The 2026-27 California Spending Plan

Other Provisions

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• Business and Consumer Services Agency
• California Arts Council
• Governor’s Office of Service and Community Engagement
• Department of Consumer Affairs
• Department of General Services
• California Department of Food and Agriculture
• Governor’s Office of Land Use and Climate Innovation
• California Military Department
• Office of Emergency Services
• Statewide Infrastructure
• California Public Utilities Commission
• November 2026 General Election
• California Gambling Control Commission
• California Horse Racing Board
• Department of Cannabis Control
• Cannabis Control Appeals Panel
• Department of Financial Protection and Innovation
• Governor’s Office of Business and Economic Development
• Labor, Employment, and Workforce Development
• Tax Policy Changes

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Business and Consumer Services Agency

The budget includes $3.6 million for the Business and Consumer Services Agency (BCSA) in 2026-27 from various special funds. This amount is $19.6 million, or 85 percent, less than the revised 2025-26 funding level of $23.2 million. The large reduction is attributable to the implementation of the Governor’s Reorganization Plan of 2025. The 2025 reorganization moved certain housing programs from the Business, Consumer Services, and Housing Agency (BCSH) to the newly formed California Housing and Homelessness Agency. Consumer services and business programs stayed with BCSH, which was renamed BCSA. The 2026-27 budget is the first to fully reflect this new agency structure.

California Arts Council

The budget provides $106.2 million—primarily General Fund—to the California Arts Council (CAC) in 2026-27. This amount is $69.5 million (189 percent) more than the revised 2025-26 funding level. The increase is primarily driven by $68 million in one-time funding for grants described below.

Agency-Directed Grants. The budget provides $19 million for agency-directed grants. This includes $10 million to support general operations at arts organizations, $5 million to support arts and cultural programming in Los Angeles as part of the 2028 Olympics, and $4 million for CAC’s cultural districts program.

Direct Grants. The budget provides $49 million in direct grants for 50 local arts and cultural institutions and activities. The largest grants are for the Watts Towers Cultural Center and Protagonist Black ($5 million each), the Juntos Fruitvale Cultural Arts Center and ODC Dance ($3 million each), and the Center for the Art of Translation ($2.8 million).

Governor’s Office of Service and Community Engagement

The 2024-25 budget package established the Governor’s Office of Service and Community Engagement (GO-SERVE) as part of a reorganization of the former Governor’s Office of Planning and Research. GO-SERVE oversees three notable programs: California Volunteers, the Office of Community Partnerships and Strategic Communications, and the Youth Empowerment Commission. The spending plan includes $269 million for the office in 2026-27, mostly from the General Fund ($217 million). This represents a net increase of $28 million (11 percent) compared to estimated 2025-26 spending, primarily due to a few one-time General Fund augmentations for California Volunteers. These include: (1) $10 million for City Year; (2) $5 million each for the California Men’s Service Challenge, Reading Corps/Math Corps, and the Student Success Coach Grant Program; (3) $2 million for the Improve Your Tomorrow program; and (4) $500,000 each for three specific local Big Brothers Big Sisters programs.

Department of Consumer Affairs

The budget provides $765 million from various funds (including $17.5 million General Fund) for the Department of Consumer Affairs (DCA) in 2026-27. This amount is $3.2 million (less than 1 percent) below the revised 2025-26 funding level of $768 million. Two DCA entities—the State Athletic Commission and Bureau for Private Postsecondary Education (BPPE)—received one-time General Fund augmentations for similar purposes in 2026-27. Specifically, both entities received funding to help cover the cost of litigation that exacerbated existing structural deficits in the special funds that typically support them. The State Athletic Commission received $1.7 million one-time General Fund, bringing its total 2026-27 budget to $2.3 million. BPPE received $10 million one-time General Fund bringing its total 2026-27 budget to $26.7 million. Provisional language in the budget also provides the State Athletic Commission with authority to consider a study evaluating its structural deficit. For more information about 2026-27 BPPE funding, see the “Other” section of The 2026-27 California Spending Plan: Higher Education.

Department of General Services

The budget provides $1.5 billion for the Department of General Services (DGS) in 2026-27. About half—$774 million—of this amount comes from the Service Revolving Fund. The remaining amount comes from a mix of state special funds and General Fund. The budget for DGS in 2026-27 is $91.7 million (6 percent) below the revised 2025-26 funding level of $1.6 billion. Most of the reduction is due to a decrease in Service Revolving Fund resources. Some of the most significant actions taken in the 2026-27 budget process are described below.

Capitol Annex Swing Space Reconfiguration. The budget includes $14.3 million in one-time lease revenue bond authority for the preconstruction phase of the 10^th and O Street Building Reconfiguration project. This funding is being provided in anticipation of the planned completion of the new Capitol Annex in late 2027 and subsequent relocation of the Governor and Legislature out of the 10^th and O Street Building. Provisional language in the budget requires the execution of a written agreement between the Joint Rules Committee, Department of Finance, and DGS on future use of the 10^th and O Street Building before actual construction may begin. The total project cost is estimated at $114 million.

