Each year the Governor and Legislature work together to pass the state’s budget that determines how taxes will be spent on state-funded programs like education, healthcare, corrections, and human services through the state's General Fund. The California Budget Challenge simulates this process by presenting spending and revenue options to choose from in order to create your own state budget.

Forecasted Budget Deficit:

Following large surpluses in 2021 and 2022 due to higher-than-expected revenue and federal COVID relief funds, the state is now facing a projected deficit of $4.3 billion in 2026-27 if the proposals in the Governor’s proposed budget are not adopted. This is a result of higher-than-expected spending, particularly related to healthcare, and uncertainty about the future of the economy and potential changes in federal policy and funding.

Balance the Budget:

As part of the 2025 budget agreement, the Governor and Legislature included proposals to maintain funding for long-standing state priorities—such as healthcare, housing, homelessness, and education—while passing a balanced budget. However, the deficit would be $4.3 billion if the proposals in the proposed 2026-27 budget weren't adopted. The California Constitution requires the state to pass a balanced budget, so changes must be made to close the gap

Getting Started:

The pie charts below represent the breakdown of state spending and revenue as presented in the 2026-27 proposed budget, with new spending and any revenue proposals stripped out to present more of a baseline starting budget, leaving you with a starting deficit of $4.3 billion. You will start with spending options, deciding whether to increase or cut spending in a variety of categories. Options are then presented that allow you to allocate additional funding for one-time or ongoing purposes or cut existing funding. After that, there are also options to raise or cut taxes. The goal is to end up with a balanced budget or surplus at the end of the exercise.