California Leaders Reach $351.7 Billion Budget Agreement with No Deficit

SACRAMENTO — Governor Gavin Newsom, Assembly Speaker Robert Rivas, and Senate President pro Tempore Monique Limón announced a final state budget agreement Thursday that they say eliminates deficits for the next two fiscal years while strengthening California's long-term fiscal position. The deal comes just days before the July 1 start of the new fiscal year.

SARATOGA, Santa Clara County — nestled in the foothills of the Santa Cruz Mountains in Silicon Valley about 50 miles south of San Francisco, is a residential community where many residents commute to Apple, Netflix, and Google.

The agreement calls for $251.5 billion in general fund spending and $351.7 billion in total spending for the 2026-27 fiscal year — slightly less than the Legislature's own $253 billion general fund plan passed on June 15. It sets aside more than $28 billion in reserve funds and creates a new sales tax on electronically delivered software expected to generate $450 million in its first year and $900 million annually thereafter.

"A balanced budget isn't an end in itself — it's how we deliver for Californians. This budget demonstrates responsible choices that protect our fiscal strength while continuing to invest in what matters most," Newsom said.

The budget preserves the In-Home Supportive Services program that allows people with disabilities to remain in their homes rather than care facilities, allocates $900 million for homelessness prevention — $400 million more than the governor's May proposal — and provides $50 million to enforce Proposition 36, the ballot measure that reinstated tougher penalties for certain property and drug crimes.

"Despite continued funding cuts from the federal administration, California was able to mitigate the impacts to programs that millions rely on," Limón said. "This budget agreement reflects our commitment to protect core programs and address our short- and long-term financial future."

Two measures headed for the November ballot are described as key pillars of the broader fiscal picture: a $11.25 billion Veterans and Affordable Housing Bond Act and the Save for California's Future Act, which would increase the cap on the state's rainy day fund from 10% to 20% and boost automatic savings when capital gains tax revenues exceed certain thresholds. The governor is expected to sign the budget before the Wednesday deadline.