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This week marks two significant milestones in the state legislative process. Today, May 14, 2026, both the Senate and Assembly Appropriations committees dispensed with the suspense file. At the same time, the Governor held his press conference upon the release of the May Revision—the revised budget based on tax receipts and ongoing discussions and reactions from the legislature. One important note on one of ACHD’s sponsored bills: AB 1811(Rogers) is currently on the Assembly Floor consent calendar and expected to pass to the Senate sometime next week.
Senate & Assembly Appropriations Results
AB 2311 (Schiavo): Physician Employment-SPONSOR
ACHD’s sponsored bill to allow all district hospitals to directly employ physicians made it out of the Assembly Appropriations Committee on an A-roll call, meaning it received no no-votes. The bill will now move to the Assembly Floor where it will be amended to address some of the ongoing concerns of the California Medical Association (CMA).
AB 2027 (Ward) Worker data: artificial intelligence-OPPOSE
AB 2027 which would have had the practical effect of banning the use of AI for any function, was held by the Assembly Appropriations Committee and will not be moving forward.
AB 1923 (Soria) Distressed Hospital Loan-SUPPORT
AB 1923 which makes changes to the existing Distressed Hospital Loan Program and adds additional funding to the program made it out of Assembly Appropriations Committee with an amendment to make its enactment contingent upon appropriation of the funding.
SB 947 (McNerney): Employment: Automated Decision Systems-OPPOSE
The reboot of last year’s SB 7 did clear the Senate Appropriations Committee suspense file. It passed out with a 5-2 vote with amendments to narrow scope and modify the enforcement language. ACHD met with the California Labor Federation yesterday to review these amendments and looks forward to continuing negotiations once these amendments are officially in-print.
A complete list of official results for the Senate can be found here, and a complete list for the Assembly, here.
Governor’s May Revise
Governor Newsom’s much anticipated May Revision was released today. The Governor, himself, presented the May Revision, in a press conference and presentation available to stream here. Budget summary and budget details can be found here. Below is a high-level summary of the budget and key takeaways. As details continue to be released and reviewed ACHD will provide ongoing updates and analysis.
The revised budget benefits from a significant revenue upgrade with more than $16.5 billion than projected in January. This surplus is driven largely by a 2025 spike in capital gains tax receipts. Despite the improved revenue picture, the May Revision continues to incorporate spending reforms and new revenues to reduce projected structural deficits in future years.
Total General Fund spending in 2026-27 is estimated at $246.6 billion in General Fund with a total balanced budget of $349.9 billion, about $1.8 billion lower than the January Governor's Budget projection. The May Revision maintains combined reserves of approximately $29.9 billion across the Budget Stabilization Account (Rainy Day Fund), the Special Fund for Economic Uncertainties, and the Public School System Stabilization Account.
Health & Human Services
The Health and Human Services (HHS) section carries the most significant implications for county health departments. The May Revision includes $334.2 billion ($90.4 billion General Fund) for HHS programs in 2026-27. Key areas of interest include:
Medi-Cal
Medi-Cal remains California's largest health care program, projected to cover approximately 13.9 million Californians in 2026-27, more than one-third of the state's population. The May Revision projects Medi-Cal General Fund expenditures of $44.9 billion in 2026-27, a decrease of $3.7 billion compared to revised 2025-26 expenditures. This decrease reflects program savings from budget solutions, lower managed care costs associated with declining caseload, and revised timing assumptions for the Hospital Quality Assurance Fee.
Key Medi-Cal developments include:
• Managed Care Organization (MCO) Tax Renewal: The existing MCO Tax expires December 31, 2026. The May Revision proposes a renewed tax effective January 1, 2027, generating an estimated $575 million in 2026-27, growing to $2.3 billion annually in 2027-28 and 2028-29. These revenues will support the Medi-Cal program and maintain targeted rate increases for primary, maternal, and non-specialty mental health care.
• Medi-Cal Asset Test Limits: As a budget solution, the May Revision re-imposes asset test limits for Medi-Cal eligibility, generating $278.3 million in savings in 2026-27 and growing to $495.6 million by 2029-30.
• Federal Policy Impacts (H.R. 1 of 2025): The May Revision reflects approximately $1.5 billion in additional General Fund costs in 2026-27 resulting from the federal legislation enacted last summer. This includes new work and community engagement requirements for the ACA adult expansion population (effective January 1, 2027), reduced federal matching funds for emergency services for certain immigrant populations, and changes to immigrant eligibility effective July 1, 2027.
• Immigrant Populations: Adults with unsatisfactory immigration status will transition to the fee-for-service delivery system effective January 1, 2027. Beginning July 1, 2027, individuals impacted by new federal eligibility restrictions will move to restricted-scope Medi-Cal coverage. Monthly premiums for this population aged 19-59 are proposed to increase to $50 beginning 2027-28. Note the Governor’s presentation highlights attempt to bring the premiums to $20 for this population.
Hospitals in Immediate Financial Distress
The May Revision allows for an augmentation of up to $50 million General Fund in 2026-27 for the Department of Health Care Access and Information to provide short-term support for hospitals in immediate and significant financial distress. ACHD is currently reviewing budget details to determine if this funding is in addition the $25 million that was provided last week in AB 108.
Behavioral Health
The May Revision continues to utilize the Behavioral Health Services Fund (BHSF) in lieu of General Fund dollars, generating $211.9 million in General Fund offsets in 2026-27, growing to $226.4 million by 2029-30. Behavioral health care supports are also embedded within community school investments (see TK-12 Education below), including implementation of the Children and Youth Behavioral Health Initiative Fee Schedule.
Other items of Note
Impact Fees
The Governor’s proposal includes eliminating impact fees for affordable housing projects. Notably the proposal impacts only cities and counties but preserves impact fees for schools, utilities and/or special districts.
ACHD will continue to review the details of the budget, legislative negotiations, and trailer bills as they are released. ACHD’s press release on the budget can be found here.
AB 108: Distressed Hospital Grant
Last week, the Legislature and Administration took immediate and early action to address imminent financial distress needs for California hospitals through AB 108. The California Department of Health Care Access and Information (HCAI) has announced a new Distressed Hospital Small Grant Program authorized through AB 108 (Budget Act of 2025).
This new $25 million program will provide cashflow grants to eligible not-for-profit and public hospitals experiencing immediate and extreme financial distress, with the goal of helping hospitals maintain operations and avoid closure. Please note that the application window is short due to the legislative requirement to disburse funding by June 30, 2026.
Eligibility includes hospitals with less than 10 days cash on hand and a payer mix composed of more than 50% government payors and uninsured patients and the application deadline is Monday, May 18, 2026, at 5:00 PM. Questions may be directed to: dhsgp@hcai.ca.gov.
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