Senate budget panel advances $351.7 billion, two-year budget package; delays some Medi‑Cal cuts to 2027

The Senate Budget and Fiscal Review Committee on Tuesday advanced a two‑year budget package that leaders described as balanced for 2026‑27 and 2027‑28 and that provides $351.7 billion in total expenditures, $251.5 billion of it from the General Fund. Chair (Chair) told the committee the package "includes record reserves of 35,200,000,000" and is designed to cut the long‑term structural deficit roughly in half.

Erica Lee of the Department of Finance provided the committee a detailed walkthrough of the package, describing two budget bill juniors (AB 111 and AB 112), 16 trailer bills and two policy bills. Lee said the package preserves core programs while delaying some reductions: "This budget does reflect the foundation for the future budget put forth by the Senate Democrats earlier this year," she said, and noted $4.5 billion in the SFEU and additional rainy‑day funds set aside in the plan.

Key allocations highlighted in the presentation include funding for 22,770 new childcare slots; $900 million for the Homeless Housing Assistance and Prevention program (HAP); $700 million for affordable housing programs; one‑time and ongoing support for public and distressed hospitals; investments in TK‑12 and higher education; and a set‑aside to support the transition caused by federal HR 1 changes to immigrant eligibility for federal benefits.

On health and immigration, the package delays implementation of some Medi‑Cal reductions (including dental and clinic payment changes) to July 1, 2027, and continues full‑scope Medi‑Cal for asylees and other groups through the 2026‑27 budget year while directing funding to mitigation and navigation. Lee described a $39 million investment to support care coordination services for individuals transitioning from managed care to fee‑for‑service delivery, saying it will fund measures such as a nurse advice line and provider navigation. "About 2,000,000 individuals will transition to fee for service," a Department of Finance official told the committee in response to member questions about scale.

Members pressed on several specifics. Senator Smallwood Cuevas raised concerns about the number of people who could lose benefits and where they would receive care; Department of Finance replied that much of the provider network servicing affected populations already operates in fee‑for‑service settings and that additional coordination funding is intended to ease the transition. Senator Durazo warned the committee that delaying cuts "does not mean resolution," calling the budget a way to "buy time" and urging continued work on policies that would require large corporations to contribute more toward Medi‑Cal costs (the "fair share" provisions discussed in AB 171).

The hearing also reviewed several trailer bills and policy proposals: AB 126 (Prop 98/education investments and LCFF adjustments), AB 135 (higher education and Pell Grant alignment), AB 150 (early learning/childcare omnibus), AB 164 (health omnibus), AB 169 (transportation/DMV modernization including data‑sharing and Real‑ID considerations), AB 170 (housing reorganization plan to create a California Housing and Homelessness Agency), and AB 181 (education governance, which would create an education commissioner appointed by the governor and confirmed by the Senate to manage daily operations of the Department of Education beginning January 1, 2027).

Committee members also probed transparency and privacy safeguards tied to transportation/DMV data sharing (AB 169). Senator Richardson questioned giving $90 million to a reproductive care provider with limits on Public Records Act access; department staff said the confidentiality provisions are intended to protect sensitive patient data while acknowledging the committee’s concerns about public oversight.

After public comment that included dozens of speakers — county officials, health‑care advocates, labor groups, education and student representatives — the committee proceeded through motions and roll‑call votes on the listed bills. The clerk read each roll‑call and the motions were approved by the committee for referral according to the tallies recorded in the hearing.

Votes at a glance (committee motions recorded in the hearing):
- AB 111 (budget bill junior amending AB 109): Motion to pass (moved by Richardson). Committee disposition: passed (committee tally recorded in the hearing).
- AB 112 (technical corrections/budget fix): Motion to pass (moved by Archuleta). Committee disposition: passed.
- AB 126 (education trailer/LCFF/Prop 98 items): Motion to pass. Committee disposition: passed.
- AB 135 (higher education trailer): Motion to pass. Committee disposition: passed.
- AB 150 (early learning and child care omnibus): Motion to pass. Committee disposition: passed.
- AB 152 (Human Services omnibus): Motion to pass. Committee disposition: passed.
- AB 163 (developmental services trailer): Motion to pass. Committee disposition: passed.
- AB 164 (health omnibus — Medi‑Cal/ADAP/UIS changes): Motion to pass. Committee disposition: passed.
- AB 165 (skilled nursing facilities): Motion to pass. Committee disposition: passed.
- AB 166 (resources/environment trailer): Motion to pass. Committee disposition: passed.
- AB 168 (energy/truck/EV incentives): Motion to pass. Committee disposition: passed.
- AB 169 (transportation/DMV/Real‑ID/AAMVA data): Motion to pass. Committee disposition: passed with committee debate about audit timing and privacy safeguards.
- AB 170 (housing and homelessness reorganization): Motion to pass. Committee disposition: passed.
- AB 171 (labor trailer/fair share provisions): Motion to pass. Committee disposition: passed; members noted this begins a multi‑year path to broader corporate contribution changes.
- AB 172 (state government/general government trailer): Motion to pass. Committee disposition: passed.
- AB 174 (courts trailer — lactation rooms and remote proceedings deadlines): Motion to pass. Committee disposition: passed.
- AB 179 (housing/homelessness trailer/HAP accountability): Motion to pass. Committee disposition: passed.
- AB 180 (tax trailer/California Competes extension): Motion to pass. Committee disposition: passed.
- AB 181 (education governance — education commissioner): Motion to pass. Committee disposition: passed to the floor with strong member debate and opposition by some education stakeholders.
- AB 182 (ballot measure placement urgency bill): Motion to pass. Committee disposition: passed.

What it means: The Committee moved a complex package that aims to stabilize the state budget in the near term while shifting many policy debates and implementation questions to the summer and the full Senate floor. The agreement preserves core health and human services programs for now, delays some Medi‑Cal reductions tied to federal HR 1 until July 1, 2027 while funding mitigation and navigation, and creates new mechanisms for housing, homelessness, and education governance. Several members said the package "buys time" but does not resolve longer‑term structural deficits; advocates urged continued oversight on homeless outcomes, hospital stability, and privacy protections tied to DMV data sharing.

Next steps: The committee recorded its motions and roll‑call tallies during this hearing and advanced the bills for further action per Senate rules. Department of Finance staff and the Legislative Analyst's Office remain available to answer follow‑up questions as trailer bill language is refined before final votes in the Senate.

Ending: The hearing concluded after an extended public comment period and roll‑call votes; the committee placed the bills on call for final disposition and will return to floor procedures per Senate schedule.