California could save $150 million annually by shuttering an additional state prison within the next few years, according to a new budget analysis. This recommendation comes as the state faces a projected $27 billion deficit for the 2027-28 fiscal year, prompting calls for more aggressive cost-cutting within the California Department of Corrections and Rehabilitation (CDCR).
The proposal identifies the Correctional Training Facility in Soledad as a prime candidate for closure. Analysts argue that because the prison lacks modern housing and does not provide specialized medical services, its operations could be absorbed elsewhere.
Crucially, the state currently maintains a significant “buffer” of empty beds, meaning another closure would not violate federal court orders regarding prison overcrowding.
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Shifting the Mental Health Approach
The push for fiscal restraint coincides with a major shift in how the state manages inmate mental health. In September 2025, a federal court appointed a “Receiver” to take over the prison mental health system. This move was triggered by the state’s inability to fill critical staff vacancies, which led to $155 million in court-ordered fines.
The Governor has proposed spending $33.9 million to implement the Receiver’s initial plan, which includes raising salaries for mental health workers to attract more applicants. However, analysts are recommending a more modern approach: a heavy expansion of “tele-mental health” services.
Currently, many providers must be on-site, but officials believe switching more staff to remote work could solve the recruitment crisis. They are urging the state to allow providers to work from out of state and to waive the requirement that remote doctors hold a California-specific license, provided they are licensed elsewhere.
Addressing Budget Shortfalls
The CDCR is also grappling with a “structural shortfall” in its $14.1 billion budget. Historically, the department relied on “salary savings”—money left over from vacant positions—to pay for things like employee leave cashouts and rising utility costs. However, as the department has closed prisons and eliminated some empty roles, those surplus funds have dried up, leaving the agency short on cash.
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To address this, the Governor’s budget includes $91 million to specifically cover leave payouts for retiring or separating employees. While analysts agree the funding is necessary for now, they suggest a three-year limit to ensure the money is still needed if vacancy rates change.
Evaluating Parole Success
On the rehabilitation front, the state is considering a cost-of-living boost for community-based parole programs. Providers who run Day Reporting Centers and transitional housing have struggled to keep up with inflation, with some refusing to bid on state contracts because the pay is too low.
While analysts support a 30% “catch-up” payment to keep these programs running, they are also calling for the first-ever formal evaluation of their effectiveness. Currently, the state spends $270 million a year on these contracts without robust data showing which ones actually prevent people from returning to crime.
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Next Steps for the Legislature
The recommendations set the stage for a tense budget season. Lawmakers will have to decide whether to follow through with more prison closures and how much autonomy to give the new federal Receiver.
The Legislative Analyst’s Office has advised the state to hold off on final decisions until the May Revision, when updated population data and tax revenue figures will provide a clearer picture of the state’s financial health.
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