What the One Big Beautiful Bill Means to California’s Government

Over the holiday weekend, the federal government passed the One Big Beautiful Bill Act — a sweeping legislative package that will further re-shape responsibilities between state and local governments and the federal government and dramatically alter public benefits, energy, immigration and education.

For the state of California, it will be a fairly large lift to comply. As the most populous and progressive state, safety net programs and those that benefit from them will be significantly impacted. The state must now look at how to overhaul key systems and processes to comply.

Initial estimates are taking shape but compliance could cost the state billions of dollars across health and human services, tax administration, education, infrastructure and IT upgrades to make it all work. Now state policymakers have the tough task of figuring out their new responsibilities and how to fund them.

WHERE THE TECHNOLOGY OPPORTUNITIES ARE

This law will drive urgent IT transformation across several major agencies in the state, with many projects likely requiring funding in the tens of millions of dollars. Let’s take a look at where we’re likely to see IT investment.

• Medi-Cal (Medicaid): The state may need to automate work verification and recertification engines as well as update eligibility logic for CALHEERS/CALSAWS.
• CalFresh (Supplemental Nutrition Assistance Program): With the cost shift in SNAP, the state will need to update eligibility recertification modules, potentially update cross-county data sharing and update benefit audit workflows.
• Tax system updates: The new law updates spousal lifetime access trust, tip exemptions and other tax-related items. The Franchise Tax Board (FTB) will need to make necessary upgrades to align with federal deductions, refund logic and validation.
• Immigration: In response to the changes in immigration law, the state may want to make updates to its case management, service intake portals, court calendaring and data sharing.
• Public health: This law has sweeping change to public health and public hospitals. In alignment with this law, we may see the state invest in predictive analytics for health-care needs and reimbursement tracking.
• Energy and infrastructure: The law reverses course on a variety of green energy and infrastructure efforts. As such, states like California will need to push forward on their initiatives without much, if any, federal support.
• Cybersecurity and data sharing: Across agencies and departments, there may be a greater need to share data to make these programs function in lieu of the federal government. This may drive further investments in identity and access management, APIs and cybersecurity.
• General compliance: Across agencies and departments, there will be a greater emphasis to demonstrate compliance with the federal government. This may result in expenditures related to regulatory tracking, audit and compliance analytics.

This law will have sweeping and significant impacts to the state at all levels of California government and K-12. The impact will be widespread and certainly place significant pressure on the state’s budget in both the short and long term. The state’s budget was finalized before this bill passed and doesn’t include funding for these compliance activities. In the very near future, expect the Department of Finance to issue budget change proposals (BCPs), rainy-day draw downs, reallocation of special funds and possibly supplemental appropriations.

WHAT YOU SHOULD DO NOW

• Translate policy into action: You should immediately move to understand and assess the new law for impacts to both your business and your customers. Agency staff will begin to interpret the new law for their operations. How can you help them connect the dots? What systems are affected? What processes need to change? What does compliance look like in reality?
• Position for midyear procurements: Don’t wait! Help agencies prepare BCPS tied to compliance and work to ensure that they can be executed to meet the various deadlines and requirements.
• Emphasize modularity and speed: Integration into existing systems such as CalWINS, CalSAWS and FTB will be necessary. Agencies will need a combination of flexibility and speed.
• Bring awareness: Agencies are going to need to work together to get this done. Partners will need to understand and drive interagency coordination.

This new law will force California (and other state customers) to move fast. Partners who understand the policy landscape of the state and can deliver modular, compliant solutions will be in a strong position. It is important to also keep in mind that there will be compliance and operational costs beyond 2026. That said, there isn’t much time for a "wait and see" approach. The bill is now law and the compliance problems are already here.

Editor's note: The budget and bill analysis were developed with assistance from ChatGPT.