CSU ($252 million) systems from 2025-26 to 2027-28. This funding was supposed to be part of multi-year investments established through agreements between the administration and the CSU and UC systems in 2022. These agreements (also known as compacts) outlined major goals, including increasing access, improving student success and advancing equity, increasing affordability, improving collaboration among systems of higher education, and supporting workforce preparedness.

The revised spending plan also decreases previously proposed ongoing reductions for both systems. The January budget proposal included a 7.95% cut — $375 million for CSU and $397 million for UC — in ongoing General Fund support for UC & CSU systems beginning in the 2025-26 fiscal year. The May Revision reduces this cut down to $144 million for the CSU and $130 million for the UC, reflecting about a 3% reduction to each of the systems.

Additionally, for the UC system, the revised budget maintains a planned deferral of $31 million General Fund dollars from 2025-26 to 2027-28 that would have supported the UC in increasing the number of resident undergraduate students.

Revised State Budget Adjusts Student Aid as Federal Threats Emerge

Students pursuing postsecondary education often face significant financial hardship, struggling to afford basic necessities while attending college. These challenges can lead to difficult trade-offs that affect their academic experience, delay their progress, or force them to abandon their educational goals entirely. These realities highlight the critical need for state support to ensure students have the resources necessary to complete their degrees.

The May Revision makes several adjustments to programs administered by the California Student Aid Commission. Specifically, the revised spending plan:

Increases support for the Cal Grant program, the state’s financial aid program for low-income students.

Increases support for the Middle Class Scholarship (MCS).

Adjusts funding for the Golden State Teacher Grant Program. Increases support for the Cal Grant program, the state’s financial aid program for low-income students. To fund growth in the number of students eligible for Cal Grants, the revised budget provides a Cal Grant increase of $94.7 million one-time in 2024-25 and $228.7 million ongoing funds in 2025-26, both General Fund dollars. These grants, as opposed to loans, do not need to be paid back and help students afford housing, food, transportation, and child care. Increases support for the Middle Class Scholarship (MCS). The revised budget includes an one-time increase of $77 million General Fund in 2024-25 to address an increase in caseloads for this program. The MCS provides awards to students to help them cover the total cost of attendance at the University of California and California State University systems. Adjusts funding for the Golden State Teacher Grant Program. Under the May Revision, total one-time funding increases to $64.2 million, an increase of $14.2 million from the January budget proposal, reflecting a carryover of unused funds from 2024-25. This program provides awards to students in professional preparation programs and those who are working toward a teaching credential.

While these proposed adjustments will certainly provide needed funds to maintain aid to students, they come at a time of growing federal threats to Pell Grants and student loans. House Republicans outlined a plan to limit Pell Grants — which support low- and middle-income students attending public institutions, including the California Community Colleges, UC, and CSU campuses — and to impose drastic changes to the student loan system, including restricting repayment options and making it more complicated to apply. These proposals could significantly impact students across all segments of California’s public higher education system.

Justice System

May Revision Calls for Closing an Additional State Prison by October 2026

Nearly 90,800 adults convicted of a felony offense are serving their sentences at the state level, down from a peak of 173,600 in 2007. This sizable drop in incarceration is largely due to a series of justice system reforms adopted by state policymakers and the voters since the late 2000s, including Proposition 47, which California voters passed in 2014 (see Prop. 47 investments section).

Despite this substantial progress in reducing incarceration, American Indian, Black, and Latinx Californians are disproportionately represented in state prisons — a disparity that reflects racist practices in the justice system as well as the social and economic disadvantages that communities of color continue to face due to historical and ongoing discrimination and exclusion.

Among all incarcerated adults, most — around 87,600 — are housed in state prisons designed to hold roughly 71,700 people. This overcrowding equals 122% of the prison system’s “design capacity,” which is below the prison population cap — 137.5% of design capacity — established by a 2009 federal court order. California also houses around 3,200 people in facilities that are not subject to the cap, including fire camps, in-state “contract beds,” and community-based facilities that provide rehabilitative services.

The May Revision:

Revised Budget Includes Little Funding to Implement Proposition 36

Last November voters approved Proposition 36, increasing penalties for certain drug and theft offenses. For example, Prop. 36 reversed some of the sentencing reforms put in place by Prop. 47 of 2014 (see Prop. 47 Investments section). In addition, Prop. 36 established a new process allowing prosecutors to charge people with a “treatment-mandated felony” for possession of illegal drugs. Yet, even with the passage of Prop. 36, most of the justice system reforms adopted by state policymakers and voters over the past couple of decades remain in effect.

