The 2026-27 Budget: Framework for Approaching the Natural Resources, Environmental Protection, and Agriculture Budget

analysis full 2026-27 BUDGET The 2026-27 Budget: Framework for Approaching the Natural Resources, Environmental Protection, And Agriculture Budget GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2026 SUMMARY Budget Decisions for Environment-Related Programs Affected by State’s Fiscal Challenges. Consideration of the Governor’s specific natural resources, environmental protection, and agriculture proposals must take place against the backdrop of the larger budget condition and context. The Governor’s January budget proposal is roughly balanced—yet it is predicated on projections that state revenues will remain on their current trend and does not incorporate the risk of a stock market downturn, which we believe is elevated. Moreover, both the administration and our office project significant and persistent structural deficits undergirding the state’s budget and threatening California’s fiscal stability. This report is intended to help the Legislature consider how to approach funding its environment-related programs within this larger context. Administration Clearly Used Judicious Approach in Crafting 2026-27 Environment Budget, but Even Justifiable Proposals Come With Trade-Offs. While we have concerns about the overall budget structure, the administration deserves credit for how it crafted its proposals for natural resources, environmental protection, and agriculture. Specifically, the Governor’s budget contains a limited amount of new spending for these departments, and most of the proposals are primarily focused on responding to near-term risks. The Legislature may find it needs to approve some level of new expenditures—even from the General Fund—such as to address pressing health and safety concerns. However, in the context of a budget deficit, any new spending from the General Fund will essentially come at the expense of existing expenditures. While new spending proposals from special funds do not have a direct General Fund impact, in some cases the Legislature can use special funds to help address its budget problem, so we recommend using a discerning set of standards when evaluating all new spending proposals, regardless of fund source. Recommended Framework for Approaching Environment Budget Decisions. In light of projected deficits and the need to balance new commitments against existing program obligations, we offer the following criteria the Legislature could use in reviewing the Governor’s new environment-related spending proposals and in crafting its overall budget. (Within this report we provide examples of how the Legislature might apply these criteria to specific proposals.) • Apply a Very High Bar When Approving New Proposals. Prioritize proposals that address critical health and safety concerns or other time-sensitive objectives. • Reject Proposals That Fail to Meet This High Bar. Certain activities might merit consideration under different fiscal conditions, but do not address urgent needs and therefore do not meet the high bar for approval. • Consider Modifying Proposals to Reduce Pressure on the General Fund. Explore options for alternative funding sources and consider funding priority proposals at a lower level. • Take Steps to Address the Budget Condition. Evaluate whether recent augmentations and agreements still represent the state’s highest priorities, begin the process of identifying potential additional budget solutions, and avoid adopting policies that will create additional out-year budget pressures. • Ensure Remaining Expenditures Focus on the Most Important Activities. Consider revisiting the mix of remaining funding to ensure it supports the state’s highest priorities. www.lao.ca.gov 1 analysis full 2026-27 BUDGET INTRODUCTION The backdrop against which the Legislature as well as for the California Department of Food and must consider 2026-27 funding levels for natural Agriculture (CDFA). Next, we provide overarching resources, environmental protection, and comments and important considerations for agriculture programs is somewhat ominous. the Legislature to keep in mind as it weighs the The Governor’s January budget proposal is roughly Governor’s proposals for these departments. balanced—yet it is predicated on projections We then offer a framework for approaching that state revenues will remain on their current environment-related budget decisions given the trend and does not incorporate the risk of a stock challenging fiscal circumstances—namely, how to market downturn, which we believe is elevated. evaluate the Governor’s new spending proposals Moreover, both the administration and our office across CNRA, CalEPA, and CDFA within the context project significant and persistent structural deficits of a General Fund condition that is only precariously undergirding the state’s budget and threatening balanced in the near term and faces significant California’s fiscal stability. deficits in the coming years. This report is intended to help the Legislature This report touches on many—though not consider how to approach funding the state’s all—of the Governor’s budget proposals for these environment-related programs within this larger departments, in order to illustrate the approach context. This report has three main sections. the Legislature could take in crafting its budget. We begin with a funding overview, detailing In addition, please see our two companion reports, the funding levels the Governor proposes The 2026-27 Budget: Cap-and-Invest Expenditure for departments within the California Natural Plan, and The 2026-27 Budget: Proposition 4 Resources Agency (CNRA) and California Spending Plan, for a more detailed discussion of Environmental Protection Agency (CalEPA), proposals from those specific funding sources. FUNDING OVERVIEW Budget Proposes Total of $18.9 Billion for totals include some General Fund carried over from Natural Resources, Environmental Protection, appropriations in prior years that departments and Agriculture Departments in 2026-27. are still in the process of spending.) Second, the Figure 1, Figure 2, and Figure 3 (on page 4) 2025-26 amounts similarly include notably more provide a summary of the Governor’s proposed one-time bond funds—reflecting $1.3 billion more funding levels for departments within CNRA and in total appropriated from Proposition 4 (2024) as CalEPA and for CDFA, respectively. compared to what is proposed in 2026-27, as well Decline in Overall Spending Proposed for the as funds carried over from other bonds (such as Budget Year. A common trend shown in all three Proposition 68 [2018]) from appropriations made figures is lower proposed spending for 2026-27 in prior years. Third, Figure 1 displays a sizeable as compared to the current year—including a year-to-year decline in federal funds for CNRA cumulative funding drop of nearly one-third for departments. The biggest component of this CNRA departments across the two years. A few change is about $675 million less for the California key reasons explain these year-over-year changes. Energy Commission (CEC) in 2026-27, primarily due First, the 2024-25 and 2025-26 totals include to a federal grant it received on a one-time basis in significant one-time General Fund spending that 2025-26 from the Grid Resilience and Innovation the state dedicated for these departments a few Partnership Program. years ago when it had surpluses. (The current-year 2 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET Totals for Some Departments Figure 1 Include Reductions From Natural Resources