The governor’s May revised budget announcement brought relief in many regards, but it doesn't mean the programs our children rely on are untouched. Significant proposals and policy shifts are still on the table for all programs in California, some good and some potentially not, and there's increased uncertainty in federal funding and how that will affect programs like Regional Center, Medi-Cal, and IHSS.
We sat down with Aaron Carruthers, Executive Director of the State Council on Developmental Disabilities, to help families understand what's happening and how telling our stories to legislators in the next few weeks could help shape outcomes for our kids. Here are the key takeaways from our conversation:
Carruthers says the proposed California budget includes a “historic” 43% increase in funding for special education, including a “one-time increase of $25 million for grants to expand inclusive college programs for students with IDD.” There are also increases for civil rights and disability rights, like affordable housing.
Carruthers says of the May revise, “It wasn't as bad as we expected, but it's still mixed. On the good side, we saw some unexpected welcomed increases in special education, but we also saw decreases in healthcare.”
Carruthers explains that the state’s budget year runs from July 1 to June 30.
What happens between the May revise and the final budget? Carruthers explains, “The legislature has a month until June 15 to pass their version. They usually take the governor's version and edit from there, so they take the governor's as a first draft and make adjustments up or down. They need to do that by June 15, and then the governor needs to sign it by June 30 to make sure it's all in place to begin July 1.”
Carruthers says that starting in January 2027, the state will start to implement changes to Medi-Cal to comply with HR-1, which passed in July 2025, when “the federal government cut $1 trillion from their Medicaid spending.” About one-third of Californians use Medi-Cal, so these changes will affect millions of people. “The number that I've seen has not been specific, but the state expects to lose tens of billions of dollars in federal funding [over 10 years] because of HR-1,” Carruthers says. These losses are not through direct cuts to Medicaid but through policy changes that the federal government expects will save money.
Here are key points to pay attention to:
Medi-Cal redeterminations will happen every six months instead of every year. Carruthers says, “This is purposeful, burdensome paperwork because people can't keep up with it. And if people can't keep up with it, they lose their coverage.”
Medi-Cal recipients with “unsatisfactory immigration status” will have their Medi-Cal coverage through fee-for-service, and their premiums will increase from $30 to $50.
At the federal level, individuals with disabilities are excluded from the new work requirements, and the broad definition includes “a physical, intellectual, or developmental disability that significantly impairs their ability to perform one or more activities of daily living.” Family caregivers are also exempt from work requirements. The state government is still determining what implementation in California would look like, but Carruthers says they’re working to automate it so that anyone receiving Regional Center services or IHSS would be exempt from work requirements.
The governor has proposed reinstating Medi-Cal asset limits so that individual recipients can have no more than $2,000 in assets or else they lose their coverage. This is a significant decrease from the current asset limit of $130,000. (For children on Medi-Cal waivers, only the child’s assets are counted, not their parents’.) Carruthers says, “The same asset limit for Medi-Cal also will impact IHSS eligibility.”
Included in the proposed budget is “effectively a cost shift from the state to the counties. The state says, ‘We're not going to pay for increases in IHSS hours. So county, if you approve those additional hours, then you pay for them. You're on the hook, you're making a decision, not us.’” However, Carruthers says that both the State Assembly and State Senate are likely to reject this proposal.
He continues, “They’re proposing to eliminate the IHSS backup provider program and to end the state-funded waiting period. [Currently] if I apply for Medi-Cal, IHSS can kick in before my Medi-Cal is approved. This would revert it, so IHSS is only available when Medi-Cal coverage starts.”
Carruthers also addresses concerns that programs like IHSS are under threat due to accusations from federal politicians of widespread fraud. He says that IHSS is following federal policy to shift away from costly institutional care to provide care within people’s communities, and costs naturally go up when more people need those services. Hear his full explanation in this clip:
Regarding the federal government’s intention to withhold Medicaid reimbursement from the state in response, Carruthers says, “I imagine they're going to fight it. Let's keep our eye on that one.”
Carruthers says that politicians are now using the message of fraud to justify cuts to Medicaid services, but they already voted on those Medicaid cuts in 2025. “I am concerned about the philosophical shift and ongoing attack on the core of [HCBS] services.”
We encourage you to reach out to your legislators and tell your stories about the programs your family relies on.
Carruthers explains that because California will be receiving fewer federal funds for Medicaid, there are new proposals to make up funding elsewhere:
A “fair share tax” on the largest 1-2% of companies to help pay for Medi-Cal, proposed by the state senate. Carruthers says, “The reason for this particular approach is that they state 42% of people enrolled in Medi-Cal are full-time employees. But they're on Medi-Cal because they're not getting health insurance from their employer or their income is so low they still qualify. So their bottom line point of view is that when the public dollars are paying for public health insurance for people who are employed, then taxpayers are basically paying for health care instead of those employers. If it's passed, it would be up to the governor to sign it or veto it.”
A “billionaire tax” that would impose a one-time 5% tax on any assets over $1 billion. According to Carruthers, the Service Employee International Union petitioning for the tax “says it should be used 90% for healthcare and 10% for food supports and education. Why this approach? From their point of view, the federal health care cuts are, they estimate, going to cost California $100 billion over five years. They say this tax will refill it.” This measure is being reviewed by the secretary of state, so “we have to wait for November to see what actually gets on the ballot.”
Other sources of revenue proposed by the governor, such as new taxes on digital software and increased sales tax. Any new taxes would need to pass the California legislature by a two-thirds vote.
Thank you to Aaron Carruthers for sharing insights and answering parent questions during our live event! Check out the full recording (with transcript available) here in our resource library. You can also find the slide presentation shared during the event here.
Whether you attended the live event or watched the replay, we invite you to fill out this 5-minute feedback form about our Zoom webinar. We appreciate your feedback!
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