New O Street State Parking Garage. The budget also provides $1.3 million one-time lease revenue bond authority for the preconstruction phase of the O Street State Parking Garage project. The garage will be located on an existing state-owned surface parking lot at 12^th and O Street in Sacramento and is expected to increase parking capacity from 145 to 750 spaces. Total project cost is estimated to be $46.2 million.

Governor’s Mansion. The budget includes $4 million one-time General Fund for improvements to the Governor’s Mansion in Sacramento, including acquisition of real and personal property. Additional provisions exempt these acquisitions from review and approval by the State Public Works Board.

California Department of Food and Agriculture

The budget provides $726 million from various fund sources to support the California Department of Food and Agriculture (CDFA) in 2026-27, which represents a decrease of $61 million (8 percent) when compared to the revised 2025-26 expenditure level. The decrease is primarily associated with a year-over-year change in one-time Proposition 4 funding (the climate bond approved by voters in November 2024). The 2026-27 spending plan appropriates $75 million from Proposition 4—including $25.9 million for the Healthy Soils Program, $14 million for the Regional Farm Equipment Sharing Program, and $14 million for the Tribal Food Sovereignty Program. The budget also maintains 20 of 69 vacant CDFA positions (and an associated $2.8 million in special funds) initially proposed to be eliminated by the Governor but objected to by the Legislature. We discuss other notable features of CDFA’s budget below.

California Farm to School Program. The budget includes $24.6 million General Fund and ten positions in 2026-27 and a similar amount on an ongoing basis to provide grants to educational agencies, food producers, and other organizations and partnerships with the goal of increasing the amount of locally grown and produced foods in schools. (Previous budgets had provided limited-term support for the program.) Of the total, $20 million is for the Farm to School Incubator Grant Program. Budget trailer legislation—Chapter 84 of 2026 (SB 172, Committee on Budget and Fiscal Review)—also establishes the program in state law.

Funding for Other Department Programs. The budget package provides funding for the following programs and efforts in 2026-27. Some of these activities will be undertaken by CDFA; in other cases, the department will pass the funding along to local governments or organizations.

• $23 million in one-time General Fund for an incentive program to reduce enteric methane emissions from the state’s dairy and livestock industries. (This funding was deferred from 2023-24 as a budget solution adopted as part of the 2024-25 Budget Act.)

• $15 million in one-time General Fund each for (1) the California Nutrition Incentive Program, (2) direct financial assistance and technical support to transition acreage to organic certification, and (3) the Local Food Purchase Assistance Cooperative Agreement Program.

• $13.3 million in one-time General Fund for a permanent farmer’s market and food innovation hub at the Agricultural Institute of Marin.

• $10.5 million in ongoing General Fund to backfill anticipated federal funding reductions to CDFA’s Invasive Fruit Fly program.

• $8.3 million in one-time General Fund to cover the costs CDFA incurred to establish the state’s industrial hemp program.

• $8 million in one-time General Fund (including $2.8 million on an ongoing basis) for CDFA’s animal care program established after passage of Proposition 12 (2018).

• $2.5 million in one-time General Fund for a managed honeybee health program.

Governor’s Office of Land Use and Climate Innovation

The budget package provides $364 million for the Governor’s Office of Land Use and Climate Innovation (LCI) in 2026-27, which represents a roughly $300 million reduction compared to estimated 2025-26 expenditures. This change is primarily attributable to a decrease in local assistance funding that the department receives from the Greenhouse Gas Reduction Fund (GGRF) due to (1) a decrease in overall statewide GGRF spending resulting from recent changes to the cap-and-invest program structure and (2) transferring administration of and funding for the housing component of the Affordable Housing and Sustainable Communities Program away from the Strategic Growth Council within LCI to the recently established Housing and Homelessness Agency. Below we describe some other notable features of LCI’s 2026-27 budget.

Bond and GGRF Appropriations. The budget package provides $217 million from Proposition 4, the climate bond approved by voters in 2024, for the department’s various extreme heat programs. Additionally, the budget package assumes a total of $107 million from GGRF for the Sustainable Communities and Agricultural Lands Conservation program, managed by the Strategic Growth Council under LCI. This includes an estimated $57 million through a statutory continuous appropriation pursuant to Chapter 121 of 2025 (SB 840, Limón) and $50 million through a discretionary GGRF budget allocation (which is specifically targeted for agricultural lands conservation). The actual amount the program will receive via the continuous appropriation will depend on cap-and-invest program auction revenues generated in 2026-27 and will not be finalized until the end of the fiscal year.

State Operations Augmentations. The budget provides an augmentation of $11.2 million in 2026-27—growing to $12 million annually thereafter through 2031-32—from the General Fund to support LCI’s existing administrative and policy workload and to implement statutorily required activities. This is intended to support 51.5 existing positions and two new positions at LCI (many of which were previously supported by limited-term funding), along with funding some information technology (IT) equipment, software licenses, and contracts. Figure 1 provides a breakdown of these augmentations. As shown, this includes $10.5 million ongoing to support IT, administrative, legislative, and land use policy staff and activities. For implementing various statutory responsibilities, the budget package authorizes $741,000 in 2026-27, $1.7 million in 2027-28, $1.5 million from 2028-29 through 2031-32, and $522,000 ongoing thereafter.