Expenditures Summary Position Eliminations That the (Dollars in Millions) Legislature Has Not Approved. The Governor’s budget reflects 2024-25 2025-26 2026-27 funding reductions for certain Actual Estimated Proposed departments from permanently Totals $16,363 $18,395 $12,812 eliminating vacant positions. By Department This is related to actions taken Forestry and Fire Protectiona $5,174 $4,719 $5,018 Water Resourcesb 3,811 4,407 2,652 through Budget Control Section Energy Commission 2,825 1,422 431 4.12 in the 2024-25 and 2025-26 General obligation bond debt service 1,315 1,564 1,720 budget agreements, which we Parks and Recreation 936 1,979 840 summarize in our webpost, Fish and Wildlife 757 719 677 The 2025-26 Spending Plan: Wildlife Conservation Board 273 876 224 Conservation 231 402 339 Other Provisions. However, the Coastal Conservancy 230 577 93 Legislature has not concurred Natural Resources Agency 219 765 178 with some of these position Conservation Corps 181 216 213 eliminations. As such, some of State Lands Commission 70 73 47 Other resources programsc 342 674 379 the funding totals displayed in the By Funding Source figures reflect reductions in both General Fund $7,641 $6,741 $4,905 2025-26 and 2026-27 to which Special funds 6,757 6,344 5,853 the Legislature has not consented. Federal funds 1,155 1,235 424 This includes $11.3 million Bond funds 810 4,074 1,631 a Includes reimbursements the department receives from work it does on behalf of other entities. annually for the Department of b Includes funding from contractors of the State Water Project that is continuously appropriated to the Toxic Substances Control (DTSC), department. c Includes state conservancies, the California Coastal Commission, and other departments. $11.2 million annually for the Department of Fish and Wildlife (CDFW), and $8.6 million annually Figure 2 for the Department of Parks and Environmental Protection Expenditures Summary Recreation (Parks), among others. (Dollars in Millions) Please see our publication, The 2026-27 Budget: Proposed 2024-25 2025-26 2026-27 Elimination of State Environmental Actual Estimated Proposed Positions, for a more in-depth Totals $6,031 $5,950 $5,460 discussion of this issue. By Department Water Resources Control Board $2,054 $2,157 $1,737 CalRecycle 2,003 2,086 1,957 Air Resources Board 1,356 1,002 1,147 Toxic Substances Control 448 504 427 Pesticide Regulation 143 168 163 Other departmentsa 27 32 29 By Funding Source Special funds $4,859 $4,603 $4,413 Federal funds 531 624 635 General Fund 445 271 115 Bond funds 196 452 297 a Includes the Environmental Protection Agency, Office of Environmental Health Hazard Assessment, and general obligation bond debt service. CalRecycle = California Department of Resources Recycling and Recovery. www.lao.ca.gov 3 analysis full 2026-27 BUDGET Figure 3 California Department of Food and Agriculture Expenditures Summary (Dollars in Millions) 2024-25 2025-26 2026-27 Actual Estimated Proposed General Fund $300 $233 $214 Special funds 269 248 211 Federal funds 151 133 132 Bond funds 1 171 76 Totals $721 $785 $633 OVERARCHING COMMENTS Governor’s Overall Budget Approach ranging from $20 billion to $35 billion annually. Raises Serious Concerns. Consideration These chronic deficits have persisted even as of the Governor’s specific natural resources, the state’s economy and revenues have grown environmental protection, and agriculture and the Legislature has adopted solutions proposals must take place against the backdrop totaling more than $125 billion to address of the larger budget condition and context. As we budget problems over the past four years, discuss in our recent publications, The 2026-27 underscoring that the problem is structural Budget: Overview of the Governor’s Budget rather than cyclical. and California’s Strong Revenue Trends Mask • Governor’s Budget Does Not Materially Looming Budget Risk, our office has identified Address These Challenges. While the three major concerns with the Governor’s overall Governor has acknowledged both the budget approach. downside risk to the state’s revenue picture • Stock Market Poses Serious Risk to and the multiyear deficits, the proposed Revenues. While the administration budget does not include material actions acknowledges the risk of a market downturn, to address either challenge. Rather, the it stops short of incorporating the possibility administration indicates it will propose a of one into its revenue estimates. Several revised budget that begins to solve the historically reliable signs suggest the out-year problems as part of the May Revision. market is overheated and at a high risk of However, such a delay would force the reversing course in the next year or so. Legislature to either accept solutions that have With a heightened possibility of a market not received sufficient public discussion or downturn—and resulting drop in income tax defer action even more. revenues—adopting the administration’s Addressing Structural Deficits Will Be Very revenue assumption would put the state Challenging. A particularly daunting characteristic on precarious footing. Further amplifying of the budget problem now facing the Legislature this precariousness, even under the is that it has already taken a number of steps to administration’s revenues, the budget is only address funding shortfalls in recent years using roughly balanced in 2026-27. tools that are now largely unavailable or less • Multiyear Budget Deficits Alarming. Both feasible. In the environment area, for example, our office and the administration expect the the Legislature was able to reduce spending by state to face multiyear deficits, with estimates scaling back one-time augmentations that had been 4 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET provided or planned through “climate packages” We suggest the Legislature keep this larger adopted when the state was benefiting from context in mind as it weighs the merits of each pandemic-era General Fund surpluses. Eliminating new proposal. planned one-time spending generally is less Special Fund Proposals May Have Unique disruptive than cutting support for base, ongoing Considerations… As highlighted in Figure 1 and programs. However, nearly all of this one-time Figure 2, the General Fund is not the main source of funding has now been spent or committed to support for most CNRA and CalEPA departments. specific projects and thus cannot easily be pulled In contrast, many of these departments are back. As such, bringing ongoing General Fund primarily supported by special funds (along with expenditures back into balance with revenues bonds and federal funds). Correspondingly, some likely will involve even more difficult decisions and of the Governor’s new spending proposals for trade-offs, such as reducing existing ongoing these departments are from other fund sources activities and/or raising revenues by increasing and therefore would not have a direct impact on the taxes and fees. General Fund condition. As such, the Legislature Administration Clearly Used Judicious may want to apply a somewhat different lens Approach in Crafting 2026-27 Environment when considering such proposals. For example, Proposals. While we have concerns about the a proposal might fund a regulatory activity using overall budget structure, the administration a special fund that is structured specifically to deserves credit for how it crafted its proposals for ensure fee-payers help support the regulation and natural resources, environmental protection, and mitigation of their industry’s environmental impacts. agriculture. Specifically, as we