California Governor Proposes $322 Billion Revised Budget

Categories: California Breaking NewsCalifornia EconomyCalifornia GovernmentCalifornia NewsCalifornia Politics

An illustration depicting a legislative meeting focused on California's budget proposal and social service cuts.

News Summary

California Governor Gavin Newsom has unveiled a proposed revised budget of $322 billion aimed at addressing a projected $12 billion shortfall. The budget features significant cuts to health and social services, including changes to Medicaid coverage for undocumented immigrants, halting tobacco tax revenue funding, and capping expenditures on in-home care services. These measures reflect a shift from previous commitments to expand healthcare access. As the fiscal challenges mount, negotiations will be crucial in finalizing the budget by mid-June, with reactions from lawmakers already brewing.

California Governor Gavin Newsom has proposed a revised budget of $322 billion that aims to address a projected shortfall of $12 billion. The proposal, revealed on May 14, 2025, outlines several significant cuts to health and social services, including adjustments to Medicaid coverage for undocumented immigrants, which marks a notable shift from the governor’s previous stance on universal health care for this population.

The budget is influenced by various factors contributing to the financial deficit. Reduced revenue has been attributed to the economic policies of the Trump administration, which have been estimated to have caused California a loss of $16 billion, alongside volatility in the stock market and a decline in global tourism. As the state grapples with these economic challenges, the proposed budget outlines measures aimed at financially stabilizing California.

Among the key provisions in Newsom’s budget is the scaling back of Medicaid coverage for undocumented immigrants, with plans to freeze enrollment beginning in January 2026. This change will require eligible low-income adults without legal status to pay a monthly premium of $100 starting in 2027. These adjustments to the Medicaid program, known as Medi-Cal, are projected to yield savings of approximately $5.4 billion by the fiscal year 2028-2029, significantly impacting over 1.6 million undocumented individuals who currently receive coverage.

In addition to changes to Medicaid, the budget proposes halting the use of declining tobacco tax revenues to fund important health services, which could save the state over $500 million annually. This decision has drawn criticism, particularly from organizations like Planned Parenthood, which warn that it would reduce their funding by a third during challenging economic times.

The governor also announced plans to eliminate state coverage for certain weight loss drugs starting in January 2026, which is expected to save around $680 million by 2028-2029. Additionally, expenditures for in-home domestic and personal care services for low-income residents and those with disabilities are set to be capped, aiming for savings of nearly $708 million in the upcoming fiscal year.

To extend the state’s cap-and-trade program, which is targeted at reducing carbon emissions, Newsom proposes to reauthorize this initiative through 2045, allocating $1.5 billion from that program to support the state fire department. Furthermore, the revised budget includes the closure of another state prison by October 2026, which is anticipated to save $150 million annually.

This current budget proposal signifies a major deviation from Newsom’s previous commitments to expand health care access to undocumented immigrants, previously viewed as a priority for his administration. As lawmakers review this substantial budget, there are already signs of dissent among some Democratic legislators who oppose cuts that compromise support for vulnerable populations.

The budget must undergo negotiations and be finalized by mid-June, with state legislature evaluations of the proposed changes expected to take center stage in the coming weeks. Newsom’s budget reflects the complexities of navigating fiscal challenges while addressing the needs of various constituents in an increasingly strained economic environment.