California Environmental Quality Act (CEQA) State Clearinghouse Fee Authorization. Budget trailer legislation, Chapter 84 of 2026 (SB 172, Committee on Budget and Fiscal Review) authorizes LCI to study, set, and levy a fee for CEQA document submissions (subject to the regulatory rulemaking process). LCI plans to use the fee revenue to help cover expenses associated with maintaining and upgrading the State Clearinghouse, the state’s digital database for CEQA documents and environmental review coordination.

One-Time Local Allocations. The budget package also includes a few one-time appropriations for local activities to be allocated through LCI, including: (1) $3 million for the Central Coast Community Resilience Hub Accelerator, (2) $1 million to Humboldt County for facility improvements to its permitting center, and (3) $1 million for Contra Costa County’s wildfire and evacuation modeling and planning tools.

California Military Department

The budget provides $375.8 million—primarily from General Fund and federal funds—to the California Military Department (CMD) in 2025-26. This amount represents a $4.1 million (1 percent) increase over the revised 2025-26 level. Some of the major actions taken in the 2026-27 budget process are described below.

Drug Interdiction. The budget includes $30 million two-year, limited-term General Fund ($15 million in 2026-27 and $15 million in 2027-28) for the state Counterdrug Task Force. These funds complement approximately $40 million in federal fiscal year 2026 funding for drug interdiction-related activities at CMD. (State funds are discretionary and not required as matching funds.) State funds enable CMD to support law enforcement agencies’ seizure of illegal drugs, the prosecution of drug traffickers, and youth outreach programs serving approximately 200 schools.

Los Alamitos Battalion Headquarters Readiness Center. The budget provides $7.8 million one-time Armory Fund for the preliminary plans phase of the Los Alamitos Battalion Headquarters Readiness Center project. The new Readiness Center is intended for the 1-160^th Infantry Battalion’s Headquarters and Headquarters Company currently stationed at the Inglewood Armory. (That facility has been deemed insufficient for the current force structure and space needs.) Total project cost is estimated at $135.3 million, with the federal share at 75 percent of allowable costs on the $120 million construction phase. The remainder, currently estimated at $30 million to $35 million, will come from the state General Fund, likely in 2030-31.

Office of Emergency Services

The budget provides $3.4 billion for the Office of Emergency Services (OES) in 2026-27, primarily from federal funds and the General Fund. This amount represents a decrease of $3 billion (47 percent) from the revised 2025-26 level of $6.5 billion. Most of the decrease is attributable to the expiration of $2.6 billion in one-time federal funds received by OES in 2025-26, which were generally used to reimburse other entities for emergency-related costs. A portion of the reduction is also attributable to the expiration of $370.7 million in one-time General Fund provided to state and local government entities in 2025-26 for costs associated with the January 2025 Southern California Wildfires. We identify some of the major actions taken in the 2026-27 budget process below.

Next Generation 911 (NG911) System Augmentations. The budget includes $144.9 million in additional one-time State Emergency Telephone Number Account fund expenditure authority—an 80 percent increase over the revised 2025-26 level. OES estimates that this will result in a 13-cent increase in the monthly 911 surcharge for calendar year 2027. Funds may be used to stabilize and bolster the state 911 system—including support for the legacy 911 system, call handling equipment upgrades at dispatch centers, and for costs associated with providing transitional statewide NG911 services. However, the budget prohibits OES from using funds to establish a permanent statewide NG911 system until the Legislature has received and reviewed the results of an independent technical evaluation required by budget trailer legislation. The 2026-27 budget also includes funding for an audit of the state effort to develop and implement NG911, external oversight of the NG911 build-out project, and the independent technical evaluation. Additional provisions direct OES to provide quarterly fiscal and project progress reports to the Legislature and prohibit OES from taking steps that would prevent the state from transitioning back to a regional network in the future.

Direct Local Grants. The budget provides $74.5 million one-time General Fund for 66 direct grants to local jurisdictions and organizations for emergency management and public safety-related activities, projects, and equipment. Some of the largest allocations are:

• $3 million to the City and County of San Francisco for public safety infrastructure.

• $3 million to the Casa Mariposa, a domestic violence shelter in the City of San Diego.

• $2.6 million to the City of Costa Mesa for emergency communications center upgrades.

• $2.5 million (each) to the Los Angeles Fire Department and the City of Perris for Sylmar wildfire mitigation and a new South Perris Fire Station, respectively.

Nonprofit Security Grant Program (NSGP). The budget includes $80 million ongoing General Fund for the state NSGP. California’s NSGP provides funding for security enhancement projects (such as reinforced doors and gates) to nonprofit organizations at risk of hate-motivated violence. The program has previously received state funding on a one-time or limited-term basis. This augmentation maintains funding for the program at the 2025-26 level on an ongoing basis.