discuss below, the Such a proposal might be worthy of approving Governor’s budget contains a limited amount of not only because it protects health and safety, but new spending for these departments, and most of also because it avoids burdening the General Fund the proposals are primarily focused on pressing and follows the “polluter pays” principle. Similarly, health and safety concerns. The administration spending proposals from Proposition 4 implement clearly crafted these proposals with careful the will of the voters and will not have major consideration of the budget condition in mind and immediate General Fund implications. (The General by using a discerning set of standards. That said, Fund eventually will need to pay for the debt service the Legislature may choose to set its “bar” for on bond spending over the course of the next approving funding for new activities at a different few decades.) level—either because of differing priorities, or by …However, Bar for New Spending Should necessity based on its overall strategy to address Be High Regardless of Fund Source. In some the evolving budget condition. cases, the Legislature can use special funds to Even Proposals With Strong Justifications help address its budget problem and ensure its Come With Trade-Offs. The Legislature may highest priorities are supported. For example, as we find it needs to approve some level of new discuss in our companion publication, The 2026-27 expenditures—even from the General Fund—such Budget: Cap-and-Invest Expenditure Plan, the as to address pressing health and safety concerns. Legislature has the option of using monies from the However, in the context of a budget deficit, any new Greenhouse Gas Reduction Fund (GGRF) flexibly spending from the General Fund will essentially to support any purpose. As such, GGRF could be come at the expense of existing expenditures. thought of akin to the General Fund and therefore That is, particularly in the case of new ongoing should similarly be targeted for the state’s highest expenditures, the state ultimately will need to “make priorities (whether within the environmental sector room” for new spending by reducing expenditures or other policy areas). Depending on their balances elsewhere in the budget or by raising new and constraints, certain other special funds also revenues. Even relatively minor new General Fund can be tools to help address the budget deficit, expenditures—especially those that are ongoing— such as by providing loans to the General Fund will exacerbate out-year structural deficits. or taking on expenditures previously funded by www.lao.ca.gov 5 analysis full 2026-27 BUDGET the General Fund. To help avoid precluding these the Legislature to ensure that solutions ultimately potential options, we recommend the Legislature improve the state’s fiscal position as intended and apply a high bar to all new spending proposals, allow for time to identify whether subsequent action even if they do not come from the General Fund. is necessary. Being proactive about identifying Strong Rationale for Taking Near-Term Steps preferred strategies also can help position to Prepare Budget Contingencies. We urge the Legislature to respond quickly if needed. the Legislature to start addressing the budget’s For example, if the state’s revenue outlook worsens structural imbalance during this budget cycle. during the budget year, the Legislature may need Starting now, before a crisis is at the state’s to consider adopting solutions in the middle of doorstep, would enable the Legislature to take a the fiscal year, without the benefit of the typical more thoughtful approach to rebalancing the state’s annual budget deliberation time frame and process. commitments, including soliciting public input and Taking steps to prepare early can help situate the weighing trade-offs and potential consequences of Legislature for this potential, including developing options being considered. Moreover, approaching detailed plans for how it will respond if or when the the structural deficit in increments would allow need arises. RECOMMENDED FRAMEWORK FOR APPROACHING ENVIRONMENT BUDGET DECISIONS Below, we offer a framework for approaching the budget nevertheless proposes a number of new environment budget decisions in today’s or expanded activities for these departments. In our challenging fiscal circumstances—namely, how to view, the Legislature should apply a very high bar evaluate the Governor’s new spending proposals to such proposals, particularly in light of projected across CNRA, CalEPA, and CDFA in the context of deficits and the need to balance new commitments a General Fund condition that is only precariously against existing program obligations. To that balanced in the near term and faces significant end, we offer criteria the Legislature could use in deficits in the coming years. Figure 4 summarizes reviewing these proposals. While the Legislature the main components of this framework. could select—and indeed may prefer—other Although the Governor’s overall approach to new criteria, the framework we suggest is intended to CNRA, CalEPA, and CDFA spending is relatively help differentiate proposals that address pressing, restrained given the state’s current fiscal outlook, near-term needs from those that are potentially Figure 4 Recommended Framework for Approaching Environment Budget Decisions Apply a Very High Bar When Approving New Proposals • Prioritize proposals that meet critical health and safety concerns or other time-sensitive objectives. Reject Proposals That Fail to Meet This High Bar Consider Modifying Proposals to Reduce Pressure on the General Fund • Explore options for alternative funding sources. • Consider funding priority proposals at a lower level. Take Steps to Address the Budget Condition • Evaluate whether recent augmentations and agreements still represent the state’s highest priorities. • Begin the process of identifying potential additional budget solutions. • Avoid adopting policies that will create additional out-year budget pressures. Ensure Remaining Expenditures Focus on the Most Important Activities • Consider revisiting the mix of remaining funding to ensure it supports the state’s highest priorities. 6 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET less urgent, even when the latter might advance when they address a documented, significant, important policy objectives. We offer examples near-term health and safety risk that potentially of proposals in the Governor’s budget for which cannot be managed without additional resources, we find a rationale that could justify approval, as and/or conditions that could lead to irreversible well as some that we believe fail to reach this high implications if not funded. While other proposals threshold. We also highlight ways the Legislature also might warrant consideration because they could consider modifying certain proposals—such offer longer-term or protective health and safety as by shifting their fund source or downsizing benefits, they may not require immediate funding in their scope—if it finds a compelling rationale for the context of current budgetary constraints. Based their support but is constrained by the General on our assessment, we find evidence that a number Fund condition. (Given their number, we do not of the Governor’s proposals address issues where discuss every environment-related proposal from additional resources might be needed to avoid the Governor’s budget. Rather, we highlight some higher future costs and/or serious harm. Some of the larger funding requests that we feel are examples include the