News
California Budget: What’s at Stake?
In short
Gov. Newsom and legislative leaders announced a deal to close the state’s budget deficit by tapping reserves and cutting some spending. The deal also calls for a bill in August to set aside more money and a 2026 constitutional amendment to increase the state’s rainy day fund.
Read this story at Spanish
To update: The Assembly and Senate approved the budget deal on June 26 and sent the bills to Gov. Gavin Newsom.
California will make across-the-board cuts to state government operations, prisons, housing programs and health workforce development in order to maintain its social safety net as it moves to close a multi-trillion-dollar budget deficit.
O $297.9 billion spending planannounced this morning by Governor Gavin Newsom, President Pro Tem of the Senate Mike McGuire and President of the Assembly Roberto Rivasit also relies on reserves and suspends some business tax credits to cover a remaining revenue gap estimated at $56 billion over the next two years.
“This agreement puts the state on a path to long-term fiscal stability – addressing the current deficit and strengthening fiscal resilience in the future,” Newsom said in a statement. “We are making sure to preserve programs that serve millions of Californians, including critical funding for education, health care, expanding behavioral health services and combating homelessness.”
The legislature approved a budget over a week ago in order to meet a legal deadline, but it did not represent a final agreement with Newsom as they continued to negotiate over the possibility of repurposing billions of dollars intended to increase payments for health care providers treating low-income patients and whether they should delay further increase in the minimum wage for healthcare professionalsamong other issues.
Their agreement — that the Democratic-controlled Legislature is expected to vote through a series of bills next week before the start of the new fiscal year on July 1 — restores funding earmarked for Medi-Cal provider fees. It postpones the salary increases in healthcare at least through October and potentially into next year, depending on the strength of revenue collections in the coming months. Despite strong opposition from unions, the measure could save California hundreds of millions of dollars.
- Become a CalMatters member today to stay informed, strengthen our nonpartisan news, and expand knowledge across California.
The plan makes $16 billion in cuts, including a 7.95 percent across-the-board reduction in funding for nearly every state department and the elimination of thousands of vacant positions, which collectively are expected to save nearly $3.7 billion. The Department of Corrections and Rehabilitation will make an additional $385 million cut at the request of progressive lawmakers, far higher than Newsom had originally sought. for the shrinking of the prison system.
Other major reductions include $1.1 billion from various affordable housing programs, $746 million for healthcare workforce development and $500 million for student housing construction. A scholarship program for middle-class college students will lose $110 million annually, about a fifth of the total. what the governor had originally tried to cut.
More than $3 billion in previously pledged funding to expand food benefits for undocumented immigrants, increase wages for providers who care for people with developmental disabilities, add new subsidized child care slots and build broadband internet will be postponed.
This will allow the state to protect what Newsom and legislative leaders touted in their announcement as “core programs,” including an expansion of Medi-Cal, California’s health care program for the poor, to all adults regardless of their status. immigration status, as well as increased funding for behavioral health, welfare subsidies and supplemental income for seniors. Local governments will receive another US$1 billion to combat homelessness.
The budget deal reduces a proposed cut to school funding, following a tense negotiation with education groups during which teachers unions ran a television ad campaign criticizing Newsom. Around US$5.5 billion will be postponed for the next few years.
“The assembly We have fought hard to protect the public services that matter most to Californians and we are delivering a budget that prioritizes affordability and long-term stability,” Rivas, a Salinas Democrat, said in a statement.
As part of the agreement, Newsom and the Legislature will pursue several additional measures to address the circumstances that led to California’s steep deficit. While the state experienced a historic surplus just two years agoa delay in tax collection last year caused by winter storms protected the extent of California’s weakening fiscal situation until after the governor and lawmakers had already committed to new spending sprees.
The budget agreement proposes legislation, to be adopted in August, that will require the state to set aside a portion of projected future surpluses so that they cannot be spent until the money is collected. It also suggests presenting a constitutional amendment to voters in 2026 to increase California’s main reserve account.
Meanwhile, the state plans to tap that rainy day fund, withdrawing more than $12 billion over the next two years to address the fiscal deficit. It will also suspend net operating loss carryforwards for companies with more than $1 million in taxable income and limit business tax credits to $5 million annually — strategies it previously employed at the height of the coronavirus pandemic — to raise about $15 billion in new revenue over the next three years.
“Make no mistake: This is a tough budget year, but it’s also not the budget situation we originally feared,” McGuire, a Healdsburg Democrat, said in a statement.This balanced budget helps address some of our toughest challenges with resources to combat the homelessness crisis, investments in housing, and funding to combat wildfires and retail theft.”
“I am a CalMatters member because I want unbiased journalism that allows me to form my own opinion.”
Susan, Palos Verdes
CalMatters Featured Member
Members make our mission possible.
div{flex-basis: unset !important;flex-grow: 1 !important;}.single-post .cm-cta.cm-cta-testimonial h6{text-align: left;}.cm-cta.cm-cta-testimonial .cm-cta-center-col{align-items: center !important;gap: 12px;}.cm-cta.cm-cta-testimonial .primary-cols.wp-block-columns{gap: 40px;}.cm-cta.cm-cta-testimonial .btn-col{flex-basis: fit-content;flex-grow: 0;}.cm-cta.cm-cta-testimonial .cm-cta-center-col > div{flex-basis: auto;}.cm-cta.cm-cta-testimonial .wp-block-buttons{min-width: 98px;}@media-screen&(max-width: 782px){.single .cm-cta.cm-cta-testimonial .cm-cta-center-col > div{flex-basis: min-content;}.cm-cta.cm-cta-testimonial > .wp-block-group__inner-container{grid-template-columns: auto;}.cm-cta.cm-cta-testimonial .wp-block-button.btn-light .wp-block-button__link{padding: 7px 24px;}div.cm-cta.cm-cta-testimonial{padding: 16px;}.cm-cta.cm-cta-testimonial h6{text-align: left;}.cm-cta.cm-cta-testimonial .primary-cols.wp-block-columns,.cm-cta.cm-cta-testimonial .cm-cta-center-col.is-not-stacked-on-mobile{gap: 16px;}.cm-cta.cm-cta-testimonial .btn-02-detail-05{font-size: 12px;line-height: 16px;}.cm-cta.cm-cta-testimonial .mob-p-12{padding: 12px;}}]]>