Victims of Crime Act (VOCA) Backfill. The budget provides $50 million one-time General Fund to backfill anticipated reductions in federal VOCA funding—half of the backfill amount provided in 2025-26. These funds support various OES victim grant programs.

Human Trafficking. The budget includes $38 million one-time General Fund for human trafficking-related activities at OES. This amount includes:

• $10 million to support victims of human trafficking, bringing the total 2026-27 amount to $20 million.

• $10 million in grant funds to county district attorney offices that employ a vertical prosecution methodology for human trafficking crimes. (Vertical prosecution assigns one attorney to each human trafficking case across case stages—from arraignment through conviction—rather than passing the case between different prosecutors at each stage.)

• $15 million to implement the recommendations of the human trafficking working group.

• $3 million in direct grants to local entities for activities related to human trafficking, including $1.5 million to expand the City of San Diego Human Trafficking Task Force.

Wildfire Mitigation Program. The budget provides $25 million in bond funding for the statewide community wildfire mitigation program authorized by Proposition 4 (2024). Proposition 4 funds may be used for loans, rebates, direct assistance, or matching funds for projects that prevent wildfires, increase resilience, maintain existing risk reduction projects, reduce community wildfire risk, or increase home or community hardening. Projects must benefit disadvantaged communities or vulnerable populations. Budget provisions add additional funding conditions. These include:

• Placing a $25,000 per property cap on loans, rebates, and direct assistance for home hardening.

• Establishing funding goals and priorities (such as maximizing the number of homeowners able to participate and prioritizing the most cost-effective home hardening measures).

• Requiring OES to submit a program proposal by January 10, 2027, as well as a report evaluating program implementation and outcomes by January 1, 2028.

Southern Regional Emergency Operations Center (SREOC). The budget includes $12.5 million General Fund in 2026-27 (decreasing to $8.4 million annually beginning in 2028-29) to open and begin operating SREOC in Costa Mesa. The funds largely support emergency, logistics, information technology, and security staff for the new facility. The new facility, which is expected to be completed in late 2027, will include an office building, warehouse, maintenance shop, and radio communications tower. The facility will be capable of hosting federal, state, and local emergency management partners.

Child Sexual Assault. The budget provides $10 million one-time General Fund for grants to organizations that provide services to survivors of child sexual assault.

Statewide Infrastructure

Debt Service

The budget provides $8.2 billion from various funds for debt service payments in 2026-27. This represents an increase of 11 percent from 2025-26. This total includes $7 billion for general obligation bond debt ($5.6 billion from the General Fund) and $1.2 billion for lease revenue bond debt ($739 million from the General Fund).

Capital Outlay

Appropriates Notably More Funding for Capital Outlay in 2026-27 Compared to Recent Years. The 2026-27 budget package includes $3.7 billion for 111 capital outlay projects. This includes $1.8 billion from the Public Buildings Construction Fund (lease revenue bonds), $766 million from Proposition 2 (the 2024 education facilities bond), $619 million from California State University revenue bonds, $195 million from the General Fund, and the remainder from various other special funds including general obligation bonds. (In many cases, the General Fund ultimately pays off the debt service costs for projects that are initially supported by bonds, as highlighted by the above paragraph.) These spending totals are considerably higher than in the previous two years. In comparison, the 2022-23 budget package included $7.9 billion for 190 capital outlay projects, the 2023-24 budget included $2.6 billion for 93 projects, the 2024-25 budget package included $863 million for 35 projects, and the 2025-26 budget package included $631 million for 90 projects.

Budget Includes More Than $3.7 Billion for Capital Outlay Appropriations. Figure 1 shows a summary of projects receiving funding in 2026-27 by administering department. A more detailed list of the capital outlay projects—including which phases are being funded in 2026-27—is available for download at this link. As highlighted in the figure, the spending plan includes $1.8 billion for 13 projects by the judicial branch for building new courthouses and renovating existing ones. Additionally, $1.4 billion (around 38 percent) of capital outlay funding provided in the 2026-27 budget package is focused within the education sector, including $300 million for systemwide infrastructure improvements at the California State University, as well as $766 million for 40 different projects within the California Community College system. The figure also shows that while the 2026-27 budget provides over $3.7 billion for certain phases of the selected projects, the total cost associated with completing the projects is much more significant—$14.5 billion. While some of that funding may have been provided in previous years, in many cases the bulk of the estimated costs is for forthcoming phases and additional state funds will be requested in future years to complete the projects.

For a variety of reasons, we do not reflect certain capital outlay projects in the figure or linked table. Specifically, to avoid double counting previously provided funds or because specific data are not available, we do not include projects for which funding is: (1) continuously appropriated, such as some bond funds; (2) reappropriated, which provides additional time for the completion of the project; (3) reverted, if a project ended or requires modification; (4) previously appropriated but shifted to a different fund source, with no net change in the appropriation amount; or (5) provided to support local infrastructure projects. We also exclude funding for capital outlay projects undertaken by the California Department of Transportation (Caltrans). While the Legislature annually approves Caltrans’ overall budget, individual projects generally are approved by the California Transportation Commission rather than through the state budget process and therefore the 2026-27 planned projects and corresponding amounts have not yet been specified.

