Enacted Budget – Fiscal Year 2027
Governor Gavin Newsom signed the state’s fiscal 2027 budget into law on June 29. The budget provides for total state expenditures (excluding federal funds) of $351.7 billion for fiscal 2027. This includes $251.5 billion in general fund spending, a 2.5 percent increase from fiscal 2026. The budget provides for a $3.6 billion deposit from the general fund to the state’s rainy day fund, the Budget Stabilization Account (BSA). Additionally, the budget transfers $6.4 billion into the Projected Surplus Temporary Holding Account to be allocated in fiscal 2028. The fiscal 2027 budget is based on a beginning balance of $57.2 billion and forecasted general fund revenues of $230.3 billion after accounting for the transfer to the surplus holding account but before the deposit into the BSA, representing a 3.5 percent decrease from fiscal 2026. After the deposit, the enacted budget projects a balance of $15.1 billion in the BSA, while the Public School System Stabilization Account (PSSSA) has a projected balance of $9.2 billion. Additionally, the budget projects a general fund ending balance of $32.5 billion, including $4.5 billion in the Special Fund for Economic Uncertainties (SFEU) – the state’s discretionary reserve account – and the remainder in the Reserve for Liquidation of Encumbrances. Combined reserve balances in the SFEU, BSA, and PSSSA total $28.8 billion. Including the Reserve for Liquidation of Encumbrances, combined year-end balances across the general fund, BSA, and PSSSA total $56.8 billion for fiscal 2027.
The fiscal 2027 budget maintains investments in education, health care, housing, behavioral health, disaster recovery, and other priorities, as well as directs surplus funds towards a number of one-time strategic investments. The balanced enacted budget has no projected deficit for fiscal 2027 or fiscal 2028, significantly reduces the projected structural deficits for fiscal 2029 and fiscal 2030, and preserves and enhances reserves. For education, the budget continues universal school meals, universal transitional kindergarten, expanded childcare, and free summer school, while making the largest single-year investment in special education in state history. The budget also protects health care affordability and access and continues investments in behavioral health care, including implementation of Proposition 1 to expand treatment facilities and supportive housing for individuals with behavioral health conditions. To address the state’s housing challenges, the budget advances reforms intended to reduce regulatory barriers and accelerate housing construction. Additionally, the budget provides tax relief for small businesses, strengthens election administration, and invests in disaster recovery, wildfire resilience, infrastructure, workforce development, and public safety. To solidify the state’s fiscal position, the budget reflects the renewal of a Managed Care Organization (MCO) tax structured to comply with the One Big Beautiful Bill Act, extends the temporary business tax credit limitation for an additional three years, and extends the sales tax to prewritten software even when delivered electronically. The budget also maintains the state’s long-term fiscal stability by limiting new ongoing commitments, preserving reserves, and setting aside additional surplus funds in a holding account for fiscal 2028.