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By: @Kyle Packham 

With Governor Gavin Newsom set to release the May Revision to his 2026-2027 State Budget Proposal this week, legislative leaders in the State Senate and Assembly recently announced their own budget frameworks.

Assembly Framework

On May 7, Assembly Democrats announced their Road Map to a Responsible and Compassionate Budget: a framework of priorities that underscores an ongoing commitment to protecting health care access and essential safety-net programs, along with increasing the rainy-day fund and advancing new housing policies.

Among the housing policies referenced in the Assembly plan are a push for a new housing bond, more low-income housing tax credits, and continued efforts to expedite housing construction and provide oversight on past policy changes.

The Assembly plan promises no new major spending commitments, stating, “We’re aligned with Senate Democrats: the current revenue surge should go toward schools, building up reserves, and one-time needs — not locking in big new ongoing expenses we may not be able to sustain.”

Senate Framework

On April 16, the California State Senate Democrats unveiled its “Foundation for the Future” budget plan. The framework focuses on three pillars: building the state reserves, maintaining funding for essential programs, and reducing the long-term structural deficit.

The Senate plan includes $2.5 billion in Prop 4 allocations to ensure funds are allocated for climate change resilience, environmental protection, wildfire resilience, and water infrastructure projects. It also includes an additional payroll tax on the state’s largest one to two percent of corporations to contribute to the Medi-Cal costs of their workers.

Additional Med-Cal contribution requirements under the Senate plane would not apply to small and medium businesses – including local franchisees. Between $5 billion and $8 billion in annual special fund revenues would be expected, which would be dedicated to offsetting Medi-Cal costs to taxpayers, assisting struggling hospitals, and supporting county health and human service program workers. Specific program details will be developed through deliberations with the Administration and the Assembly.

LAO Updated Revenue Outlook

On May 7, the Legislative Analyst’s Office (LAO) released it’s May 2026 “Big Three” Revenue Outlook, noting that revenues are surging but appear unsustainable and cautioning the Legislature against using reserves or taking on new debt.

The LAO’s updated forecast of revenues from the state’s three largest taxes (income, corporation, and sales) shows a $25 billion upgrade over the Governor’s Budget across the budget window (prior year to budget year).

According to the LAO, “This upgraded outlook is almost entirely attributable to higher expectations for income tax collections, which are being driven by enthusiasm around AI and the related stock market boom. As such, we continue to caution that these surging revenues likely are not sustainable.”

Next Steps for the California State Budget

• May 14: Governor presents May Revision
• May 18-28 (approximate): Assembly Budget Committee and Budget Subcommittee hearings on the May Revision and the 2026-27 state budget package
• June 1-5 (approximate): Deadline for Assembly and Senate to submit proposed 2026-27 legislative budget bill to Legislative Counsel. Discussions with legislators on anticipated Senate-Assembly budget plan, and with administration to advance possible budget agreement.
• June 8-15 (approximate): Additional Budget Committee hearing or hearings on anticipated Senate-Assembly budget plan or budget agreement with the administration
• June 15: Expected Floor vote on legislative budget bill (which must be in print on or before June 12)
• June 22-29 (approximate): Additional Budget Committee hearing or hearings, and expected Floor votes on budget bill amendments and trailer bills to facilitate a final budget agreement with the administration
• June 29: Expected deadline for Governor to sign or veto the June 15 budget bill
• July 1: 2026-27 state fiscal year begins