California Public Utilities Commission

The budget includes a total of $2 billion for the California Public Utilities Commission (CPUC) in 2026-27, almost entirely from various special funds. This reflects a net decrease of $2.5 billion (56 percent) compared to the 2025-26 spending estimate. This year-over-year decrease is mostly the result of a large one-time carryover of federal funds for broadband infrastructure projects reflected in the 2025-26 total. Notable changes to CPUC’s budget in 2026-27 include the following.

Provides Continued Funding for LifeLine. The budget includes $579.9 million from the Universal LifeLine Telephone Service Trust Administrative Committee Fund to support the California LifeLine program, which provides low-income California households with discounted cellphone and wireline services. This represents an increase of $77 million (or roughly 15 percent) compared to the budgeted amount in 2025-26. The increase is largely driven by continued projected growth in enrollment and the inclusion of a new Home Broadband Pilot Program. The budget also includes language authorizing the Department of Finance to adjust this funding amount to up to $664.9 million if program enrollment reaches 1.95 million participants.

Supports Implementation of Recent Legislation. The budget includes $8.1 million in 2026-27, decreasing to $7.6 million ongoing thereafter, mostly from the Public Utilities Commission Utilities Reimbursement Account (PUCURA) and 35 positions to support the implementation of seven policy bills. For example, the budget provides $1.9 million PUCURA annually and eight positions for CPUC to help implement Chapter 116 of 2025 (AB 825, Petrie-Norris), which authorizes the California Independent System Operator to transition the governance of real-time and day-ahead energy markets to the newly formed Regional Organization for Western Energy under certain conditions. The budget also provides $1.9 million PUCURA annually and eight positions for previously unanticipated workload associated with implementing Chapter 819 of 2022 (SB 884, McGuire), which authorized an expedited undergrounding program for large investor-owned utilities. (These funds add to ongoing resources provided beginning in 2023-24.)

Funds Litigation Costs. The budget includes $3 million in 2026-27 from PUCURA to pay for legal services on topics such as corporate and utility restructuring, finance, securitization, and bankruptcy matters.

Augments Funding for Public Advocates Office. The budget includes an additional $2.3 million in 2026-27 and ongoing from the Public Utilities Commission Public Advocates Account and ten positions for the Public Advocates Office, which is an independent office located within CPUC that advocates on behalf of ratepayers. This total includes $1.2 million ongoing and five positions for the Public Advocates Office to implement AB 825.

November 2026 General Election

The budget package includes $40 million in one-time General Fund money to support state and county elections officials in administering the November 3, 2026 General Election. Specifically, Chapter 21 of 2026 (SB 111, Laird) provides the one-time funds for the purposes described below.

$34 Million to Counties. The budget provides county elections officials $34 million in one-time General Fund money to administer the election. These funds shall be allocated to counties by the State Controller’s Office according to a schedule provided by the Department of Finance. The funding is divided into two purposes:

• Vote Counting Process Speed. The budget provides $29 million to county elections officials for the purpose of expediting the vote counting process and strengthening and protecting election integrity. Provisional language under Item 0890-101-0001 specifies that (1) counties shall prioritize expenditures that expedite the vote counting process and (2) the funds are available for counties to increase the number of available staff to tabulate votes, make equipment purchases or technology upgrades, or acquire space to accommodate additional staff or equipment.

• Voter Outreach and Education. The budget provides county elections officials an additional $5 million to provide voter outreach and education before the election. Provisional language under Item 0890-101-0001 specifies that these funded voter outreach activities include communicating to voters the benefits of submitting ballots before election day.

$5.25 Million to Secretary of State. The budget provides the Secretary of State a one-time $5.25 million General Fund augmentation to support the Secretary of States’ role as the chief elections officer in the state during the general election. The funding is divided into two purposes:

• Voter Outreach and Education. The budget provides $5 million to the Secretary of State to complete voter outreach and education. Provisional language under Item 0890-001-0001 specifies that these activities include communicating to voters the benefits of submitting ballots prior to election day. Chapter 248 of 2026 (AB 113, Gabriel) added language waiving the standard state procurement process for any contracts entered into or amended for this purpose.

• Administration of Election. The budget provides $250,000 to the Secretary of State to support, strengthen, and protect the administration of the November 3, 2026 General Election.

$750,000 to Office of Emergency Services. Under Item 0690-001-0001, the budget appropriated $750,000 to the Office of Emergency Services to be available for the office to conduct misinformation and disinformation tracking and contingency planning related to the election. Chapter 248 added provisional language waiving the standard state procurement process for any contracts entered into or amended for this purpose.

California Gambling Control Commission

The budget provides $273 million to the California Gambling Control Commission, largely from the Tribal Nation Grant Fund (TNGF) and the Indian Gaming Revenue Sharing Trust Fund. This is an increase of $117 million (76 percent) from the revised 2025-26 level. This increase is due to a $117 million increase in TNGF expenditures described below.

