The California Environmental Justice Alliance (CEJA) highlights key appreciations and concerns after Gov. Newsom’s Budget 2026-27 May Revise was announced on May 14, 2026.
(Sacramento, CA) – On May 14, 2026, Governor Newsom released the California 2026-27 Budget May Revise, which reflects a $56.3 billion improvement from a November estimate of a $18 million deficit for the 2026 - 2027 year and $16.5 billion higher than projected in the January version of the budget. It is apparent that hard work and difficult decisions went into generating this balanced budget. CEJA’s analysis shows several key points of interest.
To Celebrate
First, CEJA has identified many things to celebrate in the proposed budget.
The May Revise contains $137.4 million set aside to support the Transformative Climate Communities (TCC) program, which will support neighborhood-level projects across the state. Disadvantaged, unincorporated, and Tribal communities will receive these investments to improve public health, expand economic opportunity, and improve environmental quality.
The budget also allocated $55.3 million toward Community Resilience Centers (CRC), which funds infrastructure projects to provide shelter and house resources during emergencies, such as extreme weather due to climate change. $5.7 million is proposed to fund the energy modernization and affordability mandated by SB 254 (Becker), which passed in 2025. This work includes oversight and review of utility wildfire mitigation plans, transmission development and financing, and environmental regulation and reporting.
The May Revision also includes a $2.5 million investment into researching additional actions needed to protect communities from the effects of two harmful air pollutants – acrolein and ethylene oxide. In addition to other sources, the use of fossil fuels in transportation generates acrolein. Research identifying activities that will further shift California away from fossil fuels will benefit environmental justice communities throughout the state, particularly those who live near airports, shipping ports, transport depot facilities, and highways.
Although not in CEJA’s wheelhouse, we are also excited to see an investment of $100 million in ancestral land return to California Native American Tribes through the Tribal Nature-Based Solutions program.
The following item reflects both progress and an ongoing concern regarding corporate accountability. After Exide Technologies was allowed to walk away from the toxic waste site it created with its battery plant in Vernon, California, taxpayers were left with the bill. This illustrates the importance of ensuring that high-polluting industries are required to have a publicly available environmental remediation plan and bond funding to pay for the cleanup. Although CEJA would strongly prefer the funding have come from Exide Technologies, we are still pleased to see that Governor Newsom is prioritizing the cleanup of the impacted communities by investing $70 million to clean up approximately 1000 properties.
To Change
Although CEJA has an overall neutral stance of the Cap-an-Invest program (previously called Cap-and-Trade), the selected prioritizations for the three funding tiers are problematic. With the proposed model, Tier 1 programs will be fully funded first, followed by Tier 2’s full allocation, before Tier 3 receives any funding.
As a prime example of misallocation, the Manufacturing Tax Credit is placed in Tier 1. The credit perpetuates the dangerous cycle of incentivizing environmentally harmful industries, such as data centers, without sufficient protective policies and community input.
In stark juxtaposition, programs critical to environmental justice communities, such as Community Air Protection, Affordable Housing, Transit and Intercity Rail, Low Carbon Transit Operations, have been placed in Tier 3. These programs previously received continuous appropriations based on a set percentage of the overall funding. Essentially, instead of having a guaranteed small fraction of Cap-and-Invest funding, Tier 3 programs are likely to not receive any funding at all. Adding insult to injury, the Community Air Protection Program (CAPP) had its funding reduced from $250 million to $177 million, if Tier 3 funding even manifests.
Although not our area of expertise, we also wanted to uplift this concern, shared by the California Pan-Ethnic Health Network.
“Additionally, at a time of rising food and housing costs, the Governor’s proposal doubles down on targeting the poorest Californians by increasing monthly health care premiums for immigrant adults from $30 to $50 a month, and reinstating the punitive asset test that forces seniors and people with disabilities to choose between having health care and maintaining extremely modest financial security.” - California Pan-Ethnic Health Network
At CEJA, we are dedicated to making sure that communities living on the frontlines of environmental injustices are not the ones who bear the brunt of what will likely be robust budget cuts. No one should have their neighborhood turned into an environmental sacrifice zone to balance a budget, while those polluting the environment get tax breaks and skirt permitting requirements.
To Monitor
Similar to the research being conducted by MCSC on environmental impacts, $668,000 has been included in the budget to support the California Public Utilities Commission (CPUC) to research and report how datacenters will impact utility ratepayers, a requirement of SB 524 (Becker). CEJA is encouraged by attention being given toward energy affordability and will continue to monitor CPUC’s administration of this work.
“As the energy consumption of data centers surges, it’s time to measure their impact and environmental cost.” - Noman Bashir, Massachusetts Institute of Technology Climate and Sustainability Consortium (MCSC) Impact Fellow
Additionally, $1.9 million has been allocated to the enforcement of laws related to the turnaround and maintenance of refineries. These laws protect employees, communities, and public health and safety. They also establish minimums for fuel storage to prevent price spikes. The law also schedules required assessments on the supply reliability and affordability of transportation fuels in the state. While CEJA supports holding refineries accountable, the assessments generated by the Energy Commission may be utilized in an attempt to prolong dependence on fossil fuels rather than support a managed transition to renewable energy. CEJA will continue to monitor the Energy Commission’s enforcement of health and safety laws, and the accuracy of their assessment.
