Newsom May Revision Drops Mid-May 2026, FQHC Watch Items: H.R. 1 Absorption, MCO Tax, Prop 35 Allocations, Worker Reqs Cost
Issue
Historical baseline: California Governor Newsom's FY2026-27 May Revision was expected mid-May 2026, his last gubernatorial budget. The January proposed budget projected a $2.9B deficit and $1.1B in net Medi-Cal cost pressure from H.R.
1 absorption. Items CA FQHC executives were tracking in the May Revision included the State-Only/UIS PPS-to-FFS proposal, MCO Tax permanence via Prop 35 allocations to FQHC PPS supplemental rates, work/community engagement requirements, the federal admin match cut, and capacity for Rural Health Transformation funding.
The signed budget moved the major UIS/PPS clinic-payment reduction into a July 1, 2027 planning horizon pending final DHCS implementation guidance, so use this item as context for what was on the table in May and how the live posture changed.
Key points
- May Revision drops mid-May — Newsom's last governor budget
- Watch UIS PPS final, MCO tax, Prop 35, work reqs cost, $233.6M rural
- $1.1B H.R. 1 absorption pressure already baked into Jan budget
- May 2026-July 2026 = single most consequential FQHC revenue window of year
Sources for this story
California Budget & Policy CenterSources for your board packet
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Part of
- California's budget, the MCO tax and Proposition 35
The annual budget · The MCO tax and Proposition 35
- California's state-only Medi-Cal coverage
PPS reimbursement for state-only patients
- Medicaid work-requirement implementation
California's implementation
FQHC Talent. (2026, May 2). Newsom May Revision Drops Mid-May 2026, FQHC Watch Items: H.R. 1 Absorption, MCO Tax, Prop 35 Allocations, Worker Reqs Cost. Source: California Budget & Policy Center. Retrieved October 6, 2026, from https://www.fqhctalent.com/intel/ca-may-revision-fy2026-27-budget-preview-may-2026