following. helpful in illustrating our recommended framework. • CDFW: Nutria Eradication Program. To the degree we have specific comments for the The budget proposes $8.2 million in 2026-27 Legislature on other proposals, we will discuss and $8 million in 2027-28 and ongoing from them in separate publications.) the General Fund, along with one position, to Additionally, we discuss steps the Legislature support CDFW’s existing nutria eradication could take to reduce pressure on the General Fund, program. An invasive species that have been beyond just through the lens of considering the spreading in California since being detected Governor’s new 2026-27 proposals. Finally, after in 2017, nutria carry pathogens and parasites it has identified what level of funding its budget that pose risks to human and animal health, can support, we suggest the Legislature think damage flood-protection levees and water about revisiting the mix of how those resources are conveyance infrastructure with their burrowing dedicated to prioritize the most important activities. behavior, destroy crops, degrade native vegetation, and contaminate water supplies. Apply a Very High Bar The Governor’s proposal would backfill When Approving New Proposals expiring one-time funding and expand the Prioritize Proposals That Address program. Providing this funding likely would Critical Health and Safety Concerns or prevent future higher state costs as nutria Other Time-Sensitive Objectives. In the reproduce rapidly and unchecked populations context of a budget deficit, every dollar of new can lead to expanding infestations. spending essentially comes at the expense of a • Department of Water Resources (DWR): previously identified priority and requires finding Dam Safety Program Operations. a commensurate level of solution somewhere The budget proposes $1.4 million in ongoing within the budget. (This is true even under the funding from the Dam Safety Fund to Governor’s higher revenue projections, as the support enforcement-related activities, travel administration’s proposal includes actions to free costs, and new and increased information up capacity for new spending proposals, including technology costs in the Dam Safety Program. creating a settle-up obligation for schools and Following the Oroville Dam spillway incident community colleges and suspending a transfer in 2017, legislation increased both DWR’s to the state’s rainy day fund.) Given the serious enforcement authority and dam inspection budget challenges facing the state, we suggest requirements. Without the additional funding, the Legislature apply a high bar to its review of DWR would have less capacity to implement new spending proposals and be very selective current law and ensure dam owners are in approving any of them. In our view, proposals following rules designed to protect people and merit consideration of budget-year funding property from dam failures. www.lao.ca.gov 7 analysis full 2026-27 BUDGET • DWR: Urban Flood Risk Reduction. • California Department of Forestry and Fire The budget proposes $12.5 million Protection (CalFire): Fixed-Wing Aircraft ($8.7 million General Fund and $3.8 million Mechanic and Pilot Contract Increases. Proposition 4) on a one-time basis to support The budget proposes $66.5 million General state operations associated with high-priority Fund in 2026-27 and increasing amounts in flood management projects conducted in subsequent years, growing to $74.2 million collaboration with the U.S. Army Corps of ongoing in 2030-31, for CalFire to cover the Engineers. Absent this funding, the state increased costs of its air tanker and command would be unable to complete required center aircraft mechanic and pilot contracts. project support activities (such as planning, Without this funding, CalFire would not be monitoring, inspection, and close-out), placing able to use its air tanker and command significant federal flood funding at risk. center aircraft to respond to wildfires. Fewer Because Proposition 4 funding is limited to aircraft available to respond to more frequent state operations associated with bond-funded and severe wildfires in the state likely would flood projects, General Fund support is increase the risk of harm to communities and needed to cover the remaining costs. their residents and increase the future costs of • DWR: River Forecasting and Snow wildfire recovery. Survey Resources. The budget proposes • CalFire: Capital Outlay Projects. CalFire $9.5 million ongoing from the General Fund proposes $294.6 million ($47.1 million from and 15 positions to replace critical river the General Fund and $247.5 million in lease forecasting and snow survey activities that revenue bonds) in 2026-27 to acquire, plan, previously were conducted by the federal and construct 12 capital outlay projects. Once government. Reductions in federal staffing completed, the projects would relocate, repair, and capacity are leading to gaps in vital or replace facilities with significant health information that the state and local entities use and safety deficiencies. Addressing these to forecast water supply and floods, provide deficiencies likely would improve the health 24-hour flood-emergency response, and and safety of CalFire personnel as well as manage reservoirs. support the state’s wildfire response capacity • State Water Resources Control Board through, for example, improved equipment (SWRCB): Responding to Changes in maintenance and operational efficiency. Clean Water Act Protections. The budget • Department of Conservation (DOC): proposes $2.6 million ongoing from the Earthquake Monitoring. The budget Waste Discharge Permit Fund, along with proposes $2.1 million in 2026-27 and 12 positions, to mitigate impacts stemming $1.9 million in each of the subsequent three from a U.S. Supreme Court decision. That years from the Strong Motion Instrumentation decision (Sackett v. U.S. Environmental and Seismic Hazard Mapping Fund to Protection Agency) narrowed federal Clean purchase equipment and add ten permanent Water Act protections, thereby indirectly positions to DOC’s California Strong Motion shifting regulatory responsibilities for certain Instrumentation Program. Through the bodies of water to the state under state earthquake monitoring network, the state law. The additional funding and positions keeps the earthquake early warning system would allow the board to issue and enforce operational and identifies weaknesses in permits protecting water quality and public critical infrastructure, which also helps health—including limiting the discharge of inform building design and codes. However, pollutants into waters of the state—without this network currently has a maintenance redirecting staff from other critical programs. backlog, including defunct seismic monitors The Legislature could consider making and not enough field technicians to repair or complementary changes to statute to make replace them. This proposal is important to the state program more efficient. maintaining the state’s capacity for structural 8 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET integrity monitoring at critical locations, such Reject Proposals as bridges, dams, tunnels, and hospitals, That Fail to Meet This High Bar and mitigating public safety risks and higher The Governor’s budget includes a few proposals disaster recovery costs that could result that do not address critical health and safety from earthquakes. issues or pressing near-term problems. Under • Various: Landfill Support, Response, different fiscal conditions, these activities might and Enforcement. The budget proposes merit