On January 9, Governor Newsom released the details of his proposed budget for the fiscal year starting in July 2026 and ending in June 2027 (FY 26-27). The proposed budget includes one-time funding from Proposition 4 for a number of programs CalCAN has advocated for, including the Healthy Soils Program (HSP), a new equipment-sharing pilot program, and the Farmworker Housing Component of the Low-Income Weatherization Program. The proposed budget also includes an ongoing investment for the Farm to School Program, which exclusively sources local food from farmers who use climate smart practices.
The proposed budget included two surprises. First, the budget includes funding from the state’s General Fund for incentives for enteric methane-reducing feed additives for livestock operations. Second, the budget included a proposed change to the distribution of funding for the Affordable Housing and Sustainable Communities Program (AHSC) which could affect the Sustainable Agricultural Lands Conservation Program (SALC).
Disappointingly, the proposed budget does not include any new funding from the state’s Greenhouse Gas Reduction Fund (GGRF) for agricultural climate solutions because the budget proposes to use the entirety of the discretionary portion of GGRF for CalFIRE.
Below, we share more context on the state’s budget outlook and CalCAN’s current positions on the Governor’s budget proposal, which can be summarized as follows:
- Prop 4: Support the Governor’s Proposed Expenditures for Climate Smart Ag Chapter
- Farm to School: Support Governor’s Proposal, including Ongoing OARS Funding
- GGRF: Request $50 M for the Alternative Manure Management Program (AMMP)
- AHSC/SALC: Clarity Needed for Governor’s Proposal on AHSC and Impacts to SALC
- Enteric Methane Incentives: Guardrails Needed for Governor’s Proposed $23 M
Budget Context: Conflicting Near-Term Budget Outlooks but Structural Deficits Loom Ahead
The Governor’s budget projects a minor deficit of $3 billion for FY 26-27, while the nonpartisan Legislative Analyst’s Office (LAO) projects a more difficult budget deficit of $18 billion. This difference is due in large part to the different entities’ projections about the stock market and whether or not they anticipate a significant downturn. The LAO states in its Overview of the Governor’s Budget that “These risks [of a stock market downturn] are severe enough that not incorporating them into this year’s budget, as the Governor proposes, would put the state on precarious footing.”
Looking forward, both the LAO and Newsom administration anticipate the state to face multiyear budget deficits in the years ahead, with estimates ranging from $20 billion to $35 billion annually. The LAO’s analysis raises significant concerns about the state’s fiscal health, writing:
“These deficits are concerning for three reasons. First, after four years of projected deficits and a cumulative total of $125 billion in budget problems solved so far, the state’s negative fiscal situation is now chronic. Second, structural deficits have grown—our November outlook is the most negative forecast of the budget’s position since the pandemic. Finally, deficits have persisted even as the state’s economy and revenues have grown, underscoring that the problem is structural rather than cyclical. Taken together, these trends raise serious concerns about the state’s fiscal sustainability.”
This assessment, combined with continued federal funding cuts unlawfully targeting California and climate investments, means securing new investments in agricultural climate solutions will be difficult this year.
Prop 4: Support Governor’s Proposed Expenditures for Climate Smart Ag Chapter
We support the Governor’s proposed expenditure plan of Proposition 4 funding for programs in the bond’s Climate Smart Ag Chapter, summarized in the table below. This includes funding for the Healthy Soils Program, the Regional Farm Equipment-Sharing Program, and the Farmworker Housing Component of the Low-Income Weatherization Program, among others. These programs provide essential capital and technical assistance to farmers and farmworkers to mitigate climate change, increase resilience to extreme weather, and improve the health of communities and the environment.
CalCAN advocated for these investments through our multi-year campaign with the Food and Farm Resilience Coalition and we are excited to see them implemented in the upcoming fiscal year. For more details on the administration’s expenditure plan for Proposition 4, see the Climate Bond Expenditure Plan Budget Change Proposal (also known as a “BCP”).