Increased Tribal Nation Grant Fund Allocations. The budget includes a $117 million TNGF increase in 2026-27, decreasing to $40 million in 2027-28 and ongoing. This is to allow the commission to comply with Chapter 129 of 2025 (AB 221, Ramos). Chapter 129 increases the grant amount that must be allocated annually to nongaming and limited gaming tribes from the TNGF.

California Horse Racing Board

The budget provides $20 million for the California Horse Racing Board, including $15 million from the Horse Racing Fund and $4 million from the General Fund. The overall funding level is roughly the same as the revised 2025-26 amount. However, the budget includes a reduction of $4 million from the Horse Racing Fund—offset by $4 million from the General Fund—annually for two years beginning in 2026-27. This will temporarily reduce the amount of fees paid by the horse racing industry to support the board.

Department of Cannabis Control

The budget provides $197.9 million, primarily from the Cannabis Control Fund (CCF) and Cannabis Tax Fund (CTF), for the Department of Cannabis Control (DCC). This is a decrease of $1.8 million (1 percent) from the revised 2025-26 level of $199.7 million. Most of this reduction is attributable to the expiration of previously provided General Fund support. We identify some of the major actions taken in the 2026-27 budget process below.

Enforcement and Legal Affairs Staff Increases. The 2026-27 budget provides $7.6 million in 2026-27 ($6.4 million CCF and $1.2 million CTF), declining to $6 million in 2027-28 and ongoing ($2.1 million CCF and $3.9 million CTF), to augment existing DCC enforcement and legal affairs staffing. Specifically, these resources would support 16 additional positions in the Law Enforcement Support Branch, Specialized Units Command, Northern Command, and Legal Affairs Division (growing to 20 in 2027-28). Eight of the enforcement positions provided in 2026-27 would be assigned to a newly created North State field office in Redding.

Hemp Enforcement and Regulation. The budget includes $7.3 million in 2026-27 ($5.6 million CCF and $1.7 million CTF), declining to $4.9 million in 2027-28 and ongoing ($4.1 million CCF and $852,000 CTF), to implement Chapter 248 of 2025 (AB 8, Aguiar-Curry). Under AB 8, which integrates hemp into the cannabis regulatory framework, DCC gained expanded enforcement authority over illegal intoxicating hemp sales and took over regulatory and oversight responsibility for certain hemp-derived products.

Cannabis Control Appeals Panel

The 2026-27 budget includes $3.5 million largely from the Cannabis Control Fund for the Cannabis Control Appeals Panel. This amount is $127,000 (4 percent) more than the revised 2025-26 funding level. Of the total, $3.4 million from the Cannabis Control Fund is provided on a three-year, limited-term basis. This will allow the Legislature to reassess the overall funding level for the panel as part of the 2029-30 budget process.

Department of Financial Protection and Innovation

The budget includes $184.2 million for the Department of Financial Protection and Innovation, primarily from the Financial Protection Fund (FPF). This is a net increase of $3.5 million (2 percent) over the revised 2025-26 level. The most significant adjustments in the DFPI budget extended limited-term funding for certain new programs and activities, as discussed below.

Consumer Financial Protection Law. The budget provides $15.3 million (FPF) on a four-year, limited-term basis and 53 positions for programs and activities authorized under Chapter 157 of 2020 (AB 1864, Limón), also known as the California Consumer Financial Protection Law. This includes funding for the New Covered Persons program, which levied its first annual assessment on regulated entities in 2025.

Debt Collectors Program. The budget includes $13.5 million (FPF) on a four-year, limited-term basis and 51 positions for activities authorized under Chapter 163 of 2020 (SB 908, Wieckowski), also known as the Debt Collection Licensing Act. This includes funding for examinations and enforcement. The Debt Collector program levied its first annual assessment on regulated entities in 2025.

Governor’s Office of Business and Economic Development

Provides Funding for Transmission Accelerator. Chapter 119 of 2025 (SB 254, Becker) established the Transmission Infrastructure Accelerator within the Governor’s Office of Business and Economic Development (GO-Biz) and a related revolving financing program administered by the California Infrastructure and Economic Development Bank (IBank). The program is intended to reduce the cost of eligible transmission projects through lower-cost public financing. The budget package provides $322.5 million from Proposition 4 (2024) to capitalize the revolving fund and $10.3 million in 2026-27 for program implementation, including ten permanent positions at GO-Biz and IBank. Administrative funding declines to $3.5 million annually beginning in 2029-30. The budget package also shifts final authority to approve project financing from the Accelerator to IBank and extends the financing program through 2036.

Extends Funding for California Civic Media Program. The 2025-26 budget package established the California Civic Media Program, a public-private partnership administered by GO-Biz to support local and community news organizations and provided $10 million General Fund for the program. The 2026-27 budget package provides an additional $10 million General Fund in both 2026-27 and 2027-28 to continue the program. Under existing law, annual public expenditures from the fund cannot exceed expenditures from private sources. If the full state appropriation is expended, at least $20 million in private expenditures also would be required over the two-year period.