consideration because they advance various $5.1 million ongoing from various special policy objectives, such as expanding public funds to support DTSC, the California access to state parks or reducing greenhouse gas Department of Resources Recycling and emissions. However, based on our assessment, Recovery, CalEPA, and SWRCB in addressing these proposals do not address urgent needs or subsurface elevated temperature (SET) mitigate near-term risks. Given the state’s current events at landfills. (SET events are subsurface budget condition and the limited capacity for reactions that increase temperatures within supporting new commitments, we recommend that landfills, which can potentially damage liners the Legislature reject the following proposals. and gas collection systems and pose risks to • CDFA: Enteric Methane Reduction the environment and nearby communities.) The Incentives. The budget includes $23 million funding and positions would address additional one-time General Fund in 2026-27 for an workload related to two active SET events incentive program to be administered by CDFA occurring in the state; enhance overall state to reduce enteric methane emissions from the oversight; and update regulations to strengthen state’s dairy and livestock industries. Funding monitoring, response, and enforcement for this program was deferred from 2023-24 for future SET events. Ensuring regulatory to 2026-27 as a budget solution adopted as agencies have sufficient capacity to manage part of the 2024-25 Budget Act. However, the current incidents and to prevent and address state’s budget condition has not materially future events would improve protections improved, similar funding for other programs for human health and the environment. approved through past climate packages has Additionally, the proposal uses dedicated been eliminated or reduced, this program special funds consisting of fees charged does not address pressing health and safety on industry to support regulatory activities needs, and program implementation is still in such as these. the planning stages and not yet underway. • CDFW: Salmon Hatcheries and Restoration • CDFA: Farm to School Program. CDFA Program. The budget proposes $5 million in proposes $24.6 million General Fund and 2026-27 and $5.4 million ongoing thereafter ten positions in 2026-27 (as well as a similar from the General Fund, along with three amount ongoing) to support the Farm to positions, for CDFW to operate two salmon School Program along with other related hatcheries and conduct associated monitoring food system programs. This program and research. These activities support provides grants to educational agencies, spring-run Chinook salmon (a threatened food producers, and other organizations species under state and federal laws) and and partnerships to increase the amount fall-run Chinook salmon (a species that of locally grown and produced foods in has experienced long-term declines and is schools. While the program does appear to integral to the state’s commercial fisheries). provide some benefits to farmers, schools, Proposition 4 bond funding is supporting these and students, it does not meet a critical activities in 2025-26, but does not provide a health and safety concern or a pressing long-term funding source. Without ongoing time-sensitive objective. Moreover, the state funding, CDFW would be unable to supplement and federal governments provide a total natural production with hatchery releases, of close to $5 billion annually for school increasing extinction risk for spring-run Chinook nutrition programs, and over the past few and further constraining fall-run populations. www.lao.ca.gov 9 analysis full 2026-27 BUDGET years the state has allocated supplemental structure—such as duration and incentive funds to schools in order to improve their amounts—are lacking, making assessing its ability to provide more healthy meals, procure merits and trade-offs difficult. (We plan to California-grown foods, and incorporate discuss this proposal in greater detail in a more freshly prepared foods. (Given these publication, The 2026-27 Budget: Proposed investments in school nutrition, the Legislature Zero-Emission Vehicle Incentive Program.) also could explore whether some of the farm to school activities could potentially be Consider Modifying Proposals to supported by monies the state must provide Reduce Pressure on the General Fund to schools to comply with Proposition 98 The Legislature may find itself in a position of constitutional requirements.) having a compelling rationale for approving some • Parks: Library Pass Program. The budget of the Governor’s proposals—such as to respond proposes $6.8 million General Fund on an to time-sensitive health or safety concerns—but ongoing basis for the Library Pass Program, finding it challenging to do so given the budget which distributes 33,000 park passes to condition. Below, we identify two ways the more than 1,100 library branches statewide. Legislature could modify proposals such that it While the program does facilitate Californians’ could provide at least some level of support to access to parks, it does not meet a pressing pursue what it finds to be worthwhile objectives health and safety need. Moreover, the while still accommodating the state’s fiscal state already funds a number of other free limitations. These include supporting activities with state parks pass programs, including for alternative funding sources and/or providing a lower lower-income residents who may face more level of funding than that proposed by the Governor. barriers to access. We also highlight examples and potential trade-offs • California Air Resources Board (CARB): for each of these strategies. Zero-Emission Vehicle (ZEV) Incentive Explore Options for Alternative Funding Program. The budget proposes $200 million Sources. The Legislature could consider on a one-time basis ($115 million from supporting some of the Governor’s proposals GGRF and $85 million from the Air Pollution using funding sources other than the General Control Fund [APCF]) to create a new Fund. Shifting fund sources could allow the incentive program for light-duty vehicles. Legislature to advance at least some of its intended The administration indicates that the objectives while limiting additional pressure on the impetus for this new program is to partially General Fund. Pursuing this approach, however, replace a federal incentive program that would involve a number of trade-offs. For example, was discontinued in September 2025. While funding activities through new or higher fees would providing additional funding for light-duty shift costs to the individuals or entities paying ZEVs could help encourage their adoption, those fees. In addition, replacing General Fund we find a few reasons against its approval, support with fee-supported special funds could such as: (1) it does not meet an urgent or reduce flexibility and introduce specific statutory critical need, given the time horizon over or programmatic conditions, potentially requiring which the public likely will phase in purchases changes to the scope or mix of which proposed of new ZEVs; (2) the state does not have the activities could be implemented. Moreover, obligation or resources to backfill all changes alternative funding sources may not be available at in federal commitments; (3) it could result in the same level as the Governor proposes and their potential duplication and complication, given use could require redirecting resources from other the state already has existing programs aimed activities and priorities. Below are several examples at subsidizing the purchase of light-duty ZEVs; of how the Legislature could consider applying and (4) key details on the proposed program’s this approach. 