Governor Gavin Newsom’s initial January budget proposal was a relatively status quo budget; however, his May Revise budget proposed drastic cuts to important programs for Californians with disabilities, including Medi-Cal and In Home Supportive Services (IHSS). According to the Governor and the Legislature, this year California faced a significant budget shortfall driven by three key factors:

• First and foremost, the policies of the new federal Administration – in particular the tariff increase policies – have caused economic forecasts throughout the world to be significantly downgraded. The federal policies have greatly impacted California’s economic forecast as well, with the May Revision projecting slower growth and the Newsom Administration indicating that federal economic policy changes have reduced state General Fund revenues by $16 billion. The state budget condition may be further adjusted downward based on additional adverse federal policies in the coming weeks and months, such as major cuts to Medicaid.
• Second, to a modest degree, the baseline costs of key programs – particularly Medi-Cal – have grown faster than projected.
• And third, to a smaller degree, the devastating LA fires have had a negative economic impact and resulted in increased state spending.

In response to Governor Newsom’s proposed cuts, the Legislature successfully pushed back against most of the drastic reductions to health and human services programs. The final state budget signed by the Governor represents a negotiated compromise. In the end, the proposed 2025-26 California state budget plan includes $228 billion of spending from the state’s General Fund in 2025-26, an estimated $89 billion of special fund spending, and $4 billion of spending from bond accounts. In addition, as of the May Revision, $174 billion of federal funds spending was projected to flow through the state treasury, but that amount may change significantly based on actions by Congress and the White House.

The Arc & UCP California Collaborative has provided the following detailed summary of California’s enacted 2025-26 budget and its impact on people with intellectual and developmental disabilities and their families. Click HERE to view the full summary.