Governor Newsom Proposes 2026–27 California Budget With $23 Billion in Reserves and Expanded Education Funding
SACRAMENTO, January 10, 2026 (California News Today) — California Governor Gavin Newsom has announced a proposed $348.9 billion state budget for the 2026–27 fiscal year that refills the state’s reserves to $23 billion, limits new ongoing spending, and prioritizes education, public safety, and fiscal oversight.
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The proposal includes total deposits of $23 billion into state reserves, including $14.4 billion in the Rainy Day Fund, and reflects stronger-than-expected revenues paired with a cautious spending approach. Accroding to the administration, the budget is designed to preserve prior policy achievements while preparing for potential economic volatility.
“This budget reflects both confidence and caution. California’s economy is strong, revenues are outperforming expectations, and our fiscal position is stable because of years of prudent fiscal management — but we remain disciplined and focused on sustaining progress, not overextending it. As we continue our work to place the state on a sound fiscal footing into the future, we must ensure the budget remains balanced beyond the upcoming fiscal year, and I look forward to partnering with the Legislature to do just that. We must continue our prudent fiscal management, funding our reserves, and continuing the investments Californians rely on, from education to public safety, all while preparing for Trump’s volatility outside our control. This is what responsible governance looks like,” said Newsom.
The budget projects more than $42 billion in additional General Fund revenue across the three-year budget window from 2024–25 through 2026–27, resulting in a projected deficit of $2.9 billion that the administration said is resolved within the proposal. The plan also accounts for nearly $3 billion in stronger-than-anticipated December revenues that are not yet reflected in the official forecast.
Education spending remains a central focus, with proposed record per-pupil funding of $27,418. The budget continues funding for universal transitional kindergarten, expanded community schools, free before- and after-school programs, universal school meals, literacy initiatives, and expanded college and career pathways. Higher education funding includes $5.3 billion for the University of California, $5.6 billion for the California State University, and $15.4 billion for the California Community Colleges.
In addition to education, the proposal outlines $194.6 million in new public safety investments, continued funding for homelessness prevention programs with added accountability requirements, and new grants for reproductive health care providers. The plan also proposes reductions in state operations spending and the elimination of long-vacant positions to generate long-term savings.
The budget further commits to paying down $11.8 billion in long-term pension obligations over the next four years and includes investments in wildfire resilience, clean energy incentives, and drinking water infrastructure. The administration cited ongoing federal policy changes as a source of uncertainty, particularly in health and nutrition programs, adding to the need for fiscal restraint.
Source: Office of Governor Gavin Newsom
For more information, visit www.ebudget.ca.gov.
