“It’s budget season again” in California.

That’s the type of announcement that conjures up visions of bored officials and lawmakers, of “snooze fests of reviewing minutiae interrupted by periodic flare-ups of partisan temper tantrums.”

Occasionally, though, there are dramatic spikes in the numbers – or worse still – massive drops.  That can spark interest as well as headlines with staying power. That’s what happened in the spring of 2022, in the second year of impressive state budget surpluses while the pandemic lingered on.

It was at this time that we started our in-depth coverage of this anything-but-boring California budget story.  See e.g.: Nonprofits Reaching for Piece of CA Budget Pie (April 11, 2022) FPLG Blog [$29-billion surplus; “…a time of plenty”]; and That CA Budget Pie?: Much Bigger Than Expected (May 17, 2022) FPLG Blog [January revenue estimate way understated; actual surplus is $97-billion. “That’s three times as much pie. Yum.”]

The Turbulence Continues

The rollercoaster of highs and lows hasn’t stopped since then.

There were darkening clouds in 2023, and record deficits in 2024.  See e.g., additional FPLG Blog posts with boring and forgettable titles like CA’s Budget & Nonprofits: Part Three (May 18, 2023).

For a definitive history see: From big surpluses to projected deficits… (February 14, 2025) Jason Sisney, jasonsisney.substack.com [“Responding to questions on how California’s budget situation evolved in recent years”].

Mr. Sisney advises the Speaker of the California State Assembly and Assembly Democrats on state budget matters. He represents Assembly at staff level in budget negotiations with the Governor’s Office and the California State Senate. Follow him also at #CABudget and at www.linkedin.com/in/jasonsisney.

The difficulties of 2023 and 2024 were followed by the utter chaos of 2025 which, sadly, has included unconscionable economic harm inflicted by our own federal government. See e.g., CA Budget Time Again: Small Surplus is Back But Catastrophic Needs Ahead (January 11, 2025) FPLG Blog. [The catastrophe here referred primarily to the Pacific Palisades wildfire which broke out earlier in the week. Of course, Inauguration Day looming the following week was also a factor in this headline.]

The Next Chapter

We’re now at the start of the next chapter in the California state budget saga.

Last Friday, January 9, 2026, Governor Gavin Newsom released his proposed budget for the new fiscal year that begins on July 1, 2026.

It’s the first step in the six-months-long, constitutionally choreographed, ritual budget dance between the state’s chief executive and the state legislature. They are required to agree on, and enact into law, a balanced budget for FY 2026-27.

It’s by no means a free-for-all: There are rules and restrictions. It’s like a chess game where only certain moves may be taken. The annual California budget negotiations are circumscribed by numerous constitutional mandates and proscriptions as to various categories of funding.

A unique feature in this state is that the public have a guaranteed seat at the table during the negotiations. See The Budget Process: A Citizen’s Guide to Participation; and California Budget Process. See also our linked posts here which repeatedly explain the rules of the budget game.

The Fireworks Have Started

There are already interesting developments. In the past few months, there have been solid signs of unexpected revenue growth, making obsolete the November 2025 formal (and somewhat gloomy) official revenue estimates by the Legislative Analyst’s Office. See that Legislative Analyst’s Report.           

See also State deficit estimates often differ (January 5, 2026) Jason Sisney, jasonsisney.substrack.com. The state’s Artificial Intelligence tech startups are exploding in value, far beyond even the rosiest forecasts. Of course, it’s a bubble, and bubbles eventually burst. and planning is underway to soften that blow.

Key Documents: The Proposed Budget 

In this opening post, we’ll get the ball rolling by listing (and linking) the key documents from January 9, 2026, produced by the governor’s office and his Department of Finance.

What, exactly, is the Governor’s Proposed Budget? “The budget proposal provides a detailed overview of the governor’s proposed expenditures for the upcoming fiscal year, estimated expenditures for the current fiscal year, and actual expenditures for the prior fiscal year.”

The California Constitution requires a “balanced budget.”  That means if the proposed expenditures for the budget year exceed estimated revenues, the Governor is “required to recommend the sources for the additional funding.” The Governor’s Budget “… must be accompanied by a Budget Bill itemizing recommended expenditures which shall be introduced in each house of the Legislature.”

The January 9, 2026, Governor’s Budget package includes:

The Department of Finance’s E-Budget package includes:

  • E-Budget: The Department of Finance’s presentation online, divided into multiple clickable linked sections, or the alternate printable and PDF version

The E-Budget is the California Department of Finance’s detailed online presentation that was developed over many months in the second half of 2025 and early in 2026 in consultation with each of the executive branch agencies and departments. It’s available in two formats: One is an online PDF version formatted for printing. The other – and most helpful – is also presented online but in clickable format for each of several sections.

The clickable online E-Budget is organized as:

See also, separately: Jan. 9 documents: Governor’s budget proposal (January 9, 2026) Jason Sisney, jasonsisney.substack.com [“Other documents such as LAO analyses and trailer bill proposals, will emerge later”]

Conclusion

“The annual state budget is – next to the State Constitution – the most important document in California government.”

First, California now ranks as the No. 4 economy in the world – beating out all nations around the globe except the United States, China, and Germany.

Second, California’s 39-million+ population is almost 12% of the nation’s total. Not an insubstantial number of people require services and assistance from the state’s charitable institutions. And, by a large margin, this state has the most 501(c)(3) organizations in the United States.

Third, California’s budget is a big deal for our community. The charitable sector relies heavily on federal funding. Whenever that spigot is narrower than usual, or deliberately damaged, the nation’s 501(c)(3)s as well as all of their charitable beneficiaries suffer serious harm.

There is much more to say on these and other points, including reaction and commentary from the charitable community, from their professional advisors, from academics and other experts, and from officials and lawmakers.

Stay tuned.

– Linda J. Rosenthal, J.D., FPLG Information & Research Director

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