CA lawmakers add more homeless funding to budget. How will it impact Sacramento?

The state of California will send $900 million in local homelessness funding this fall, reversing course on budget cuts that Gov. Gavin Newsom originally proposed to the state budget, and restoring funds that Sacramento leaders say will help keep shelters open.

The seventh round of the state’s Homeless Housing Assistance and Prevention program will go to cities and counties, according to the state budget signed Monday, up from $500 million in Newsom’s January budget proposal.

The increase, which comes after intense lobbying from local governments, is set to hit coffers in September — faster than previous rounds. Local leaders across the state, including in Sacramento, praised the decision. But they warned that without an eighth round of funding for the program included in the budget, it may become difficult to keep shelters open.

Since the program started in 2020, about 100,000 homeless people statewide have moved into permanent housing, according to Newsom’s office. The program provides funding for cities and counties to build and run shelters, create affordable housing, and help homeless people find housing.

Not counting the money coming this fall, the city of Sacramento has so far received from the program $104.6 million, the county has received $48.2 million, and Sacramento Steps Forward has received $51.4 million, according to a state Department of Housing and Community Development web page.

“Even though unsheltered homelessness went down in the city, sheltered homeless went up a little bit, and we are pegged at a formula for HHAP based on the countywide count,” Sacramento Mayor Kevin McCarty, a former legislator, said. “HHAP is a big relief. We increased capacity by about 500 beds in the last 18 months, and plan to increase it by another 500 or so in the next year.”

After a state audit in 2024 found the state was not consistently tracking outcomes for the homelessness funding, the state started requiring localities to report outcome data every month. The new funding reduces that to quarterly.

Alex Visotzky of the National Alliance to End Homelessness said that’s a positive change because it frees up city and county staff time to work on getting more people housed.

“We don’t know what works if we keep changing the program radically each year and then never following up on the data from previous rounds,” Visotzky said. “We appreciate the legislature focusing in on making sure people are spending the money on getting people housed as opposed to performative paperwork.”

McCarty said he is not worried about the city meeting the accountability measures.

The new round of funding also requires cities and counties to provide a local match in order to receive the funds. For the fiscal year that started Wednesday, the city of Sacramento is spending about $40 million on homelessness, which includes $30 million from the city’s general fund, satisfying the local match requirement, McCarty said.

The amounts that cities and counties get will partly be determined by Point in Time counts, which should mean Sacramento will get more money than the $16.1 million it got this spring, McCarty said. There are now an estimated 7,458 homeless people living in Sacramento County, up 13% from 2024.

When Newsom started the program in 2020, it vastly increased the amount of the state budget allocated to homelessness. It was also the first significant revenue source for cities to address the crisis, not just counties. Sacramento, which had only one city shelter in 2019, now has nine large city and county shelters, partly as a result of the funding.

“California’s investment in the (HHAP) program reflects Governor Newsom’s longstanding commitment to addressing homelessness,” Gallegos said. “Governor Newsom is the first California governor to make homelessness a statewide priority, advancing foundational reforms that will strengthen the state’s response for years to come.”

Sacramento received its sixth round of the funding this spring and summer. Sacramento County received $7.5 million and nonprofit Sacramento Steps Forward received $8 million, according to the state web page.

Sacramento County is still spending previous rounds of the funding, said Janna Haynes, a county spokesperson. The county plans to use its fourth round in part to fund operations of large $64 million shelter, which is now set to open in late 2026 or early 2027, after several delays.

“With a new governor incoming, I am not surprised there isn’t yet a projection for HHAP 8,” Haynes said in an email. “However, we hope that investing in our homeless solutions continues to be a priority for the state ... We continue to advocate for multi-year HHAP allocations to allow us to more strategically plan our long-term projects.”

Despite the new shelters in Sacramento, there is still a shortage of beds. At any given time, Sacramento County Homeless Services and Housing Director Emily Halcon has said, there are about 3,000 people on the waitlist for a city or county shelter bed.

Sacramento Steps Forward is using its $8 million largely to help prevent families at risk of eviction from becoming homeless, as well as move-in and move-out assistance, said Kim Winters, nonprofit spokesperson.

“We applaud the Legislature and Governor for doubling down on that progress and staying committed to the program,” Visotzky said. “Because we can give that progress right back if we don’t keep funding the housing and services that people are relying on to stay housed.”

The leaders of the League of California Cities and California State Association of Counties agreed, and urged the next governor — Democratic candidate Xavier Becerra, the former U.S. Health and Human Services Secretary, or Republican candidate Steve Hilton — to keep the program alive.

“In the face of fiscal uncertainty and growing pressure on local communities, this year’s investment is critical,” the organizations said in a news release. “We look forward to building on this progress with the Legislature and the next Governor to make HHAP a long-term, sustainable funding source that helps local agencies plan, sustain programs, and deliver results.”

If the program ends under a new governor, it could mean the closure of shelters run by the city of Sacramento. Amid a budget deficit earlier this year, City Council members Lisa Kaplan and Karina Talamantes proposed the city cancel plans to build a tiny home shelter for homeless seniors in North Natomas.

The council passed a budget for the fiscal year that started Wednesday without those cuts, which were opposed by McCarty. But the city is again facing a projected budget deficit for the fiscal year that starts July 1, 2027.