January 29th, 2026
Overview
On January 9, Governor Newsom released his proposed $348.9 billion state budget for 2026-27, an early look at how the State plans to invest in kids over the next fiscal year. California is facing a budget deficit, with estimates ranging from roughly $3 billion to $18 billion depending on economic assumptions. While the January Budget Proposal does not include major cuts to services for kids, it represents only the first step in the state’s budget process. The Governor’s proposal will be revised in May and negotiated through June, when a final budget is adopted ahead of the new fiscal year, which begins on July 1.
Below, we highlight key items from the proposal across early childhood, health, education, and child welfare programs that affect California’s kids.
Proposed Budget Impacts by Issue Area
When it comes to early childhood programs and services, the budget proposal includes the following:
- Retains $30 million in child care prospective payments, includes one-time increases to help address the rising cost of care, and provides a 2.41% cost-of-living adjustment for child care providers.
- $11.5 million in one-time Proposition 64 funds to support childcare providers impacted by wildfires.
- Full restoration of $26.1 million for the CALWORKs Home Visiting Program, which was previously reduced, honoring the 2024 budget agreement with the Legislature.
- The proposal does not follow through on the multi-year commitment made in the 2021-22 State Budget for new child care slots. In 2021, the Governor committed to expanding child care access by 200,000 slots, yet the state remains at 129,800, falling short of that goal.
- The proposal does not secure advance reimbursement rates aligned to the new alternative methodology that reflects the true cost of care, leaving rates outdated and insufficient, and limiting the ability of providers and educators to earn livable wages.
There are several key takeaways from the budget proposal related to children’s health, including:
- Health Insurance: The State remains committed to major Medi-Cal initiatives like CalAIM, however, there are significant upcoming changes due to restrictive federal policies and reduced health care-related funding from H.R.1. For example, the budget proposal would limit coverage for children and adults in certain legal immigration categories because of reduced federal funds available for those populations due to H.R.1.
- Community Schools: The budget proposes $1 billion from the ongoing Proposition 98 General Fund for community school model expansion, providing ongoing resources to current grantees and expanding access to thousands of additional high-need schools to improve student outcomes that includes partnering with health and social service agencies.
- Mental Health Supports: The Administration has proposed a major change to the mobile crisis benefit. Beginning in April 2027, the budget proposes to change the mobile crisis Medi-Cal benefit from mandatory to optional. This will impact the implementation of the 988 phone line, as well as the ability for quick responses to youth in crisis.
The proposed budget includes several provisions affecting education, including funding, investments, and governance:
- Education Funding: The proposal preserves the Proposition 98 minimum funding guarantee for K-12 public schools and community colleges and avoids formal funding suspensions, however, it continues a troubling pattern of meeting that obligation by withholding funding owed to schools. Despite strong revenues that increase Proposition 98 funding, nearly 40% of the new funding is being set aside or delayed rather than reaching classrooms.
- TK-12 Investments: The proposal’s largest TK-12 investment is a $2.8 billion one-time discretionary block grant. Keeping persisting achievement gaps in mind, it’s critical that these funds are allocated using an equity-based approach aligned with the Local Control Funding Formula to ensure resources are directed towards students with the greatest needs.
- Other Education Priorities: The proposal largely maintains other key education priorities, including transitional kindergarten, community schools, after school and summer learning, special education, literacy, school meals, workforce preparation, and student behavioral health supports.
- Governance Reform: The proposal advances an important governance reform by aligning the California Department of Education under the authority of the Governor-appointed State Board of Education, a critical step toward clearer accountability and more effective implementation of education policy.
Overall, the Governor’s budget proposal does not include significant cuts to services and supports for youth in foster care and their caregivers. However, after multiple consecutive years of budget deficits and proposed reductions – and with several months left before the budget is finalized – it is important to ensure that additional cuts affecting children and youth in foster care are not introduced as budget negotiations progress. This includes closely monitoring potential changes in federal funding and assessing their impact on the child welfare system.
