California Infrastructure Funding in Late 2026: What Changed and What It Means for Projects

California's transportation pipeline has not stopped, but the rules around it changed this fall. The federal law that paid for five years of highway, bridge, and transit work reached the end of its authorization. The state enacted a smaller transportation budget. And Caltrans began rebuilding its federal Disadvantaged Business Enterprise (DBE) program.

Here is where things stand as of September 24, 2026, and what it means if you own, design, or build a publicly funded project in California.

What happened to IIJA funding after September 30, 2026?

The IIJA, also called the Bipartisan Infrastructure Law, authorized federal surface transportation programs for federal fiscal years 2022 through 2026. The last of those years ended September 30, 2026. The Federal Highway Administration (FHWA) describes the law as providing about $350 billion for highway programs over the five years, most of it distributed to states by formula.

Congress did not pass a replacement in time. Instead, H.R. 6500, the Continuing Appropriations and Extensions Act, 2027 (Public Law 119-103), was signed on September 2, 2026, before the programs lapsed. It keeps the government funded, and its Division C, the Surface Transportation Extension Act of 2026, continues surface transportation programs from October 1 through December 11, 2026. During that window, Highway Trust Fund programs continue at prorated fiscal year 2026 levels.

For agencies, a ten-week extension means planning against a partial-year number. Formula dollars keep moving, but the full-year amount for fiscal year 2027 depends on what Congress does next.

From the IIJA to the short-term extension

Illustrative diagram — not to scale

1. 1IIJA: authorized programs for federal fiscal years 2022 through 2026. The last of those years ended September 30, 2026.
2. 2September 2, 2026: H.R. 6500 signed, before the programs lapsed.
3. 3Extension: October 1 through December 11, 2026. Highway Trust Fund programs continue at prorated fiscal year 2026 levels.
4. 4No new money: the extension does not fund the IIJA's Division J programs, such as the Bridge Formula Program, for fiscal year 2027.

Is a new five-year federal transportation bill coming?

The leading proposal is the BUILD America 250 Act (H.R. 8870). The House Transportation and Infrastructure Committee approved it with bipartisan support on May 22, 2026. As approved by the committee, it would authorize about $580 billion for federal fiscal years 2027 through 2031, with about $474 billion of that guaranteed from the Highway Trust Fund.

The committee bill also changes environmental review under the National Environmental Policy Act (NEPA). According to the committee's section-by-section summary, the highway title would raise the limits for the categorical exclusion for projects of limited federal assistance. Projects receiving less than $12 million in federal funds would qualify (up from $6 million), as would projects with a total cost under $70 million (up from $35 million) (Sec. 1214). It would also clarify NEPA review timelines and page limits (Sec. 1203).

Two other project-delivery changes are in the bill's railroad title (Title X), not the highway title. One would set a 90-day time frame for the lead agency to decide the scope of required NEPA review (Sec. 10509). The other would add categorical exclusions for projects located entirely within an existing railroad right-of-way (Sec. 10502).

December 11 is the next checkpoint. By then, Congress will need to pass a multiyear bill or another extension. The House Transportation and Infrastructure Committee's surface transportation reauthorization page tracks the bill's status.

How much transportation money does California have in 2026-27?

The Legislative Analyst's Office (LAO) reported on September 22, 2026, that the 2026-27 budget package provides $31.2 billion for transportation-related programs. That total covers more than infrastructure projects: it includes Caltrans, local streets and roads, transit, the California Highway Patrol, the DMV, high-speed rail, and bond debt service. It is $3.9 billion (11 percent) less than estimated 2025-26 spending, mostly because limited-term General Fund and Greenhouse Gas Reduction Fund money from earlier budgets is running out.

Senate Bill 1 (2017), the state's gas tax and vehicle fee package, still provides an estimated $5 billion a year, split between state and local transportation work. It has no built-in sunset date.

The key number is the federal share. Nearly half of Caltrans's 2026-27 budget comes from federal funds, so the size and timing of the next federal bill will shape how much state highway work moves forward, and when.

