Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Michael P. Callagy, County Executive
Connie Juarez-Diroll, Chief Legislative Officer
Subject: FY 2026-27 May Revision - State Budget Update
RECOMMENDATION:
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Accept the June 2026 informational report on the FY 2026-27 May Revision.
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BACKGROUND:
On May 14, 2026, Governor Newsom released his final revised budget proposal for the 2026-27 state fiscal year. The plan includes $246.56 billion in General Fund spending, an $18.6 billion increase over last year's enacted budget. According to the Governor, the proposal eliminates the state's projected deficit through July 2028 while maintaining strong reserves and protecting core public services amid continued economic uncertainty. The May Revision includes a $1.8 billion reduction in General Fund spending, avoids major new ongoing expenditures, and sets aside surplus funds to support the 2027-28 budget and improve the state's long-term fiscal stability.
Overall, the May Revision projects slower short-term economic growth for both California and the U.S., driven by global instability and uncertainty around federal trade, immigration, and monetary policies. International conflict and rising energy prices continue to cloud the state's economic outlook. However, longer-term growth is expected to improve as economic pressures ease and AI-driven productivity increases.
As for state reserves, the Budget Stabilization Account (BSA) balance (commonly known as the Rainy-Day Fund) for 2026-27 is $15.1 billion. In addition to the BSA, the May Revision includes $4.5 billion in the Special Fund for Economic Uncertainties and $10.3 billion in the Public School System Stabilization Account, bringing combined reserves in 2026-27 to nearly $29.9 billion. The Administration intends to continue discussions with the Legislature on Proposition 2 reform to allow the state to build additional savings during pe...
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