Governor Newsom’s January Budget Proposal: In the Face of an Affordability Crisis, Investing in Equity Is Still the Answer
Last week, Governor Newsom released his January proposal for California’s 2026 – 27 budget as families across the state face rising housing, healthcare, transportation, and energy costs – and as federal protections for equity, affordability, and consumers continue to be dismantled.
Today, one in five Californians struggles to cover a $1,000 emergency expense. For communities of color and low-income communities, rising costs are compounded by disproportionate exposure to pollution, climate disasters, and long-standing economic discrimination. These pressures deepen inequality and push public dollars toward crisis response instead of prevention.
The Greenlining Institute outlined our detailed 2026 – 27 budget priorities focused on affordability, climate resilience, and racial equity. You can read our full budget letter here.
As negotiations move forward, lawmakers face a clear choice: invest now in programs that stabilize communities and reduce long-term costs, or accept higher economic and human costs later.
Affordability Is Shaped by Policy Choices
California’s affordability crisis is not accidental – it reflects policy choices shaped by profit-driven industries and the special interests that represent them, rather than the needs of California families. For households across the state, those choices show up in everyday tradeoffs: rising gas prices, soaring energy bills, increased healthcare costs, and the growing challenge of covering rent, childcare, and basic necessities at the same time.
Transportation is now the second-largest household expense after housing, and California’s electricity rates remain the highest in the nation. At the same time, extreme heat, wildfires, floods, and worsening air quality disrupt work, increase health costs, and strain local economies.
These pressures fall hardest on communities of color and low-income communities, where pollution exposure is highest, climate shocks are most destabilizing, and household budgets have the least room to absorb new costs. Treating systemic problems with temporary fixes leaves families facing higher costs, deeper instability, and the same crises over and over again.
Capacity-building programs such as Regional Climate Collaboratives – which the state has previously funded but recently cut – allow under-resourced communities to plan, compete for funding, and bring innovative, community-led solutions to scale. Clean transportation investments reduce one of the largest and most unavoidable household expenses while improving air quality in frontline neighborhoods. Strong consumer protections and access to fair capital – through adequate funding for the Department of Financial Protection and Innovation and programs like California Investment and Innovation Program to support CDFIs – prevent predatory practices that drain household wealth and destabilize small businesses, particularly in communities already facing the highest costs.
Together, these investments determine whether California lowers costs through prevention and access — or pays more later through emergency response, health impacts, and widening economic inequality.
Equity Programs Advance Affordability
Voters have already spoken on the need to address the climate crisis. Lawmakers now have a clear responsibility to invest taxpayer dollars through proven programs like Transformative Climate Communities and Community Resilience Centers that deliver affordability and resilience where it is needed most.
TCC supports community-led climate projects that cut pollution, lower household costs, and strengthen local economies — from affordable housing near transit to clean energy and green infrastructure. Demand continues to far exceed available funding, leaving communities with approved plans unable to move forward.
CRC investments strengthen local facilities – such as libraries, schools, and health clinics – to serve as emergency hubs during climate disasters while supporting year-round community health, workforce development, and stability. Delays in CRC funding leave communities exposed and increase the likelihood of avoidable harm.
We are encouraged that the Governor’s proposed budget allocates the vast majority of voter-approved Prop 4 dollars reserved for these programs – $137.4 million for TCC and $55.3 million for CRC – ensuring resources can reach communities that are ready to move forward with community-driven projects and services.
At the same time, the proposed budget falls short on other critical climate and affordability priorities, particularly clean transportation.
Equity-centered clean transportation programs like the Clean Truck and Bus Voucher Incentive Project and Clean Mobility Options help electrify trucks that pollute formerly-redlined neighborhoods and get communities into multimodal zero emissions transportation. While the Governor’s budget supports a new light-duty ZEV incentive that may or may not have equity provisions, choosing not to fund existing clean transportation equity programs threatens to undermine the progress we’ve fought for to get the most pollution-burdened Californians into clean transportation options.
Equity Is the Blueprint for Lasting Affordability
California has a mandate to embed racial equity into state government, following Executive Order N-16-22 and the development of the California Racial Equity Commission (see CA Racial Equity Framework). This work is essential to advancing affordability because an equitable system is one where everyone has a fair shot at economic opportunity, stability, and upward mobility.
Implementing the Commission’s robust recommendations depends on whether the state invests in the infrastructure required to turn equity goals into budget decisions — through data collection, budget analysis, and accountability mechanisms that shape how public dollars are allocated and evaluated. When budgets are designed without an equity lens, resources do not flow where they are most needed and families facing the highest costs are left behind.
Without this infrastructure, California’s budget will continue to produce disparate outcomes for communities of color. Equity is the blueprint for systems change and how California can ensure its affordability agenda expands opportunity, reduces long-term costs, and delivers shared prosperity across the state.
The Cost of Inaction Is Already Clear
As budget negotiations continue, California faces pressure to resolve multi-year budget deficits. But doing so by cutting equity-centered programs will only deepen affordability challenges and increase long-term costs across the state.
California has the tools and solutions needed to reduce costs and build resilience, and voters have made their priorities clear. What’s required now is leadership willing to act with urgency and put communities first when deciding how public dollars are spent.
The Greenlining Institute will continue to push for a budget that delivers on the state’s equity promises to communities of color, lowers household costs, prevents avoidable crises, and builds lasting economic and climate security — now and under the state’s next generation of leadership.
