> At a Glance
> – California’s 2026 budget shortfall drops to $2.9 billion, down from $12 billion in 2025
> – State to roll back health-care access for undocumented immigrants
> – $1.4 billion in federal funds lost under new federal rules
> – Why it matters: Residents may see fewer services as the state tightens spending amid federal cuts
California is narrowing its budget gap next year, but the relief comes with a cost: scaled-back health coverage for undocumented immigrants and the loss of over a billion in federal aid.
Budget Outlook
Governor Gavin Newsom unveiled a $349 billion spending plan that trims the deficit to $2.9 billion-the smallest gap in four years. The general fund will claim $248 billion, while reserves hit $23 billion.
Revenues rose on the back of strong stock-market returns, the governor’s office noted.
| Reserve Bucket | Amount |
|---|---|
| Rainy day fund | $14.4 billion |
| Economic uncertainties fund | $4.5 billion |
| Public-school rainy-day fund | $4.1 billion |
Education & Climate
School districts will receive $2.8 billion to cover rising operational costs. Transitional kindergarten becomes fully universal, and higher-education systems split $716.3 million.
Students get $688 million in aid, with $552 million earmarked for Cal Grants.
Wildlife and landscape resilience projects receive $314 million.
Federal Cuts & EV Rebates
California is suing the federal government more than 50 times, and the new budget boosts the Department of Justice to keep up the fight.
The state will lose $1.4 billion in federal support, including:
- $1.1 billion from Medi-Cal limited-scope services
- $300 million from CalFresh/SNAP
To offset the eliminated federal EV rebate, Newsom proposes a $200 million state rebate funded by cap-and-trade and air-pollution dollars.
Key Takeaways
- Deficit falls sharply, but health-care rollbacks affect undocumented immigrants
- $11.8 billion will pay down long-term debt over four years
- Federal funding cuts total $1.4 billion across health and nutrition programs
- State launches its own EV rebate after federal program ends
California’s smaller shortfall offers breathing room, yet federal belt-tightening and policy clashes ensure the budget battle is far from over.
