What to Know about California’s Budget Proposal for 2026-27

On January 9, 2026, California Governor Newsom released his budget proposal for 2026-27. Although many people are relieved that the proposed budget does not contain significant cuts, others have raised concerns that it doesn't do enough to protect disability services from threats coming from the federal level, specifically the Medicaid cuts expected in November 2027.

To help us understand the budget proposal and what’s at stake for people with disabilities in California, we sat down with Christofer Arroyo, Deputy Director of Policy and Public Affairs for the State Council on Developmental Disabilities. Here are the top takeaways from our conversation that families need to know.

The governor allocates the budget based on the fiscal year, not the calendar year, so the new budget proposal covers July 1, 2026 to June 30, 2027. Arroyo tells us that the proposed budget for the entire state of California is $248 billion, about $10 billion more than last year.

The governor will revise the budget in May based on state revenue, and then it must be passed by the State Assembly and signed by the governor by July 1, 2026. Hear Arroyo explain in this clip how the budget timeline works and how what’s in the current proposal might change in May:

Arroyo directs everyone to ebudget.ca.gov, a website published by the state Department of Finance. “There's a summary that isn't too tough to read,” Arroyo says. “It's not in totally plain language, but it's not written in super accounting speak either, which is great.” Here’s what it shows for the Department of Developmental Services (DDS), which oversees Regional Centers:

• $21 billion to serve 527,000 people
• An increase of about $2.4 billion from last year to serve about 37,000 more people

Arroyo points out that some of the changes in the state budget are due to “HR-1, a federal bill that essentially reduces states funding for Medicaid programs. Here in California, there are many Medicaid dollars that California receives that go to more than just Medi-Cal.” Here are the ways Arroyo says HR-1 will impact the state budget:

• $300 million will be required from the state budget to cover CalFresh food assistance.
• California won't be able to collect taxes from some Medicaid providers, which means that there's less money coming into the state.
• Beginning January 1, 2027, people who are able to work must either be working, attending school, or volunteering to receive Medicaid benefits. Arroyo says, “There's an expectation that some people won't satisfy the work requirement so will no longer receive services,” which the state expects will save money.
  • According to Arroyo, people with disabilities are going to be exempted from these work requirements. “Many folks still have questions about exactly how this is going to work and what the definition and qualifiers and all that stuff should be. The early indicators are that people with developmental disabilities are largely going to be exempted from this requirement, but we're still looking for the details.”
• Currently, the federal government matches 90% of emergency funds spent by California. Arroyo says, “Because of HR-1, we're going to see that drop down to 50%, so if we want to continue providing emergency services at the same level as they look right now, it's going to cost us $658 million to do that.”
• There's going to be a reduction in federal funding for Medi-Cal for people with certain immigration statuses. The state has not announced that these services will continue, potentially reducing costs for the state.
• It has been proposed that redeterminations for Medi-Cal eligibility will occur every six months instead of every year. Arroyo says, “Fewer people are expected to be found eligible because some people just aren't going to be meeting that deadline to submit their paperwork. It's going to result in a reduction of $463 million in the coming fiscal year. So understand that much of these savings that are going to arrive at our doorstep are because fewer people are going to be utilizing the services because of these requirements.”

Will there be cuts to Medi-Cal services in this budget?

Arroyo says it’s unlikely: “I don't anticipate any major changes due to HR-1. That doesn't mean Congress couldn't pass another law impacting Medicaid services and funding, but I'd say people don't have anything really to worry about in terms of Medicaid-funded services. Those seem to be accounted for in this year's budget.” Arroyo says that he doesn’t anticipate any changes in Medi-Cal waivers either.

One piece of good news that Arroyo points out from HR-1 is the new federal Rural Health Transformation program, which allocates $233 million in federal funds “to expand access to health care, to strengthen the workforce, which usually means training, creating more positions, and enhancing infrastructure in rural and frontier communities. So that's good stuff, right? More money coming in and new programs to serve people in rural areas where it may be tough to get services.”

We will have to wait for more details about whether this only affects increases in hours for current recipients or whether it also applies to new applicants. Arroyo says, “Highly densely populated counties are going to have more recipients in their area, so I think there's just going to be an increased cost to them compared to more rural counties where there are fewer recipients.”

There are two other proposed changes to IHSS:

1. Eliminate the IHSS Backup Provider system to save $3 million.
2. Eliminate early access to IHSS during the waiting period before Medi-Cal is approved.