10 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET • CalFire: Defensible Space Inspector operate and staff the new museum could Resources. The budget proposes $6.2 million come from sources other than General Fund, General Fund and 19 positions in 2026-27 such as admission fees (which the museum (and a similar amount ongoing), along with currently does not charge), higher parking 12 new positions to be funded by CalFire’s fees, and/or private funds. existing GGRF allocation, for the department • DTSC: Exide Residential Cleanup. to perform defensible space inspections of The budget proposes $70 million in both parcels within the State Responsibility Area 2026-27 and 2027-28—$20 million from (SRA) once every three years. Without these the Lead-Acid Battery Cleanup Fund and resources, CalFire expects it could perform $50 million from the General Fund as a loan only about half of these inspections. Fewer to the Toxic Substances Control Account inspections could mean fewer parcels have (TSCA)—to support DTSC in cleaning up defensible space around their structures, additional residential properties impacted increasing the risk of damage during a wildfire. by lead-contaminated soil linked to the However, the Legislature could support this former Exide facility in the City of Vernon. activity while lessening the General Fund The proposed funding would support the impacts by funding more or all of these cleanup of approximately 1,000 properties positions out of CalFire’s existing GGRF (about 500 per year), though DTSC estimates allocation in lieu of using General Fund. that about 2,100 properties still would Alternatively or in addition, the Legislature require remediation thereafter. Given the could consider reinstating the SRA fee to help ongoing public health risks posed by cover these costs. Moreover, the Legislature lead-contaminated soil to residents in the may want to approve funding these positions surrounding communities, the state has on a one-time rather than ongoing basis, as a strong interest in advancing cleanup forthcoming state regulations to strengthen efforts. However, the Legislature could defensible space requirements likely will consider shifting a portion of activities increase the amount of time required to from the proposed General Fund loan to complete each inspection, triggering a the environmental fee (a tiered charge on rationale for revisiting the program’s staff and statewide businesses with 100 or more structure in the coming years. employees) that supports TSCA. (We note that • Exposition Park (Expo Park): California this change would not limit DTSC’s current Science Center Staffing. The budget efforts to pursue potentially responsible proposes $9.3 million General Fund and parties for cost recovery—the primary 31 positions (and a similar amount ongoing) mechanism that would, if successful, help to open the Samuel Oschin Air and Space reimburse General Fund loans and special Museum, a significant new addition to fund expenditures for Exide residential the Science Center in Expo Park recently cleanup.) While such a shift would reduce constructed largely using private funds. pressure on the General Fund, it would require The proposal would provide administrative, the Board of Environmental Safety to raise the curatorial, maintenance, and support staff to environmental fee, with the magnitude of the operate the new museum in 2026. Adequate increase depending on the amount of costs staffing for the museum will allow it to open that are shifted. (The Legislature also could to the public on time and with the appropriate free up General Fund resources by providing maintenance, especially as the number of a smaller loan relative to the Governor. visitors to Expo Park increases in advance of However, a key trade-off of downscaling this the 2028 Olympic and Paralympic Games in proposal would be fewer residential properties Los Angeles. However, the Legislature could being remediated and prolonging pollution consider whether at least some funding to burden impacts for affected households.) www.lao.ca.gov 11 analysis full 2026-27 BUDGET Consider Funding Priority Proposals at a Providing less funding and fewer positions Lower Level. Several of the Governor’s proposals would mean sustaining the existing, more involve activities that can be scaled up or down, limited hand crew availability during five with the level of funding determining the scope months of the calendar year. (The Legislature of work that can be undertaken. Providing less also might consider whether some portion of funding in 2026-27 would still allow the Legislature crew operations could qualify for federal or to make progress toward its intended objectives, other reimbursement, such as from work on albeit at a lower level and slower pace. Clearly, such fuels reduction projects.) a choice would involve trade-offs, including lower • CCC: Greenwood Residential Center levels of service, fewer public health and safety Staffing. The budget proposes $12.3 million improvements, and less risk mitigation. We discuss ($6.8 million General Fund and $5.5 million in some options and resulting implications related to reimbursements) and 24 positions in 2026-27 the Governor’s budget proposals below. (and a similar amount ongoing) to open the • DWR: Delta Levees Program Mitigation. Greenwood Residential Center in El Dorado The budget proposes $14 million one County. Since 2018-19, the Legislature has time from the General Fund for required approved a total of over $73.5 million to plan habitat mitigation projects associated with and construct this new facility. CCC would Sacramento-San Joaquin Delta levee projects. use the proposed funds to hire (1) 100 new State law requires mitigation when a project Corpsmembers dedicated to conservation disturbs or destroys habitat. Without mitigation work, including fire prevention and suppression funding, DWR’s ability to proceed with levee activities (but not hand crews); (2) 19 on-site maintenance projects may be delayed, putting personnel to support daily operations at the Delta communities—and vital state water residential center; and (3) 5 headquarters supply infrastructure—at risk of flooding from staff to help manage increased administrative levee failure. However, up to $3 million of the workload. The Legislature has a couple of proposed amount is to buy mitigation credits, ways it could consider downsizing the scope yet the administration indicates that credits and cost of this proposal. One option would currently are not available for purchase. be to fund and hire some amount lower than Therefore, we recommend the Legislature the proposed 100 new Corpsmembers. For reduce the proposal to $11 million since example, CCC could allow some existing $3 million may not be urgently needed or used. Corpsmembers to transfer to the Greenwood Residential Center instead of expanding the • California Conservation Corps (CCC): overall statewide corps through hiring so Hand Crew Resources. CCC proposes many new Corpsmembers. Alternatively, for $11.7 million General Fund and 49 positions greater savings the Legislature could postpone in 2026-27 (as well as a similar amount opening the residential center for a set amount ongoing) for its hand crews to operate on of time in recognition of the budget condition. a daily, year-round schedule consistent However, delaying opening and staffing the with CalFire’s hand crew requirements. new center would mean that comparatively less This augmentation would help offset a conservation—including wildfire prevention— declining number of hand crews staffed by work would be undertaken. incarcerated individuals and help provide relief to existing CCC hand crews, allowing • Expo Park: Site Improvements and them to maintain their current capacity Utility Replacement. Expo Park proposes even when some members are temporarily $96.5 million one time ($76 million General unavailable due to injury or illness. However, Fund and $20.5 million from the Exposition the Legislature could consider downsizing the Park Improvement Fund) to repair the sidewalk proposal by prioritizing funding for positions curbs, streets, and walkways in the park ahead that provide staffing relief to existing hand of the 2028 Olympic and Paralympic Games. crews to reduce their attrition and burnout. 