News Summary

Governor Gavin Newsom of California has revealed a staggering $12 billion budget deficit for the upcoming fiscal year, leading to proposed cuts in health programs for undocumented immigrants and a freeze on Medi-Cal enrollment. The deficit stems from unexpected Medicaid expenditures and economic uncertainties, including a volatile stock market and potential decreases in state revenue due to federal policies. The budget must be finalized by June 30, 2025, with significant implications for health and education funding.

California Governor Gavin Newsom has announced a significant budget deficit of $12 billion, prompting proposed cuts and a freeze on enrollment in health programs for undocumented immigrants. The upcoming fiscal year’s budget is set at nearly $322 billion, but Newsom has indicated that higher-than-expected Medicaid spending and various economic uncertainties are at the heart of the financial shortfall.

In his statement, Governor Newsom attributed the deficit to increased costs associated with the Medi-Cal program, California’s Medicaid program. He highlighted challenges such as federal tariffs and a volatile stock market, which impact state revenues that heavily rely on taxes from capital gains. Moreover, he expressed concerns that President Donald Trump’s economic policies could lead to a projected $16 billion decrease in state revenues in the near future.

The state is approaching a deadline for finalizing the budget, which must be signed by June 30, 2025. Among the notable proposals is a freeze on enrollment in Medi-Cal for low-income adults who lack legal status, effective from 2026. Current beneficiaries will not be removed from the program, and children will remain unaffected by this decision. However, starting in 2027, adults enrolled in Medi-Cal without satisfactory immigration status will be required to pay a $100 monthly premium.

These proposed changes are expected to yield approximately $5.4 billion in savings by the fiscal year 2028-2029. The expansion of Medi-Cal, which costs $2.7 billion more than initially anticipated, has seen over 1.6 million undocumented individuals enrolled this fiscal year alone.

The proposals have faced opposition from various political figures and groups. Democratic State Senator Dave Cortese has voiced concerns over the coverage changes for low-status immigrants, emphasizing California’s dedication to its immigrant population. On the other hand, Republican leaders have criticized Newsom’s budget crisis claims, with Assembly Republican Leader James Gallagher describing his comments as mere “finger-pointing.” This political tug-of-war highlights the contentious atmosphere surrounding budget discussions in the state.

In addition to the health sector cuts, Governor Newsom’s proposal also includes significant reductions to funding for higher education. The latest budget adjustments propose to cut funding to the University of California (UC) and California State University (CSU) systems by more than half. Specifically, the proposed cut for UC has been reduced from $397 million to $130 million, while CSU’s cut decreased from $375 million to $144 million, reflecting 3% reductions across both institutions.

The higher education funding cuts have already begun to impact institutions, prompting hiring freezes and further austerity measures as they adapt to diminishing resources. Both UC and CSU systems are advocating for increased funding, citing rising operational costs and the potential for further federal funding cuts that could exacerbate their financial challenges.

Conversations surrounding new legislation, such as California Senate Bill 829 aimed at creating a state scientific research institute, continue amid these budget hurdles. The leadership at UC, including President Michael V. Drake, has expressed relief over the amended budget outlook, while CSU Chancellor Mildred Garcia has echoed similar sentiments, underscoring the need for continued funding support in the face of ongoing financial struggles.

As budget negotiations progress, California’s approach to managing its significant deficit while balancing the needs of its diverse population remains a critical and heavily scrutinized topic.