For people wondering if they will see reduced IHSS hours as a result, Arroyo advises, “People are going to have to engage in strong advocacy. Whenever we see any kinds of changes like this, the implication is always to know your rights, know how to advocate, and understand what the changes are so that you can advocate appropriately. IHSS is a program designed to keep people in their own homes and out of a nursing home, so keep that in mind. Don't ever forget: It's to keep your family member or yourself in your home. That's a big deal.”

A big concern for many families in the Self-Determination Program is whether SDP budgets are changing. DDS has stated that there will be savings in the Self-Determination Program going forward but has provided no details yet.

It’s likely that changes in SDP funds will be at the program level, not to individual budgets. Arroyo says, “Every year, the advisory committees get together with the Regional Centers to figure out how this money should be spent to promote and make the program smoother, better, etc. DDS right now has been absorbing costs. They've been paying for the background checks, the fingerprint checks, all that administrative stuff that happens behind the scenes that moves SDP forward. Consequently, it's being proposed that those implementation funds are eliminated, and instead get transferred over to cover the administrative costs that have come out of DDS general funds.”

Another proposed change is a new streamlined grievance process, the HCBS access rule, which would be getting $2.4 million to implement a new grievance process. Arroyo says that rights-based complaints currently include 4731 complaints, whistleblower complaints, general citizen complaints, and others, which all have their own forms and different procedures. Completing the wrong form can cause frustrating delays. According to Arroyo, “DDS is unifying the complaint and grievance processes under a singular process to really streamline it and ensure that people can get their concerns and their complaints addressed. Rest assured that you will see trainings from our department, Undivided, and Disability Rights California providing information about exactly what is the process.”

Why does this matter? With the new requirement to re-establish Medi-Cal eligibility every six months, it’s more important than ever to get paperwork in early so that no one loses their benefits. Arroyo says, “Send it certified mail. Send it a minimum of two weeks before the deadline, if not a month before. Don't get anywhere near the deadline of losing your benefits because it is completely preventable. You do not want to have to go through the process of reestablishing eligibility from scratch. I would not lay back and wait to be told. I would take a proactive stance.”

This is where Smart Reminders in the Undivided app can be a lifesaver. Once you add a Medi-Cal renewal or IHSS renewal date to your account, Smart Reminders will notify you when a deadline is coming up, plus step-by-step guidance to walk you through applications and paperwork. Get started→

Education and assistance programs

Of the state budget of $248 billion, nearly $150 billion is being devoted to schools. Here are the items Arroyo highlights for our community in the budget proposal:

• Continues the learning recovery emergency block grant first administered during the pandemic
• Continues reading screenings for students in kindergarten through second grade
• Home-to-school transportation program
• Special education child nutrition program
• LA County school wildfire recovery
• Additional funding for Child Find, which helps identify students with disabilities
• Community college funding

Arroyo confirms there are no proposed changes to Early Start. Another item to highlight is there will be cost of living adjustments for parents utilizing child care programs.

Arroyo also mentions additional funding going toward the prevention of discrimination, including:

• Bureau for Descendants of American Slavery
• Commission on the State of Hate
• Housing and Homelessness Agency and affordable housing programs, which will impact people with developmental disabilities

Arroyo emphasizes that people really can change policies and budgets through advocacy efforts; we don’t have to sit back and accept something that doesn’t serve our families. Arroyo’s advice between now and the final budget in July is to familiarize yourself with anything in the budget that concerns you and reach out to your legislator. He says, “Now, if you don't have a relationship with your legislator, use this as an excuse to create that relationship. Say, ‘Hey, look, there's this thing here. And I know it could have been worse, and I appreciate the fact that it's not so bad. There's this thing going on that's wonderful. But there's this thing that's going on that's going to impact my life.’”

“Stories drive decisions,” Arroyo says. “Statistics appeal to people's brains. Stories appeal to their hearts. You are an expert on your story.” Check out our article What We Can Do Now to Protect Our Children’s Rights for tips and templates for contacting legislators and telling your story. You can also see our article California State Updates in January 2026 for a roundup of legislation currently under consideration that would impact kids with disabilities.

Thank you to Christofer Arroyo for sharing insights and answering parent questions during our live event! Check out the full recording (with transcript available) here in our resource library.

We have more live Q&As coming up soon, including a special walkthrough of Undivided’s new IEP Assistant with CEO Seth Besse! To stay updated on upcoming events and other helpful resources, join our free weekly newsletter list!