By increasing punishment for drug and theft crimes, Prop. 36 is creating new costs — including for incarceration, probation, and the courts — at the state and local levels. However, Prop. 36 amounts to a massive unfunded mandate. The measure provides no new revenue to pay for these additional state and local costs — even though Californians were promised that Prop. 36 would provide evidence-based treatment, housing solutions, and programs to increase community health and safety. Instead, Prop. 36 assumes that state and local officials will be able to accommodate the measure’s substantial costs in their already strained budgets.

As a result, state and local leaders face difficult choices about how to pay for the unfunded costs created by Prop. 36 even as they are struggling to close substantial budget deficits for the upcoming fiscal year and beyond.

The May Revision does not include any new state funding to implement Prop. 36 beyond the funds needed to support higher state prison costs. The revised budget increases prison spending by about $29 million in 2025-26 to reflect a larger state prison population due to Prop. 36, according to Department of Finance testimony provided to Senate Budget and Fiscal Review Subcommittee #5 on May 15. However, the May Revision does not propose any new additional state funding to support the service needs and other unfunded costs imposed by Prop. 36 — costs that could easily reach to the low hundreds of millions of dollars each year.

May Revision Projects Steep Drop in Proposition 47 Savings in Coming Years

Passed by voters in 2014, Proposition 47 reduced penalties for six nonviolent drug and property crimes from felonies to misdemeanors. As a result, state prison generally has not been a sentencing option for these crimes. Instead, people convicted of a Prop. 47 offense have served their sentence in county jail and/or received probation.

However, with the passage of Prop. 36 last November, some of Prop. 47’s sentencing reforms have been reversed. Key changes enacted by Prop. 36 as well as their potential impact are described at the end of this section.

How Prop. 47 Savings Are Determined and Allocated

By decreasing state-level incarceration over the past decade, Prop. 47 reduced the cost of the prison system relative to the expected cost if Prop. 47 had not been approved by voters. The Department of Finance is required to annually calculate these state savings, which are deposited into the Safe Neighborhoods and Schools Fund and used as follows:

65% for behavioral health services — which includes mental health services and substance use treatment — as well as diversion programs for individuals who have been arrested, charged, or convicted of crimes. These funds are distributed as competitive grants administered by the Board of State and Community Corrections.

25% for K-12 school programs to support vulnerable youth. These funds are distributed as competitive grants administered by the California Department of Education.

10% to trauma recovery services for crime victims. These funds are distributed as competitive grants administered by the California Victim Compensation Board.

Since 2016, California has allocated $816 million in state prison savings attributable to Prop. 47. These funds have been invested in local programs that support healing and keep communities safe. For example, research shows that people who received Prop. 47-funded behavioral health services and/or participated in diversion programs were much less likely to be convicted of a new crime. Individuals enrolled in these programs had a recidivism rate of just 15.3% — two to three times lower than is typical for people who serve prison sentences (recidivism rates range from 35% to 45% for these individuals).

May Revision Estimates That $91.5 Million in Prop. 47 Savings Will Be Available to Invest in Local Communities in 2025-26

The May Revision estimates that Prop. 47 will generate an additional $91.5 million in savings due to reduced state-level incarceration — dollars that will be invested in local communities starting in the 2025-26 fiscal year. (These savings are attributable to the 2024-25 fiscal year, but are available for expenditure in 2025-26.) With these additional funds, Prop. 47’s total investment in California’s communities will exceed $900 million, up from the current $816 million.

Prop. 47 Savings Are Projected to Decline Substantially Due to Prop. 36

With the recent passage of Prop. 36, voters increased penalties for certain drug and theft offenses, including by reversing some of Prop. 47’s sentencing reforms (see Prop. 36 section). For example, Prop. 36 allows simple drug possession, petty theft, and shoplifting to be charged as felonies in certain circumstances. Under Prop. 47’s rules, these crimes were generally misdemeanors.

The state prison population is expected to rise in the near term due to the longer sentences allowed by Prop. 36 (see State Corrections section). As a result, the annual savings attributable to Prop. 47 is projected to substantially decline. Budget documents project that annual Prop. 47 savings will decrease from $91.5 million in 2024-25 to $27.1 million in 2026-27 — a drop of $64.4 million (70%) over this two-year period.

