Newsom and California Legislature Reach $351.7 Billion Budget Deal for 2026-27

Governor Gavin Newsom and California legislative leaders announced an agreement on a $351.7 billion state budget for the 2026-27 fiscal year, reached in his final year as governor. The deal was announced around June 26, 2026, and uses a tax revenue windfall to avoid major spending cuts and address the state's chronic budget deficit. The agreement generates nearly $2 billion in additional state revenue through tax increases, including higher corporate taxes, new levies on software sales, and a revamped tax on managed healthcare organizations. It requires the next governor to develop options for reducing taxpayer subsidies for corporations whose employees rely on Medi-Cal rather than employer-provided health coverage. As part of the deal, Democrats approved placing an $11.25 billion affordable housing bond, described as the Veterans and Affordable Housing Bond Act of 2026, on the November ballot to fund housing construction, preserve affordable housing, and expand homeownership opportunities for veterans and lower-income households. The budget also includes $900 million in Homeless Housing, Assistance, and Prevention grants. The Governor's office characterized the budget as balanced with no deficit, emphasizing efforts to build reserves and reduce long-term liabilities. The budget agreement was reached but its final legislative passage and specific implementation timeline were not detailed in available reporting. The characterization of the budget varies by source: the Governor's office presented it as fully balanced, while other reporting emphasized reliance on new taxes and a revenue windfall to avoid cuts, indicating differing emphasis on how the deficit was addressed rather than outright factual conflict.