Establishes Grants for Ethnic and Public Media. The budget package provides $6 million one-time General Fund to GO-Biz for media grants. Of this amount, $3 million is for outreach grants to media outlets that primarily serve non-English-speaking populations, communities of color, or both. The remaining $3 million is for grants to public media stations to address the loss of federal funding.

Provides Funding for Quantum Technologies and Deep Space Research. The budget package provides $30 million General Fund to GO-Biz to support activities related to quantum technologies and deep space research. The funding is available through June 2029, with up to 5 percent available for administrative costs.

Provides Additional Funding for Performing Arts Equitable Payroll Fund. The budget allocates $12 million General Fund for a second round of grants from the Performing Arts Equitable Payroll Fund. The program provides grants to eligible small, nonprofit performing arts organizations to support payroll costs and the hiring and retention of employees. The program’s first funding round provided about $11.6 million in grants to 100 organizations.

Formalizes GO-Biz’s Role in California Jobs First and Extends Administrative Funding. The budget package creates the Office of Regional Economic Development Initiatives within GO-Biz and assigns it responsibility for maintaining, updating, and implementing the California Jobs First State Economic Blueprint. The office is also responsible for coordinating state economic development activities, supporting regional economic development strategies, and providing technical assistance to regional partners. The budget package also extends the availability of administrative funding from prior Jobs First appropriations for GO-Biz, the Employment Development Department, and the Labor and Workforce Development Agency.

Establishes Ongoing Funding for Export Promotion. GO-Biz historically has utilized federal State Trade Expansion Program (STEP) grants to support its export promotion activities. Federal STEP funding has not been awarded to California for the current grant cycle, and future federal funding is uncertain. The budget provides $1.4 million ongoing General Fund to establish a state funding source for export promotion activities through the California Export Promotion Program.

Labor, Employment, and Workforce Development

Background

California’s major labor, employment, and workforce development programs provide work-related services and benefits to its residents, enforce its employment laws, oversee its workers’ compensation system, and regulate its workplace safety and health. Many of the work-related services and benefits are funded or required by the federal government, including unemployment insurance (UI) benefits and federal workforce training programs. The labor and employment programs are administered at the state level by the Employment Development Department (EDD), the Department of Industrial Relations (DIR), the California Workforce Development Board (CWDB), and the Agricultural Labor Relations Board. The state’s Labor and Workforce Development Agency oversees these entities and works to set policy and coordinate programs.

Key Budget Actions

Allocates $668 Million for Interest Payment on Federal UI Loan. The budget agreement includes $668 million General Fund to make the required annual interest payment on the state’s outstanding federal UI loan. As of July 2026, the state’s outstanding federal loan was $18.5 billion, approximately the same amount as was originally borrowed during the pandemic. The interest rate on the outstanding loan is variable and for this year was 3.2 percent.

Continues Funding for Sixth Year of State’s New Technology System at EDD. The budget plan includes $165.5 million ($70.9 million General Fund) to continue the EDDNext technology modernization project. This amount includes an additional $20 million ($10 million General Fund) requested as part of the May Revision for an aspect of EDDNext related to digital document management.

Reverts Prior-Year EDDNext Funding Due to Delay and Sequencing Change. The budget plan reverts $70.6 million General Fund from EDDNext’s 2024-25 appropriation. The reversion reflects a delayed start to the Integrated Claims Management System update and a shift to a sequential approach that would update the paid family leave and disability insurance before unemployment insurance, rather than doing all three programs at once.

Tightens Eligibility for Workers’ Compensation Benefits for Workers With Pre-Existing Disabilities. A budget trailer bill—Chapter 83 of 2026 (SB 171, Committee on Budget)—tightens eligibility for the Workers’ Compensation Subsequent Injury Benefit Trust Fund (SIBTF) program. Since the 1940s, the program has paid lifetime disability benefits to injured workers with pre-existing health conditions. The state collects an employer tax each year to cover benefit costs. The number of claims filed each year increased dramatically in the past decade, with most new claims citing common health issues—such as hypertension, sleep apnea, arthritis, diabetes, and acid reflux—as qualifying conditions rather than severe conditions as the state originally intended. The budget plan includes the following major eligibility changes:

• Pre-existing Conditions Must Be Labor Disabling. Pre-existing conditions must have reduced the worker’s earnings or otherwise limited their work. Previously, a condition could qualify even if the condition did not affect the worker’s job.

• Pre-existing Condition Must Be Documented Before the New Injury. Conditions must be documented in medical records or testimony before the subsequent workplace injury. Previously, pre-existing conditions could be established retroactively, after the subsequent injury occurred.

• Multiple Conditions Are Combined, Not Added Together. Multiple impairments will be combined in the same way they are in the main workers’ compensation system, which accounts for overlapping impairments, instead of being added together.

• Restores Original Threshold to Qualify for Benefits. Workers’ compensation reform in 2011 had the unanticipated side effect of making less severe injuries eligible for SIBTF benefits. The budget plan restores the original severity threshold for eligibility.

