LEGISLATION COMMITTEE
Meeting Date: August 24, 2026
Subject: State Budget Updates of Interest to Contra Costa County
Submitted For: Legislation Committee
Department: County Administrator’s Office
Referral Name: State Budget Update
Presenter: M. Rubalcava and G. Neill, Nielsen Merksamer
Contact: E. Struthers (925) 655-2045
Referral History:
The Legislation Committee regularly receives reports on the State Budget and bills of interest to the County and provides direction and/or input to staff and the County’s state lobbyists.
Referral Update:
During this item, the County’s state advocates will provide an update on various legislative and budgetary matters of interest.
FY26-27 State Budget
On Friday, June 26, the Administration and Legislature announced that they had reached a three-party agreement between the Assembly, Senate, an Administration on the FY26-27 state budget. The agreement purports to be balanced for the next two fiscal years and prioritizes building reserves.
During this budget cycle, Contra Costa County has advocated for resources related to H.R. 1 needs, IHSS underfunding, Homeless Housing, Assistance, and Prevention (HHAP) and homelessness underfunding, Prop. 36 underfunding, the Sustainable Aviation Fuel Tax Credit, climate bond allocations, and other key issues.
H.R. 1 has been the most significant issue this budget cycle for counties, shifting billions in safety net costs and introducing new eligibility requirements for Medi-Cal and CalFresh. While some funding was secured, major gaps remain, especially for indigent care and behavioral health.
For H.R. 1, some of the key issues are summarized below:
• Indigent Care/Emergency Only Medi-Cal Program: No funding was provided for counties to cover indigent medical care for those losing health coverage due to H.R. 1, nor for an alternative emergency-only program.
• Public Hospitals: $250 million in General Fund grants to support public hospitals, as proposed in the Legislative Budget Plan.
• County Eligibility (Medi-Cal & CalFresh): $420 million one-time General Fund for county eligibility related to H.R. 1 implementation ($223 million for CalFresh, $197 million for Medi-Cal). Additionally, a three-year CalFresh Match Waiver allows counties to maximize federal and state funds.
• County Behavioral Health: No funding was included for county behavioral health impacts of H.R. 1. Counties face up to $9.5 billion in increased costs at full implementation, with ongoing advocacy for additional resources.
Some of these investments are balanced on new revenues, including three new revenue measures.
Revenue Measures
• Sales and Use Tax Expansion: Digital downloads are now taxed, generating $450 million in 2026-27 and $900 million in 2027-28 for the General Fund, plus increased local sales tax revenues.
o However, further analysis is needed to determine how much the County will pay in new taxes, versus receive back in general fund revenue.
• Business Credit Limitation: Permanent cap on business credit use, increasing revenues by $850 million in 2026-27.
• Managed Care Organization (MCO) Tax: Revised and extended due to H.R. 1 requirements, supporting Medi-Cal spending.
A few other notable items in the FY26-27 budget agreement include:
• Mobile Crisis Services: $42 million to continue community-based mobile crisis response.
• Homeless Housing, Assistance, and Prevention (HHAP): $900 million for Round 7, with streamlined implementation and increased grant funding for counties, cities, and continuums of care.
• Development Impact Fees: Counties must waive certain fees as a condition of receiving state affordable housing grants, potentially impacting infrastructure funding.
• Disaster Response: $100 million for a Disaster Rebuilding Fund to expand access to construction and renovation financing for disaster-impacted homeowners through a combination of tools including loan loss guarantee and interest rate buydown programs.
• Proposition 36 implementation: $50 million one-time general fund dollars, only $20 of which is new county funding. It is allocated across County behavioral health departments, trial courts, and pretrial services.
• Victims of Crime Act (VOCA): The state included $50 million one-time General Fund to supplement the federal VOCA program, which has been significantly reduced in recent budget cycles.
• Election Administration: $34 million for vote counting and voter outreach for the November 2026 election. However, it is difficult to say whether this funding will result in faster vote counting due to the regimented state laws that prescribe the process and deadlines, along with the late arrival of funding.
Legislation
The Legislative session ends on August 31; this is the last day for the Legislature to pass bills and send them to the Governor. Accordingly, this is essentially the last week of floor session, and a flurry of activity-and long days-are ahead.
On August 13, the Assembly and Senate Appropriations Committee’s reported on bills from the suspense file.
Outcomes for county-tracked bills on suspense are summarized below.
|
Outcome |
Bill |
Author |
Topc |
County Position |
|
Pass/amend |
SB 872 |
McNerney |
Delta Levees and Canal Subsidence Fund. |
Support |
|
Held |
SB 1157 |
Archuleta |
Juveniles: secure youth treatment facilities: less restrictive programs. |
Support |
|
Pass/amend |
SB 1180 |
Allen |
Plastic Pollution Prevention and Packaging Producer Responsibility Act: California Plastic Pollution Mitigation Fund. |
Support |
|
Pass |
AB 762 |
Irwin |
Disposable, battery-embedded vapor inhalation device: prohibition and penalties. |
Support |
|
Pass |
AB 1383 |
McKinnor |
Public employees’ retirement benefits. |
Oppose |
|
Pass |
AB 1813 |
Ward |
Electricity: customer renewable energy subscription program. |
Support |
|
Pass/amend |
AB 1934 |
Bennett |
State Fire Marshal: home hardening certification program implementation plan. |
Support |
|
Held |
AB 2201 |
Boerner |
Medi-Cal: eligibility redetermination. |
Support |
|
Held |
AB 2208 |
Stefani |
Medi-Cal: cost sharing and accessibility. |
Support |
|
Held |
AB 2216 |
Aguiar-Curry |
Sacramento-San Joaquin Delta Conservancy. |
Oppose Unless Amended |
|
Pass |
AB 2278 |
Ávila Farías |
In-home supportive services: Community First Choice Option program: noncompliance penalties. |
Support |
|
Pass |
AB 2724 |
Bauer-Kahan |
Catastrophe modeling: distressed areas. |
Support |
Further attachments include the list of tracked bills and their status, which is expected to change rapidly as the deadline approaches.
Recommendation(s)/Next Step(s):
RECEIVE the report and provide direction and/or input to County staff and the County’s state advocates, as needed.
Fiscal Impact (if any):
None.