In other words, because of Prop. 36, more than $64 million in state funding that would otherwise have supported behavioral health treatment and other critical services over the next two years is expected to be shifted back to the state prison system.

state budget terms defined What’s the difference between a trailer bill and policy bill? A deficit and an operating deficit? And what exactly is a “Budget Bill Jr.?” Our Glossary of State Budget Terms answers that and more. View Glossary

Climate Change

Budget Maintains Funding for Wildfire Relief and Recovery

As demonstrated by the devastating wildfires that swept through Los Angeles County earlier this year, as well as other disasters in recent years, Californians are deeply impacted by the effects of climate change. While the climate crisis affects all Californians, communities of color and low-income communities are often hit hardest due to historical and ongoing displacement and underinvestment.

In January, the governor signed legislation to provide over $2.5 billion in wildfire relief to Los Angeles County to help communities hit hard by the disastrous wildfires in the region. This funding included:

$2.5 billion for response and recovery efforts , including support for emergency protective measures, evacuations, and sheltering for survivors;

, including support for emergency protective measures, evacuations, and sheltering for survivors; $4 million to expedite rebuilding homes in local communities; and

in local communities; and $1 million to rebuild local schools damaged by the wildfire.

In April, the governor signed into law “early action” legislation to use some of the funding approved in January as well as funding approved by voters in November through Proposition 4 for wildfire relief and prevention. This included:

Appropriating $181 million in Prop. 4 bond funds for wildfire prevention and resilience, including $170 million to conservancies for forest vegetation and management and $10 million to the Department of Forestry and Fire Protection to fund a tribal fire resiliency center.

in Prop. 4 bond funds for wildfire prevention and resilience, including $170 million to conservancies for forest vegetation and management and $10 million to the Department of Forestry and Fire Protection to fund a tribal fire resiliency center. Authorizing the Department of Finance to use funds approved in January to increase funding for unmet response and recovery needs from damage caused by the wildfires.

The governor’s May Revise maintains previously appropriated funding for relief to Los Angeles County from the wildfires suffered earlier this year. Additionally, the May Revise:

Nearly 300 parents, child care workers and other advocates rallied in Lansing at an annual Early Childhood Capitol Day on Wednesday.

Though providers and advocates said they were grateful for the early childhood investments in Whitmer’s budget, many were in agreement that it was not enough.

Operating child care centers is expensive and Michigan is falling behind other states by not recognizing the investment needed to support the crucial businesses, early childhood community members say.

Many child care advocates and providers are fed up with what they say is the state’s lack of investment in Michigan’s early childhood infrastructure and traveled to the capitol last week to meet with legislators to demand more help.

Nearly 300 parents, child care workers and other advocates showed up in Lansing at an annual Early Childhood Capitol Day on Wednesday, with many hoping to push Gov. Gretchen Whitmer to add more funding in her proposed budget.

“It’s time to come up with a plan real quick, before the (child care) crisis gets worse,” said Amy Zaagman, director at the Michigan Council for Maternal and Child Health.

Their priorities include pushing the state to increase the amount it pays child care facilities for the care they provide low-income families and expanding income eligibility so more families can qualify for public assistance for child care costs.

The group also said that state funding is overwhelmingly focused on universal pre-K without enough dollars going to the rest of the early childhood system, like services for new mothers, and infants and toddlers under the age of 4.

Michelle Campbell, who attended the lobbying day, said these persistent challenges are the same she dealt with when she owned a day care in Howell for nearly 20 years before closing it in 2008.

“I went broke paying my staff, but you want to keep these people,” said Campbell, who now works in maternal and infant health at a homeless shelter in Detroit.

Many child care providers also spoke of their frustration over being undervalued despite serving an essential function for Michigan’s economy.

Even though early educators are necessary for many to make it to work, over a quarter of early childhood educators in the state qualify for public benefits, according to Annette Sobocinski, executive director at the Child Care Network.

“We are the workforce behind the workforce,” said child care provider Angela Mentink. “The state cannot continue the economic growth we’ve seen without us.”

According to a recent report from the Michigan Chamber of Commerce, Michigan’s economy loses nearly $3 billion dollars in tax revenue and costs to employers because of child care issues.

Whitmer’s team referred the Free Press to MiLEAP which did not respond by Friday afternoon to requests for comment on the critics of her budget priorities.

Advocates said Michigan is falling behind other states in funding child care by not acknowledging how expensive it is for child care centers to operate. This is especially true in the wake of expired pandemic emergency funds which provided temporary relief to both parents and providers in the form of things like expanded eligibility for government assistance and grants to help child care facilities cover costs, but were then taken away, they said.

“One time investments aren’t going to work,” said Zaagman.

“The vision the Governor should have is to make Michigan the best state to have and raise a child.”

