The Legislature passed a budget on June 15, although negotiations between Democratic leaders and Gov. Gavin Newsom continued over the past two weeks to reach a final budget.
SACRAMENTO, Calif. (CN) – California’s top leaders on Friday announced a budget deal between lawmakers and the governor as they continued their verbal sparring with President Donald Trump.
Gov. Gavin Newsom, Assembly Speaker Robert Rivas and Senate President Pro Tempore Monique Limón unveiled a state budget deal they say eliminates deficits for the next two fiscal years while strengthening California’s fiscal stability.
The budget deal calls for $251.5 billion in spending from the state’s general fund in fiscal year 2026-27, rising to a total of $351.7 billion when all funds are included. It’s a slight drop from The budget of the legislaturepassed June 15, which requested $253 billion in general fund spending and $355.9 billion in total.
More than $28 billion is slated for state reserve funds, the Finance Department said.
Lawmakers had until June 15 to pass a budget, though negotiations continued with Newsom over the past two weeks to reach a final budget. The governor must sign a budget before the start of the next fiscal year on Wednesday.
“A balanced budget is not an end in itself — it’s how we deliver for Californians,” Newsom said in a statement. “This budget demonstrates responsible choices that protect our fiscal strength while continuing to invest in what matters most.”
Newsom and Democratic lawmakers criticized Trump during the budget process, blaming the White House for the Big Beautiful Bill, what they called politically motivated attacks and withholding of state funds. They have said Republicans on the national stage have pulled funding for state health care systems, forcing state lawmakers into tough choices.
“Despite ongoing funding cuts from the federal administration, California was able to mitigate impacts to programs that rely on millions,” Limón said in a statement. “This budget agreement reflects our commitment to protect core programs and address our short- and long-term financial future by building our rainy day fund and making balanced budget choices.”
Limón’s office emphasized the creation of a fair share of the program for large corporations, saying it would oppose cuts to the Big Beautiful Bill, and the governor’s administration will develop options for lawmakers, ensuring that large corporations are responsible for the health care costs of their employees.
Lawmakers will receive those options by April 1 and consider them during next year’s budget process.
“Working families deserve a budget that has their backs — and that’s exactly what California is providing,” Rivas said in a statement. “We’re protecting health care, saving food programs, investing in housing at record levels and building reserves to fight back, no matter what Trump and the Republicans throw at us.”
Lawmakers pointed to $900 million in funding for the latest round of the Housing, Assistance and Homelessness Prevention program — $400 million more than Newsom in his job. May’s revised budget.
The deal also rejected Newsom’s proposed cuts to the state’s Home Support Services, which allow people with disabilities to stay in their own homes rather than in a care facility.
It also provides $50 million to fund Proposition 36, which reinstated tougher penalties for certain property and drug crimes — far less than Republicans wanted.
Finding new sources of revenue, the deal approved Newsom’s plan to impose a sales tax on electronically delivered software, which would increase general fund revenue by $450 million in 2026-2027 and $900 million in 2027-2028 and beyond.
Lemon’s office called two ballot measures heading to the November ballot, key pillars of the larger budget picture.
of Veterans and Affordable Housing Bond Act of 2026 will help finance construction, preserve affordable housing and expand people’s opportunities to own a home. Of the $11.25 billion package, $10 billion in general obligation bonds will finance the construction, purchase and rehabilitation of affordable housing for lower-income residents. The remaining $1.25 billion in self-supporting revenue bonds will support the CalVet home loan program, helping veterans and military families buy homes.
of Save for California’s Future Act would raise a cap on the rainy day fund from 10% to 20% and increase the amount saved in that fund when taxes derived from capital gains and related income exceed certain levels.
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