12 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET The number of visitors to the park is expected Take Steps to to significantly increase over the next several Address the Budget Condition years and its hardscape is currently deficient, Given the fiscal challenges facing the state, the which increases risks of both safety hazards Legislature may need to take additional actions and, consequently, litigation against the within the environment-related section of the state. The proposal prioritizes improvements budget beyond just considering the proposals in high-traffic areas to mitigate this risk and included in the Governor’s budget. Below, we improve public access to newly opening discuss three approaches the Legislature could museums and sport facilities which will be pursue to help address its overall budget condition. used for high-profile international events. Evaluate Whether Recent Augmentations and Given the budget condition, the Legislature Agreements Still Represent Highest Priorities. could consider providing less General Fund Given the difficult choices it faces in crafting this and downscaling the amount of work to be year’s budget, the Legislature may wish to reassess completed at the park. A key trade-off of whether recent augmentations and previous funding fewer improvements is that fewer agreements continue to reflect its highest priorities. safety risks would be addressed. Often, discontinuing or scaling back new activities • Various: California Sixth Climate Change that are still in the process of expanding or being Assessment (CCCA6). The budget proposes implemented can be done without too much $9.9 million over five years from GGRF for the disruption. To the extent the Legislature identifies Governor’s Office of Land Use and Climate areas of previously approved spending that could Innovation, CNRA, and CEC to jointly produce be reduced, delayed, or eliminated, doing so could CCCA6. This climate research is required by free up resources to help address the budget law to be completed every five years pursuant shortfall and/or to redirect toward more pressing to Chapter 136 of 2020 (SB 1320, Stern) concerns. For example, the Legislature could and provides data and information that state consider reducing funding for existing commitments agencies and local governments use to inform to enable it to support some of the new health their planning and programmatic decisions. and safety-related proposals described above. In light of policy changes at the federal level, Some of the recent augmentations the Legislature CCCA6 could help fill in key climate knowledge could consider pausing or rolling back include gaps and relieve other state and local agencies the following. of the task of producing their own data. The absence of such information could lead to • CalFire: Conversion of Seasonal to inconsistent climate assumptions, plans, Permanent Firefighters. The 2025-26 and policies across agencies. However, the Budget Act appropriated $39 million Legislature could scale down some of the General Fund to begin to transition seasonal proposed elements, such as the amount firefighters to a permanent classification. dedicated to research grants. This approach Budget bill language also stated the would ease pressure on GGRF and, because Legislature’s intent to appropriate $78 million of the flexibility around how that fund can General Fund in 2026-27 and ongoing for be used, therefore free up more resources this purpose, and to eventually transition to potentially help the General Fund. all seasonal firefighters to a permanent A key trade-off of providing less funding is classification (subject to future funding and that the topical and geographic scope of the legislation). The Legislature could evaluate assessment would also be narrowed as a whether this transition and service expansion result. (The Legislature could also explore remain among its highest priorities, or whether whether other resources, such as climate it would rather focus funding on sustaining research funding that was previously provided existing programs. to the University of California system, could help support this assessment.) www.lao.ca.gov 13 analysis full 2026-27 BUDGET • Cap-and-Invest Commitments. Given its subcommittee hearings—to begin identifying size and legal flexibility, GGRF can serve as potential additional budget solutions. These options an important budget tool to help it fund its could include further limitations on new spending, highest-priority activities across the entire reducing previously approved augmentations state budget. As we discuss in greater detail and existing funding, or adopting new or higher in our publication, The 2026-27 Budget: fees or charges. Some approaches—particularly Cap-and-Invest Expenditure Plan, the raising new revenues—could require lead time Legislature has committed large portions to design and implement. Accordingly, starting of GGRF in 2026-27 and out-years through these discussions and planning efforts now the passage of recent legislation, including would increase the likelihood that any resulting Chapter 121 of 2025 (SB 840, Limón). fiscal benefits could be realized more quickly and Given this, using GGRF as a budget tool when needed. would necessitate reexamining existing Avoid Adopting Policies That Will Create commitments—including discretionary Additional Out-Year Budget Pressures. and statutory allocations—to make sure We recommend the Legislature exercise caution they continue to reflect the Legislature’s when considering policies that would add new highest priorities. If any of the existing GGRF ongoing state spending commitments. Even commitments are for lower-priority activities policies with relatively modest budget-year costs than programs at risk of being defunded, can grow over time, limiting future budgetary the Legislature could reallocate some of flexibility and exacerbating the state’s structural this funding. imbalance. As a result, avoiding approval of • Implementing Recently Enacted policies and proposals that would increase out-year Legislation. The Legislature could review spending until the state’s fiscal outlook improves some of the legislation it approved last year would be prudent. Below are two examples for the that would begin to take effect upon an Legislature to consider. appropriation in 2026-27. If some of these • CalFire: Further Reductions to Duty Week activities do not currently represent the Through Collective Bargaining Process. Legislature’s highest priorities in light of the In 2024-25, the state began to reduce its budget condition and difficult choices ahead, firefighter duty week from a 72-hour workweek it could consider delaying implementation to a 66-hour workweek, consistent with a to a future year