The new rules apply to pending claims filed after July 1, 2020 that have not yet cleared the final procedural steps. The number of claims (out of a total of about 30,000 claims pending) that will move forward under the old eligibility rules is unknown.

Establishes New Workplace Safety Unit to Track Safety of Emerging Technologies. The budget includes $1.8 million in special funds to create a new unit at the Division of Safety and Health within DIR to evaluate and regulate the use of artificial intelligence (AI)-controlled and autonomous workplace technologies. Examples include the use of AI-controlled drones, algorithmic management systems, wearable injury detection, and exoskeletons to reduce musculoskeletal strain.

Increases Support for Existing Grant Administration at CWDB. The 2026-27 budget plan includes additional resources for CWDB to administer previously approved workforce grant programs. In particular, the budget plan includes a total of $37 million—about one-third General Fund and two-thirds federal Workforce Innovation and Opportunity Act funds—in additional spending over the next four years.

Provides $41 Million for Various One-Time Workforce Grants. The 2026-27 budget plan includes $41 million for grant programs supporting nonprofits who provide training and employment to individuals. In particular, the budget provides one-time funds for the following programs administered by CWDB: Creating Restorative Opportunities and Programs, the United Food and Commercial Workers International Union Western States Council High Road Workforce Initiative, Hospitality Training Academy, Social Entrepreneurs for Economic Development, Community Coalition Workforce Training Facilities, the Dream Machine Innovation Lab, and a youth workforce training program at the ports.

Tax Policy Changes

Apply Sales Tax to Digital Prewritten Software. Starting January 1, 2027, the budget extends the sales tax to many sales of prewritten software. The administration estimates that this would raise General Fund revenue by $450 million and local sales tax revenue by $560 million in 2026-27, when it would be in effect for half a year. The full-year revenue estimates for 2027-28 and ongoing are $900 million General Fund and $1.1 billion in local sales tax revenues.

Extends Limitations on Business Tax Credits. Two years ago, the state temporarily increased corporation tax revenues by limiting the amount of tax credits a business can claim to $5 million for tax years 2024, 2025, and 2026. A mechanism was also created for taxpayers to recoup these temporary tax increases as tax refunds in future years. Under this mechanism, taxpayers can elect to receive 20 percent of the affected credits as a refund in each of five years, beginning in the third taxable year after the election. The budget extends both the credit limitation and the availability of the refund mechanism through 2029. Beginning in 2030, the budget also permanently limits business tax credit claims to the greater of $5 million or 70 percent of a business’ tax liability. The administration estimates that the extension of the limitation raises General Fund revenue by $1 billion in 2026-27, $3.3 billion in 2027-28, and over $4 billion per year for the remainder of the budget multiyear.

Modifies Film and Television Tax Credit Rules. The budget package makes several changes to the state’s Film and Television Tax Credit. The package extends the carryforward period for credits awarded under versions 2.0 (credits awarded July 2015 to June 2020) and 3.0 (July 2020 to June 2025) of the program from 9 years to 15 years for taxpayers that are active participants in version 4.0 (July 2025 to June 2030) of the program. For version 4.0, the legislation increases the share of unused credits that taxpayers can elect to receive as a refund from 90 percent to 95 percent and shortens the period over which these refunds are paid from five years to two years. Beginning in 2027, the legislation also exempts film tax credits that have been sold, which is an option available to independent productions, from the state’s business tax credit limitations. As a result, purchasers of these credits would not be subject to either the $5 million limitation in effect through 2029 or the permanent limitation beginning in 2030. These changes are estimated to reduce state revenues by $10 million in 2026-27, rising to around $170 million by 2029-30.

Reduces First-Year Tax for Certain Businesses. Limited liability companies, limited partnerships, and limited liability partnerships generally pay an annual tax of $800. From 2021 through 2023, the state temporarily exempted newly formed businesses of these types from the tax in their first year, but this exemption has since expired. The budget package reduces the annual tax for these businesses to $400 in their first taxable year for tax years 2027, 2028, and 2029. The administration estimates that the reduction will lower General Fund revenues by $25 million in 2026-27, $100 million annually in 2027-28 and 2028-29, and $75 million in 2029-30.

Extends California Competes Tax Credit. The budget package extends the California Competes Tax Credit by five years. The program provides nonrefundable tax credits to companies in exchange for a commitment to increase employment and investment in the state over several years. Under prior law, the Governor's Office of Business and Economic Development could allocate credits through 2027-28. The budget extends this authority through 2032-33, while maintaining the program’s baseline annual allocation of $180 million.

Budget Extends and Expands Homeowner Tax Exclusion for Wildfire Mitigation Grants. The budget agreement extends and expands a 2024 law that excludes from the state income tax grants that homeowners receive from the state to harden their properties against the risk of wildfires. State grants have been used to clear vegetation or install ember resistant roofing and vents. Without the exclusion, the grant amounts would count as taxable income under state law. The 2026 budget agreement extends the existing exclusion from 2029 to 2031 and broadens it to include new grant programs offered under Proposition 4 (2024).