Farm to School: Support Governor’s Proposal, including Ongoing OARS Funding
CalCAN supports the administration’s budget proposal for Farm to School, which helps educational institutions increase access to locally grown, minimally processed food. With cuts made to federal programs that support local markets for California farmers, this program is even more critical. In order for producers to participate in Farm to School, they must farm with climate smart practices, which are supported through incentives and technical assistance provided by CDFA’s Office of Agricultural Resilience and Sustainability (OARS). However, funding for OARS depended on unreliable, one-time appropriations, which has limited CDFA’s ability to support more producers in adopting climate smart practices and becoming eligible for the Farm to School program. Thus, we support the administration’s inclusion of ongoing funding for OARS.
GGRF: Request $50 M for the Alternative Manure Management Program (AMMP)
CalCAN’s sole funding request this year is for $50 million for the Alternative Manure Management Program (AMMP) from the discretionary portion of the Greenhouse Gas Reduction Fund (GGRF) to support California dairy producers with upgrading their infrastructure and equipment to implement non-digester technologies and practices that reduce methane emissions, reduce water use, improve water quality, and produce compost.
AMMP is essential to achieving the state’s climate, water quality, and healthy soils goals
Methane is a short-lived climate pollutant that is 80 times more potent than carbon dioxide over a 20-year period, which means that methane reductions have a near-term impact on curbing the worst effects of climate change. In California, dairy and livestock operations are the largest source of agricultural methane emissions, accounting for over two-thirds of total agricultural emissions. In 2016, the state enacted SB 1383, which set a target of reducing dairy and livestock manure methane emissions 40% from 2013 levels by 2030. Alternative manure management strategies are necessary to achieve this target but have thus far been underutilized by the state.
Scaling up AMMP practices is also necessary to achieve the state’s water quality, healthy soils, and organic transition goals. The State Water Resources Control Board (SWRCB) has pending water quality regulations (called the “Dairy Order”), which, if enacted, will create limits on manure land application, requiring many dairies to export their surplus manure. As a result, many dairies in the state will need to utilize AMMP practices to separate, dry, and process surplus manure into compost or other products so that it can be transported and used off-site. At the same time, the state’s 2022 Scoping Plan and 2024 Nature-Based Solutions Climate Targets both set acreage targets for healthy soils practices and certified organic croplands, which there is currently insufficient compost supply to achieve, since both require the application of large volumes of compost. AMMP projects, two-thirds of which convert their manure to compost, will need to fill this gap.
AMMP is one of GGRF’s most cost-effective programs and is likely underestimated
According to CARB’s official GGRF data, AMMP currently ranks 15th out of 115 GGRF-funded programs in cost-effectiveness for GHG reductions, which is good but is likely an underestimate. Based on a review of the most recent CARB and CDFA data sets, conversations with CARB and CDFA staff, and interviews with 20 dairy methane researchers, dairy producers, and dairy technical assistance providers, CalCAN found: (1) correcting an assumption CARB made in 2017 about the expected lifespan of AMMP projects could make AMMP twice as cost-effective as CARB has reported to-date; and (2) CARB’s GHG estimates from “AMMP track” projects funded through the federally-funded Dairy Plus Program show that newer and advanced AMMP technologies, such as vermifiltration systems, can reduce two to three times more methane emissions than earlier technologies. These findings suggest that AMMP’s cost-effectiveness and potential have been significantly underestimated.
AMMP is consistently oversubscribed, and demand is expected to increase
Since AMMP’s creation in 2017, the program has consistently been oversubscribed by 200-300%, and has been plagued by highly variable state funding (see graph below). Demand for AMMP grants exceeded $50 million in three of the last five application rounds, and is expected to sharply increase in the next few years as dairies seek to adopt AMMP practices in order to comply with the Water Board’s new Dairy Order.