or, if appropriate, repealing 2022 memorandum of understanding (MOU) the legislation. For example, the Legislature between the state and the CalFire firefighters’ could reject the Governor’s proposed budget union. In July 2025, an amendment to augmentations to implement newly enacted the MOU stipulated that the state agreed legislation, which would result in some budget to include a 56-hour workweek in the savings, and it could, if necessary, adopt new 2027 successor MOU negotiations. While this statute specifying delayed time frames or amendment does not yet obligate the state to scaled back requirements. Depending on the make further workweek reductions, it does activity, such actions might be less disruptive create a real possibility of additional policy than having to reduce an existing program, changes that could increase annual General or than beginning implementation and then Fund costs by hundreds of millions of dollars. having to pause it in the next year or two due In light of the budget condition, we suggest to worsening budget conditions. the Legislature carefully weigh the implications Begin the Process of Identifying Potential of any further reductions to the firefighter Additional Budget Solutions. Given projections duty week before approving agreements of significant budget deficits in the out-years as from upcoming MOU negotiations, especially well as downside risks associated with budget-year if it does not have specific estimates of the revenue forecasts, we recommend the Legislature fiscal effects and time line to implement a use the spring budget process—including budget 56-hour workweek. 14 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET • New Legislation With Fiscal Impacts. If the budget condition means that less overall As the Legislature considers policy bills in funding is available for wildfire resilience the environment, natural resources, and going forward, the Legislature likely will want agriculture policy committees, it may wish to to look across its various funding sources— carefully assess whether proposed policies including GGRF and Proposition 4—and suite with fiscal impacts are essential under current of programs to ensure its highest-priority conditions. While this is always an important activities are being supported. This could factor the Legislature weighs through the mean redirecting and refocusing remaining appropriations committees, the forecasted funding. For example, this could mean shifting out-year budget deficits should raise the bar some funding from forest resilience activities even higher for expanding state costs through to defensible space maintenance and home new legislation. hardening improvements. It could also mean targeting funding for the most vulnerable Ensure Remaining Expenditures Focus communities facing high wildfire risk that may on the Most Important Activities not be able to improve their resilience without state assistance. Consider Revisiting Mix of Remaining • ZEV Funding. The state has various existing Funding to Ensure it Supports the State’s funding sources that it uses to support ZEV Highest Priorities. In times of budget surplus, the and other clean transportation programs, such state is able to dedicate new funding to create or as (1) revenue collected from vehicle-related expand a broad array of priority activities. However, taxes pursuant to Chapter 319 of 2023 when the budget is facing a deficit, not every (AB 126, Reyes), (2) Low Carbon Fuel desired activity can be supported, and certain Standard program credits allocated through worthwhile activities likely will have to be defunded. CARB regulations, and (3) settlement monies As such, in tandem with making budget reductions, that are deposited into APCF. The Legislature we recommend the Legislature identify which could look holistically at these existing revenue activities are most important to receive remaining sources to determine whether they are funding funding. Specifically, to the degree the Legislature the highest-priority ZEV-related activities, is concerned that particular activities are not and, if not, take action to reallocate funding receiving adequate levels of support to meet its accordingly. For example, this could include most important objectives within the overall levels looking at the amounts dedicated to vehicle of funding its budget can accommodate, it could adoption activities as compared to charging take another look at existing program structures infrastructure, or considering a different and funding allocations and potentially change the mix between light-duty and heavy-duty mix. This could include targeting funding to support vehicle programs. communities that are most vulnerable or at risk, or activities that focus on the most time-sensitive • Hino Motors Settlement Funds. The pressing concerns. Some examples might include administration proposes to use $96 million the following. in settlement funds flowing into the APCF for various specific purposes. The Legislature • Wildfire Resilience Funding. Over the past could consider whether the proposed uses several years, the Legislature has made of these funds represent its highest priorities significant investments in wildfire resilience or if it would prefer to reallocate them to ranging from fire prevention projects to forest other priorities that fit within the legally health programs to home hardening grants. allowable uses. www.lao.ca.gov 15 analysis full 2026-27 BUDGET CONCLUSION The Legislature is facing difficult budget Californians depend—such as education, health decisions this year. California has numerous goals care, social services, and public safety. Moreover, and challenges in the environmental space— the Legislature must make these choices within an including pursuing its ambitious greenhouse uncertain and evolving economic backdrop and gas reduction goals; reducing the health and while responding to changing policies and reduced safety risks posed by climate impacts such as funding support from the federal government. A key heat, wildfires, and floods; protecting vulnerable task before the Legislature is to identify the state’s communities burdened by pollution; and preserving most important priorities that can be supported the state’s biodiversity in the face of warming by the level of available resources—which likely temperatures and changing climactic conditions. will require a scaling back of some worthwhile and Yet while the state continues its efforts to make important activities. The challenge is daunting. progress on these objectives, it does so within However, failing to confront the fiscal realities and the context of significant budget challenges that delaying action for too long could make the choices will force it to grapple with difficult decisions and trade-offs even more difficult. about preserving other core services upon which CONTACTS Rachel Ehlers Deputy Legislative Analyst: Environment and Transportation Rachel.Ehlers@lao.ca.gov (916) 319-8330 Frank Jimenez Hazardous Waste Management and Cleanup Frank.Jimenez@lao.ca.gov (916) 319-8324 Helen Kerstein Climate Change, Energy, and Air Quality Helen.Kerstein@lao.ca.gov (916) 319-8364 Brian Metzker Forestry and Fire, Parks, and Agriculture Brian Metzker@lao.ca.gov (916) 319-8354 Sonja Petek Water, Flood Management, and Fish and Wildlife Sonja.Petek@lao.ca.gov (916) 319-8340 Gökçe Sencan Land Use, Conservation, and Climate Resilience Gokce.Sencan@lao.ca.gov (916) 319-8329 LAO PUBLICATIONS This report was reviewed by Rachel Ehlers and Ross Brown. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 16 LEGISLATIVE ANALYST’S OFFICE