On Wednesday, Senate Democrats unveiled a package of legislation in Lansing separate from the state’s budget called “Building Blocks” meant to address the state’s child care crisis. It included a $5,500 tax credit for families with a newborn and an increase in the state’s reimbursement rate to providers serving low-income families tied to the rate of inflation. Matt Gillard, president of Michigan’s Children, said the legislation made some progress towards what is necessary to fund the state’s struggling child care system — but still not enough.

“This is something,” Gillard said, referring to tying reimbursement rates to inflation. “But we’re asking for a lot more than this. The state has gotta get serious.”

What’s in the budget

Gov. Whitmer’s proposed budget — set to be finalized and released after negotiation with the legislature by July — included a number of early childhood investments, including $50 million towards changing the payment system to allow the state to pay providers for work sooner and guaranteed contracts for infant and toddler child care slots, and $400,000 towards studying the potential expansion of Medicaid to cover children under the age of 6.

Though providers and advocates were careful to say that they were grateful for the early childhood investments that were included in Whitmer’s budget, many were in agreement that it was not enough.

Child care providers need help

The biggest issue raised: there was no rate increase to the government child care subsidy, now called a scholarship. Gillard called this “a missed opportunity” to get more money in the hands of providers.

Scholarship reimbursement rates dictate the amount of money providers get back from the state government for providing subsidized care to low-income families. Providers bill the state and get money back, but that amount isn’t enough to sustain a child care business, according to Sobocinski.

Providers said they could use this additional money to offer higher pay and benefits to staff. Currently, early childhood educators in Michigan make an average annual salary of $22,000. This is in comparison to teachers in the state who make an average yearly salary of $65,000.

“We are perpetuating poverty wages for child care workers, which contributes to high turnover and instability,” said Danielle Atkinson, whose organization Mothering Justice, was represented at the lobbying day.

Nina Hodge, who founded Above and Beyond Learning Center in Detroit and has worked as a child care provider for over 20 years, is exasperated and believes Whitmer isn’t doing enough to support her industry.

“How am I supposed to pay my workers?,” Hodge said. “If you cared about small businesses, you’d invest in them.”

Hodge spoke to the daily struggle of staying afloat in this business. “I’d go back to Chrysler because it’s less of a headache. You’re hindering us,” she said.

Parents need money

Not enough parents qualify for government assistance with child care costs, advocates said. And when they do qualify, there are a lot of hoops they have to jump through to actually receive the money which hurts both parents and providers, they said.

Symone Wilkes, a Detroit mother of two young boys, said she hoped legislators would raise the income level at which parents can qualify for assistance.

“Stop saying the money needs to be used, and then put so many stipulations and boundaries on it,” she said.

The process itself also needs investment, said Angela Mentink, child care provider at Early Impressions in Jackson.

“It takes families a long time to get this money,” she said. “We need to make a smoother, easier, and timelier process.”

Focus on pre-K

Gillard voiced a concern often repeated in the early childhood community in Michigan: public funding flows toward universal pre-K for all, but is not equally matched for the rest of the early child care system. Whitmer’s budget included nearly $700 million for the universal pre-K program, which would provide free preschool education for all 4-year-olds in Michigan.

“What we’ve seen in Michigan is almost singular focus on pre-K for all,” Gillard said. “Other states have been doing that in combination with also increasing supports for early childhood providers. We need to recognize infants and toddlers, not just the 4-year-olds.”

Because of their higher needs, and therefore need for more one-on-one attention, infants and toddlers are more expensive to take care of.

While Gillard discussed a number of highlights with regards to Whitmer’s investments in pre-K in her budget, including removing income requirements, the worry is that investment in universal pre-K is overshadowing much-needed investments in the rest of the child care system.

Deanna Curry, parent educator at a Head Start program in Lansing, said given 90% of a child’s brain develops between the ages of 0 and 5, “we need to focus on all those ages, especially 0 to 3,” she said.

More state support wanted

Gillard said he’s seen other states spend more money when federal pandemic relief dollars expired to keep funding going for things like higher reimbursement rates for providers and expanded eligibility for parents.

“We’re not seeing that from Michigan,” he said.

Gillard said this was particularly important given an uncertain federal landscape which may soon see cuts that could impact state early education programs like Head Start and MiLEAP, a state agency overseeing early education initiatives, which receives nearly 70% of its funding from federal dollars.

“If we’re in a situation where we see federal cuts, we’re not as impacted when we have state funds invested,” he said.

Beki San Martin is a fellow at the Detroit Free Press who covers child care, early childhood education and other issues that affect the lives of children ages five and under and their families in metro Detroit and across Michigan. Contact her at rsanmartin@freepress.com

This fellowship is supported by the Bainum Family Foundation. The Free Press retains editorial control of this work.

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