AHSC/SALC: Clarity Needed for Governor’s Proposal on AHSC and Impacts to SALC
The Governor’s budget proposes “statutory adjustments to clarify SB 840 and modernize the Affordable Housing and Sustainable Communities [AHSC] program” and splitting SB 840’s $800 million annual GGRF appropriation for AHSC into two buckets: Up to $560 million for affordable housing and up to $240 million for “Sustainable Communities and Agricultural Land Conservation.” It is unclear in the proposal what that means for the Sustainable Agricultural Lands Conservation Program (SALC), which has historically received 10% of AHSC funds.
According to USDA Census of Agriculture data, between 2012 and 2022, the state lost roughly 500,000 acres of farmland to sprawling development, including warehouses and utility-scale solar. SALC addresses this threat to food security by funding projects that permanently protect farmland at-risk of development and supporting local governments with smart growth land use planning. Since 2014, SALC has funded 245 conservation easement projects and 15 fee acquisition projects to protect approximately 285,500 acres across the state – equivalent to four times the size of Sacramento.
SALC is also the 3rd most cost-effective GGRF program and is responsible for 15% of the GGRF’s total emission reductions to-date despite receiving only 2% of its funding. Agricultural conservation easement programs have also been proven to make farmland more accessible for beginning and historically marginalized farmers and to encourage the adoption of more widespread climate resilient farming practices. For these reasons, we urge the legislature to clarify the Governor’s proposal and maintain at least 10% ($80 million) of AHSC for SALC.
Enteric Methane Incentives: Guardrails Needed for Governor’s Proposed $23 M
The Governor’s proposed budget includes a one-time investment of $23 million to incentivize the adoption of feed additives to reduce enteric methane emissions from dairy cows. This funding was originally allocated to CDFA in the Budget Act of 2023 but was postponed until 2026-27 due the limited availability of proven enteric methane solutions at that time. Since 2023, research has continued into a variety of enteric methane solutions, but only one feed additive has been approved by the U.S. Food and Drug Administration (FDA).
We wrote an in-depth enteric methane blog last year that summarized current scientific findings on leading strategies for reducing enteric methane and assessed their effectiveness, trade-offs, and limitations. Given the current state of enteric methane strategies and research, CalCAN believes it is imperative that the state develop a principled framework for ensuring investments in enteric methane incentives reflect scientific effectiveness, feasibility, equity, and long-term sustainability. To that end, CalCAN has developed the following principles in consultation with dairy and livestock operators and industry advisors to inform future enteric methane policy and incentives, which we urge the legislature to enshrine as guardrails to the Governor’s proposed enteric incentives:
- Whole-farm evaluation. Feed additives and management changes should be assessed through life cycle assessments that account for net greenhouse gas outcomes.
- Co-benefits. Priority should go to solutions that offer additional benefits for air and water quality, soil health, animal well-being, and farmworker safety.
- Accessibility. Programs must be designed to work for small- and mid-sized farms, pasture-based systems, and organic producers, not just for large dairies and feedlots.
- Farmer fairness. Incentives should fully cover the implementation costs for small and mid-sized dairy and livestock operations, and any benefits accrued through carbon or ecosystem markets should go to the farmer implementing the practice.
- Diversity of Solutions. No single product manufacturer should benefit from state funding and promotion of their products.
How You Can Support
To be successful in our budget advocacy efforts, we rely on support from our network. Elected representatives need to hear from farmers and other agricultural stakeholders about why agricultural climate solutions matter and how they benefit farms and communities. If you’re interested in learning more about how you can support our efforts, please email our partner engagement manager, CC Ciraolo at CC[at]calclimateag.org.
Next Steps in the Budget Process
The Governor will release an updated budget proposal in May, known as the May Revise. In the months between now and then, the legislature’s budget committees and subcommittees will hold a series of budget hearings to discuss the Governor’s proposal and the legislature’s priorities, as well as hear from advocates and stakeholders. The legislature and the Governor are then required by the constitution to pass and approve a final budget by the end of June. We will keep you informed about this process in our blog and monthly newsletter.
