Final Budget Protects Many County Priorities — with One Critical Gap

The new California state budget reflects meaningful progress in helping local communities respond to the impacts of federal cuts, but more work remains to protect California’s safety net.

Governor Newsom and the Legislature preserved several critical investments that will help communities maintain health care, homelessness services, and other essential programs.

At the same time, by failing to fund indigent care for Californians who lose health coverage under H.R. 1, the budget leaves a major gap that will continue to strain local health systems and the services residents rely on every day.

“We’ve always said H.R. 1 will require a multi-year partnership between the state and counties — and this budget is a good starting point,” said CSAC CEO Graham Knaus. “We’re grateful to the Governor and Legislature for recognizing the lifesaving needs to support public hospitals and eligibility work. But Californians will still lose health coverage. and counties will be forced to cut core services in public safety and homelessness to meet the state’s obligations to them.

H.R. 1: Progress, but a Critical Gap Remains

The final budget deal includes support for two critical areas of county responsibility in response to H.R. 1:

• County Eligibility: Includes $420 million in one-time funding for county eligibility for Medi-Cal and CalFresh to meet increased requirements created by H.R. 1 and help people retain health care and food support.

• Public Hospitals: Provides $250 million in grants to support California’s public hospitals as they face growing financial pressures from federal changes.

But it fails to address H.R. 1’s deepest harm to local communities:

• Indigent Care: Provides no funding to help counties provide indigent health care for Californians who lose Medi-Cal coverage under H.R. 1. Counties remain deeply concerned about the growing gap between extensive obligations and limited resources.

Because they are mandated by the state to provide indigent care, counties will have no choice but to pull money away from other programs — especially public health, public safety and efforts to reduce homelessness.

Positive Steps for Counties

In several important ways, the final budget recognizes the essential role counties play in providing services that our communities rely upon:

• Homeless Housing, Assistance and Prevention (HHAP): Provides $900 million for Round 7 of HHAP, with a larger share set aside for grants. This means more funding will reach counties, cities, and continuums of care than in previous rounds.

• In-Home Supportive Services (IHSS): Rejects the Governor’s proposed county cost shift, protecting counties from hundreds of millions of dollars in new ongoing costs.

• Mobile Crisis Services: Preserves the Medi-Cal Mobile Crisis benefit for another year, ensuring counties can continue providing community-based behavioral health crisis response.

• Distressed Hospitals: Provides up to $140 million to help hospitals facing significant financial distress, helping preserve access to care invulnerable communities, particularly in rural California.

• Election Administration: Invests $34 million for counties to expedite the vote counting process in the November 2026 election, as well as for voter outreach and education.

• Victims of Crime Act (VOCA): Allocates $50 million one-time General Fund for victim services, an increase from the $25 million proposed in the May Revision. This investment will support counties and other service providers in maintaining critical services for thousands of survivors statewide due to the historical decline in federal funding.

Where Counties Need More

Unfortunately, the budget also includes provisions that will make it harder for counties to serve local communities effectively:

• Proposition 36: While counties appreciate the unwavering efforts of the Senate, the final spending plan falls well short of what counties will need to successfully carry out the voter-approved measure. The budget provides:
  • $20 million one-time for county behavioral health planning and capacity building—less than half of last year’s already inadequate $50 million behavioral health investment. This is the only funding for counties specifically earmarked for Proposition 36, and it’s only for a single department.
  • $20 million to restore proposed cuts to pretrial services. While the budget includes language authorizing these funds to support Proposition 36-related work, this is not a new investment. In addition, the historical funding levels already fail to meet the needs of the current pretrial and diversion population.
  • $10 million one-time for trial courts to address increased workload.
• Development Impact Fees: The budget introduces new language that limits counties’ ability to collect certain development impact fees on state-funded affordable housing projects, shifting costs onto county taxpayers instead of developers.

  This provision will harm, not help, the production of affordable housing because it will make it harder for counties to spearhead these projects. These fees don’t bring in any revenue — they’re strictly to cover the costs of basic infrastructure.

  The state could have covered this cost from affordable housing developers by backfilling the fees. Instead, it’s sticking counties with yet another unfunded mandate.