Implications of Federal Budget and Policy Proposals

Stronger-than-expected revenues do not solve all of the state’s challenges. The 2026–27 budget is Governor Newsom’s last opportunity to fully respond to the harmful federal cuts enacted through H.R. 1.

key takeaway California’s state budget reserves, including the “rainy day fund” and other reserve accounts, serve as a financial safety net for services like education, health care, and child care during economic downturns. The rules for depositing and withdrawing funds are complex, and policymakers should consider reforms, such as excluding reserve deposits from the Gann … Continued