Can federal funding change after it is announced?

Yes, and it helps to separate the two main kinds of money. Formula funds follow a formula written into federal law, so they are fairly predictable once Congress sets the totals. Discretionary grants are awarded project by project and carry more risk.

For a local agency, a project that depends on a discretionary grant needs a fallback plan. A project funded by formula dollars mainly needs to be ready when the money is.

What is happening with DBE goals on federally funded contracts?

On October 3, 2025, the U.S. Department of Transportation (USDOT) issued an Interim Final Rule amending the DBE regulations in 49 CFR Part 26. It removed the race- and sex-based presumption that owners who are women or members of certain racial and ethnic groups are socially and economically disadvantaged.

It also required each state's Unified Certification Program to reevaluate every currently certified DBE under the new standard. Until that reevaluation was complete, agencies could not set DBE contract goals or count DBE participation toward goals.

In California, the reevaluation phase is now largely done:

• April 16, 2026: interim deadline for certified firms to submit complete reevaluation materials.
• July 20, 2026: the California Unified Certification Program notified USDOT that reevaluation was complete for firms that met that deadline. New DBE applications reopened July 21.
• September 16 to 30, 2026: public comment on Caltrans's proposed overall DBE goals for federal fiscal years 2027 and 2028. The proposal lowers the goal for FHWA-funded work from 21.35 percent to 11.80 percent, and for FTA-funded work from 6.7 percent to 0.08 percent. Caltrans says the new goals reflect a much smaller pool of recertified firms.

Contract goals cannot resume until FHWA and the Federal Transit Administration (FTA) acknowledge the final goals and Caltrans's amended DBE program plan. Caltrans expects that in fall 2026.

After that, goals will be set contract by contract based on how many certified firms are available for the type of work, so some contracts will carry no DBE goal at all. New goals apply to projects still in development, not to projects already advertised.

Do the DBE changes affect state small business and DVBE goals?

No. The federal rule covers contracts assisted with USDOT funds. State-funded contracting follows state law.

Under the Government Code and the Military and Veterans Code, each state department has an annual goal of at least 25 percent small business participation and at least 3 percent Disabled Veteran Business Enterprise (DVBE) participation, as the Department of General Services' State Contracting Manual explains. Caltrans's DVBE program page describes the same goal: DVBEs in at least 3 percent of the state's overall annual contract dollars.

So one prime contractor can work under two different subcontracting frameworks in the same year. Check the funding source on each solicitation before you build a team.

What this means for your project

• Local agencies with federal-aid projects: confirm that each phase has FHWA authorization before starting work you plan to bill to federal funds. Caltrans's Local Assistance Procedures Manual says work done before FHWA authorization is not eligible for federal reimbursement.

  The exception is At-Risk Preliminary Engineering (PE): when the project and phase are already in a federally approved Federal Statewide Transportation Improvement Program (FSTIP), PE costs can be reimbursed once the phase is authorized. The agency bears the risk if the phase is never funded.

• Keep the front end moving: a project with its survey, preliminary design, and right-of-way mapping done is in the best position when a full-year federal amount is set. Topographic surveys for design and legal descriptions and easements for right-of-way are early steps that often set the schedule.
• Primes and subconsultants on federal-aid bids: read each solicitation's DBE provisions instead of assuming the old goals. Expect goals to vary from contract to contract as the certified pool grows.
• Development that ties into public streets or storm drains: street frontage, storm drain, and sewer improvement plans go through the local agency's public works review. Construction that disturbs one acre or more, or less than one acre as part of a larger common plan of development that disturbs one acre or more, also needs coverage under the state's Construction Stormwater General Permit (Order WQ 2022-0057-DWQ). That permit requires a stormwater pollution prevention plan (SWPPP).
• Sites and corridors still being evaluated: a feasibility study can surface drainage, utility, and access constraints before you commit to a funding application or a purchase.

Funding rules and local procedures vary by agency, so confirm the details with the agency administering your funds. If you are planning survey, civil design, or stormwater work for a funded project, tell us about the project and we will help you map out the next steps.