|
State Budget — The May Revise and What It Means for Downtowns
Governor Newsom released his May Revision two weeks ago, and the headline numbers are stronger than most expected heading into this budget cycle. The revised General Fund budget comes in at $246.6 billion and the Governor is claiming a balanced budget through 2027-28, with the structural deficit for 2028-29 cut by more than half from the January baseline.
The revenue windfall, approximately $16.5 billion above January projections, is almost entirely driven by personal income tax receipts tied to AI and tech sector capital gains. The Governor is explicitly treating this as temporary money and parking the bulk of it in reserves rather than spending it into new ongoing programs. Total reserves at the end of 2026-27 are projected at roughly $39.6 billion. Whether that discipline holds through June 15 negotiations is the central question of the next month.
The state’s tight fiscal situation does impact the landscape for legislation, especially proposals that cost a lot of money, and limits new state funding for CDA priorities.
Context for CDA members
The good news is that $40 million in one-time General Fund has been allocated for Clean California — litter abatement, waste disposal, and encampment resolution along California highways and roadways — along with $6.2 million per year over two years for dedicated homeless encampment liaisons at Caltrans.
The bigger concern is what the May Revise omits. There is no new funding for the Homeless Housing, Assistance, and Prevention (HHAP) program, which provides cities with funding to combat homelessness, beyond the existing $500 million cap for a seventh round, and that amount remains contingent on the Legislature enacting a governance framework via a trailer bill. There is also no new affordable housing production funding. The Governor is explicitly signaling that both HHAP and housing production are left for legislative negotiations, which means the next 30 days represent the highest-leverage window of the year to push for these investments.
Three tax proposals will dominate the final negotiations through June 15: a permanent corporate tax credit cap beginning tax year 2027, a new sales tax on digital prewritten software, and a revised Managed Care Organization (MCO) tax structure to support the state’s Medi-Cal program. These will generate significant discussion and could become bargaining chips in negotiations over legislative priorities.
With Governor Newsom in his final year in office, it remains an open question whether the Legislature will show its customary deference to the Governor's budget framework or push harder on its own priorities — particularly on housing and homelessness.
Governor's Race — Closing Stretch Before June 2
With the June 2 primary less than two weeks out, the governor's race remains competitive heading into the final stretch. That said, the outcome seems much clearer with Election Day now in sight. Tom Steyer and former U.S. HHS Secretary Xavier Becerra are leading among the Democrats in the race, with Becerra consistently polling as the top Democrat. A large contingent of politically active organizations and groups previously supporting former Congressman Eric Swalwell, who dropped out of the race after facing sexual assault allegations, has coalesced around Becerra and provided him with the resources he needs to get his message out prior to June 2. Tom Steyer has spent upwards of $200 million but remains in second place amongst the Democratic field.
On the Republican side, President Trump's endorsement of Steve Hilton has consolidated GOP support and reduced the odds that two Republicans will advance to November under California's top-two primary system. With that, most polling demonstrates a Becerra vs Hilton matchup going into the November general election.
CDA Priority Legislation — Bills on the Move
The Legislature has cleared its first major deadline, with bills having survived policy and fiscal committee reviews and now moving toward Assembly and Senate floor votes. All bills must pass their respective houses by the end of this week (May 29). Once that happens, the bills will move to the other house of the Legislature and need to receive full approval by August 31.
The status of CDA's core package is as follows:
On the Assembly Floor — Final Assembly Vote Pending:
-
AB 1815 (Wicks) — Factory-Built Housing. This bill updates building standards for factory-built housing to expand the supply pipeline — a critical tool for accelerating the kind of mixed-use residential development that drives downtown foot traffic and vitality.
-
AB 2074 (Haney) — The Downtown Revitalization Act. This creates regional transit hub districts that streamline approvals for downtown housing developments.
-
AB 1679 (Gonzalez) — Temporary Commercial Permits. The bill creates a local pop-up small business program, allowing temporary use permits for vacant storefronts — a direct tool for filling empty ground-floor retail while longer-term occupants are secured.
-
AB 2418 (Gonzalez) — Nonresidential Permit Streamlining. This bill enables private permit review for nonresidential building permits, cutting approval timelines that have long frustrated downtown property owners and retailers.
-
AB 1740 (Chavez Zbur) — Urban, Transit-Rich Coastal Communities. This bill exempts the City of Santa Monica from coastal development permit (CDP) requirements under the Coastal Act for parking modifications, bike lanes, mass transit, housing, outdoor dining, and temporary events.
In the Senate — Transitioning to Senate Process:
Three bills have crossed over to the Senate and are now in the early stages of the Senate process:
-
AB 1693 (Chavez Zbur) — Accelerated Retail Building Plan Approval has passed the Assembly and is now pending committee referral in the Senate. This bill streamlines tenant improvement approvals for retail spaces — a practical fix to one of the most common bottlenecks our members face when trying to activate vacant storefronts. CDA is preparing a Senate support letter for this bill.
-
AB 1941 (Gonzalez) — Organized Metal Theft has also cleared the Assembly and is pending Senate referral. This bill targets coordinated theft operations that have caused significant harm to retailers, infrastructure, and property owners in downtown districts statewide.
-
AB 2663 (Rogers) — Alcoholic Beverage Off-Sale Privileges has passed the Assembly and is now in the Senate Governmental Organization Committee. The bill would extend off-sale privileges to retail on-sale licenses, an important flexibility tool for downtown restaurants and entertainment venues. CDA is preparing a Senate support letter.
Jason Bryant
CDA’s Legislative Advocate
Principal, Bryant Government Affairs
| 
