California Governor Gavin Newsom signed a budget Friday that significantly reduces funding for several progressive initiatives, including a healthcare expansion for low-income adult immigrants without legal status, in response to a $12-billion deficit.
This marks the third consecutive year that California has had to curtail funding for programs that were championed by Democratic leaders.
The new budget, amounting to $321 billion, was reached through negotiations between Newsom and Democratic lawmakers, who passed the plan just before the signing.
However, the budget will become void if lawmakers do not send him legislation by Monday aimed at making it easier to build housing.
State leaders claimed that the budget avoids some of the more severe cuts to essential safety net programs by utilizing state savings, borrowing from special funds, and delaying payments to close the budget gap.
“This budget is balanced, maintains substantial reserves, and is focused on supporting Californians,” Newsom stated.
In addition to the anticipated deficit, California also faces potential federal cuts to healthcare programs, alongside broader economic uncertainty that could necessitate even deeper cuts.
In a previous estimate, Newsom indicated that federal policies concerning tariffs and immigration enforcement could decrease state tax revenue by approximately $16 billion.
Senate President Pro Tempore Mike McGuire remarked, “We’ve had to make some tough decisions. I know we’re not going to please everyone, but we’re doing this without any new taxes on everyday Californians.”
Republican lawmakers have criticized the budget negotiations, claiming they were excluded from discussions. They also expressed concerns that the budget does not adequately address looming future deficits, projected to range from $17 billion to $24 billion annually.
Republican state Senator Tony Strickland commented, “We’re increasing borrowing, we’re taking away from the rainy day fund, and we’re not reducing our spending. And this budget also does nothing about affordability in California.”
Healthcare priorities have undergone significant changes in the new budget.
Starting in 2026, California will cease enrolling new adult patients without legal status in its state-funded healthcare program designed for low-income individuals.
Additionally, beginning in July 2027, a $30 monthly premium will be implemented for remaining immigrants in the program, which will affect adults under 60 years of age, including some individuals with legal status.
These adjustments to the program, known as Medi-Cal, are a reduced version of an earlier proposal by Newsom.
The changes represent a major setback for a program initiated last year that aimed to move California closer to achieving universal healthcare.
In a notable dissent, Democratic state Senator María Elena Durazo voted against the healthcare changes, labeling them a betrayal of immigrant communities.
Furthermore, the budget eliminates $78 million in funding for mental health phone lines that served approximately 100,000 people annually.
Funding to support dental services for low-income individuals will also be removed in 2026, and the implementation of mandated insurance coverage for fertility services has been delayed until 2026.
Despite these cuts, lawmakers successfully resisted several proposed reductions from Newsom that they deemed excessively harsh.
Funding for in-home domestic and personal care services for low-income residents and individuals with disabilities has been preserved, as has funding for Planned Parenthood.
Environmental initiatives also received attention in the budget.
Lawmakers reached an agreement to access $1 billion from the cap-and-trade program to bolster state firefighting efforts.
This program, designed to reduce carbon emissions, requires companies to purchase credits to pollute, with the resulting funds intended for climate-related spending.
While Newsom aimed to extend this program’s authorization through 2045 and guarantee $1 billion annually for the state’s delayed high-speed rail project, legislative leaders opted to resolve spending plans outside the budget discussions.
Currently, 25% of cap-and-trade proceeds, amounting to about $1 billion yearly, are allocated to the rail project, depending on annual revenue.
In a separate endeavor, funding has been approved to assist part-time firefighters in transitioning to full-time roles, addressing the challenges associated with a seasonal workforce.
The deal includes $10 million to increase the daily wages of incarcerated firefighters, who are currently paid between $5.80 and $10.24 a day.
Public safety initiatives feature prominently in the budget agreement as well.
An allocation of $80 million will support the implementation of a crime initiative that voters approved overwhelmingly last year.
This measure categorizes repeat shoplifting offenders as felons, increases penalties for certain drug offenses, and allows judges to assign treatment to individuals with multiple drug charges.
Most of the allocated funds, amounting to $50 million, will assist counties in increasing the number of behavioral health beds.
Additionally, probation officers will receive $15 million for pretrial services and courts will be granted $20 million to manage increased caseloads.
However, advocates for the measure, including sheriffs, district attorneys, and probation officers, argue the funding is insufficient, estimating that around $400 million would be necessary for the first year.
Other noteworthy priorities in the budget include an increase in the state’s film tax credit from $330 million to $750 million annually, aimed at supporting Hollywood.
This program, a key objective for Newsom, will take effect this year and is scheduled to expire in 2030.
The budget also allocates $10 million for immigration legal services, including deportation defense assistance.
Conversely, cities and counties will not receive additional funding for homelessness initiatives next year, potentially risking the loss of thousands of shelter beds.
Moreover, the budget does not address Newsom’s proposal to streamline a project to create a massive underground tunnel for rerouting a significant portion of the state’s water supply.
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