Governor Newsom released his May Revise of the 2026-2027 state budget proposal on May 14, 2026. The May Revise state budget proposes expenditures of $349.9 billion ($246.6 billion general fund) with a balanced budget and substantial reserves over the next two fiscal years. For ACSS members’ salary and benefit interests, there are no significant changes from the Governor’s January proposal.
In January, the Governor’s Budget estimated a $2.9 billion deficit for the upcoming fiscal year. With the May Revision, estimated General Fund revenues are now $16.5 billion higher than projected in January over a three-year budget window. Despite this slightly better budget situation, the Governor’s plan does not include any significant ongoing expenditures. The revised budget proposal would actually reduce General Fund spending to $1.8 billion lower than estimated in the Governor’s January 2026 budget.
The May Revision includes $307.2 million in increased employee compensation to fund projected health care and dental premiums for state employees in 2027. The proposed budget continues the status quo – no pay increases are contemplated for July 1, 2026 and the Personal Leave Program and employee relief from funding retiree health care (OPEB) are each expected to continue through the 2026-2027 fiscal year. The May Revision notes that the nine bargaining units represented by SEIU Local 1000 remain in bargaining for new contracts with the agreements expiring in the summer 2026.
The May Revision includes $9.8 billion for the state employer’s contribution to CalPERS and an additional $3 billion supplemental payment toward retirement liabilities at CalPERS. The budget proposal continues to score the savings for 6000 vacant positions and to reflect reduced state operation expenses of $1.5 billion.
During his presentation of his May Revise to the proposed state budget, Governor Newsom answered a question about Return to Office by saying he wants to get 4-days per week in the office done. He noted that while he is empathetic to change, the RTO has been previewed for years and he believes it will build team and community. ACSS is continuing to sponsor and advocate for Assembly Bill 1729 (Lee) which resists the 4-day in-office mandate and would provide state departments with the ability to make sensible telework decisions. ACSS continues to meet with CalHR and communicate ACSS’ opposition to the 4-day RTO mandate as operationally unnecessary and a missed opportunity to score $225 million in budget savings by maintaining the current level of telework and efficiencies.
The Legislature must pass a budget by June 15, 2026. As the state budget progresses, ACSS’ legislative advocates will continue working to protect the interests of excluded employees. ACSS will keep you apprised as the excluded pay plan for the fiscal year beginning July 1, 2026 continues to develop.
The May Revision summary can be found here: Budget Summary (ca.gov)