$952,000 is slated to support implementation of the California Ratepayer Protection Act, AB 1167 (Berman), which was passed into law in 2025. This program will provide oversight and enforcement of political and promotional advertising expenses by utility providers to ensure the expenses aren’t passed onto ratepayers.
The Equitable Building Decarbonization Program also retains its funding of $433 million, including a $30 million allocation for the Tribal Direct Install Program. These programs support retrofitting homes to reduce their carbon footprint, reduce greenhouse gas emissions, and increase resilience to extreme heat while improving indoor air quality.
Interestingly, the May Revision includes a proposal to allow a fee to be placed for documents submitted through the State Clearinghouse as part of the development permitting process. These fees would be used to support updating CEQAnet and CEQA Submit functions. It is encouraging to see that the state will put resources into maintaining a database of both current and historical land use records across California communities. This provides access for disadvantaged, environmental justice, and vulnerable communities to key information in order to understand how past and present planning and zoning decisions have affected their health and environment, and to advocate for stronger protections going forward. This will be an important part of a larger process to ensure that any development project proposed in these communities will be done responsibly, with considerations for public health, displacement prevention, and environmental health.
What is Missing
Despite several years of budget deficits, it appears that Governor Newsom is not planning on holding high-level polluters accountable to the financial strain they place on the state through climate impacts and degrading public health. Without some form of financial accountability, California taxpayers will continue to pay more while these polluters report record profits.
“It is disappointing that California’s leaders seem to expect the state’s most heavily impacted communities to pay with their health and their dollars to offset the expenses brought on by the fossil fuel industry. Those who cause the harm should be responsible for paying for its mitigation and for creating better paths forward. In this case, that is a future where the state’s energy needs are met fully by clean energy, controlled by the community rather than large corporations. There is a great opportunity here to help make things right, if leadership is brave enough to seize it.” - Nile Malloy, Climate Justice Director, California Environmental Justice Alliance
California residents are no stranger to high living expenses, and energy bills are rapidly rising. To combat this, there must be major investments in a managed transition away from fossil fuels and the infrastructure necessary to support community energy and storage programs. With green energy and energy storage more affordable than fossil fuels, the timing is right to make this investment that will provide relief from the economic pressures of today’s economy.
CEJA calls upon Governor Newsom to secure proper funding for the Demand Side Grid Support (DSGS) program within the California Energy Commission (CEC). The DSGS program incentivizes customers that use backup generation and load reduction during grid emergencies like heatwaves to avoid turning on old, polluting gas plants. This includes the deployment of demand response, energy storage, managed electric vehicle charging, smart building controls, and coordinated local solar and storage resources. Collectively, these resources support grid reliability without perpetuating harm on frontline communities.
This program has received no funding in the budget for this year and currently no projected funds for future years. Specifically, we support an allocation of $26.5 million from unused Distributed Electricity Backup Assets (DEBA) funds to DSGS for 2026, so instead of prolonging the life of gas plants we can invest in clean solutions for all communities. We also support an increase of $70 million for DSGS over the next 2 years reallocated from existing unspent interest on California School Healthy Air, Plumbing and Efficiency Program (CalSHAPE) program funds.
This investment in the DSGS will have tangible and immediate benefits to environmental justice communities. Currently, the Strategic Reliability Reserve (SRR) incorporates three once-through cooling (OTC) gas plants that are long overdue for decommissioning – Ormond Beach Generating Station, AES Alamitos, and Huntington Beach Generation Station. Not only have these plants been unreliable during emergencies, such as heatwaves, but their retention has been incredibly expensive to taxpayers at $1.19 billion since 2023. Investment in DSGS will increase grid reliability and give our communities what they have been demanding - the retirement of polluting OTC gas plants and investment in an affordable clean energy future.
“California has long been a leader in renewable energy development, and the time is right to take the next step by investing in community-level energy production and storage. Increasing grid resiliency and reducing fire risk, while lowering costs to the consumer is a win-win for Californian’s and would be a great way for Governor Newsom to leave a legacy during his last year in this office.” - Feby Boediarto, Senior Energy Justice Manager, California Environmental Justice Alliance
As California grapples with a housing crisis, there is no better time to invest in programs to support healthy, accessible, and affordable housing for everyone. Although programs such as TCC and CRC are a great start, there must be robust, wrap-around services and oversight to ensure that communities lead the process of the development they want to see, rather than corporations. We do not have to choose between housing and a healthy environment.
CEJA’s Environmental & Housing Justice Policy Platform states that housing is both a health and human right. By this reasoning, we will always advocate for deeply and healthy affordable housing for communities most impacted by climate, economic, and other inequities. It is therefore concerning that the May Revision does not include new funding for affordable housing or homelessness. As state budget negotiations ramp up, we urge our elected officials to prioritize meaningful investments in these programs.
“Corporations have created a false dichotomy in California between environmental protections and housing. This narrative has pushed us to a regulatory tipping point where protections are being eroded and community voices are being silenced. California could prioritize a pathway forward that meets housing needs without perpetuating environmental injustices, but it is largely missing from this year’s budget.” - Rabeya Sen, Equitable Land Use Director, California Environmental Justice Alliance
As the budget goes through revisions, we call on California’s leadership to allocate where it is needed the most - low-income and BIPOC communities living on the frontlines of environmental hazards.
If you are interested in an overview of the entire budget, the California Budget & Policy Center’s First Look Report provides an accessible, bipartisan analysis.
