California’s legislative council approved a budget of $325 billion for the fiscal year 2025-26 on June 13, surpassing Governor Newsom’s revised budget proposal of $321.9 billion in May. The legislature rejected several reduction measures proposed by the governor to address a $12 billion deficit, opting instead to address the funding gap through internal borrowing, accessing emergency funds, and cutting appropriations for certain projects. Republican lawmakers opposed the budget, and according to polls, more than half of Californians also do not support it.
Democratic lawmakers, who dominate the state legislature, sought to postpone the “painful reduction measures” for a few years to allow more time to find alternative solutions and hope for a miraculous turnaround in the California economy. According to nonprofit media outlet CalMatters, Jesse Gabriel, the chair of the State Assembly Budget Committee from the 46th district, expressed concerns that the cuts may not be necessary in the end and that they could negatively impact social welfare programs. The uncertainty of the situation was highlighted by the warning that “we may face a different world in six months.”
Some Republican lawmakers criticized the budget for not taking any measures to solve the structural deficit issue. Roger Niello, vice-chair of the Senate Budget and Fiscal Review Committee and a Republican legislator, commented that the budget continues to overspend without prudent preparation for the worst-case scenarios. He warned that a budget built on hopes of revenue growth is bound for despair.
A significant portion of the deficit in the 2024-25 budget was attributed to California’s healthcare, including the Medi-Cal program open to undocumented immigrants. Since January 2024, Medi-Cal has been expanded to include undocumented immigrants of all ages, leading to higher enrollment and healthcare costs exceeding projections. To address the $6.2 billion shortfall in Medi-Cal funding, additional appropriations were made by the California lawmakers in the spring session.
Regarding the healthcare provisions in the 2025-26 budget, the state legislature rejected the governor’s proposed cuts but agreed to temporarily freeze new applications for Medi-Cal, suspend insurance coverage for weight-loss drugs, reduce the monthly premiums for undocumented immigrants from $100 to $30 as requested by the governor, allow those who lost coverage due to inability to pay to rejoin the system, delay cuts to their dental benefits, and preserve their long-term care benefits. Assembly Democrat Celeste Rodriguez from the 43rd district emphasized the importance of not exacerbating community fears and suffering, urging consideration of alternative options.
The state legislature postponed the governor’s cutbacks, including funding for family planning clinics, public transportation, economic aid for University of California (UC) and California State University (CSU) students; delayed the governor’s requested freeze on pay raises for state employees amounting to $767 million; introduced legislative priorities such as over $900 million for affordable housing construction and first-time homebuyer mortgage assistance; and allocated $1.75 billion in loans from the state government for transportation agencies in Los Angeles and the San Francisco Bay Area.
All these measures will increase expenditures by tens of billions in the coming year and beyond. The state legislature aims to borrow more money from dedicated state funds or impose higher taxes on the wealthy to fill the projected annual budget deficits of up to $30 billion over the next three years. Governor Newsom’s revised plan relies on transferring funds from climate projects and Medi-Cal provider reimbursements, as well as utilizing $7.1 billion from the state’s reserves to cover the deficit.
On the 13th, Republican Assembly leader James Gallagher and others held a press conference criticizing the budget allocation of approximately $12 billion to support undocumented immigrant healthcare at the expense of higher reimbursements promised for doctors, nurses, clinics, and hospitals under Proposition 35. They argued that the governor and Democratic lawmakers have been engaging in unsustainable spending practices that will lead California into massive deficits in the future.
Gallagher also pointed out that the new budget allocated only $200 million from the greenhouse gas reduction fund for wildfire prevention but earmarked $1 billion for California high-speed rail construction.
Assembly Republican Diane Dixon from the 72nd district voiced her opposition to the state budget on the 13th, stating in a post titled “Why I Voted No on the State Budget”: “Today I voted against the ‘bipartisan budget,’ which is not a collaborative effort between the parties but rather a proposal developed by the House and Senate leadership in closed-door meetings followed by a vote.”
“I advocated for a budget that prioritizes the people of California, but this proposal failed to do so,” Dixon said, criticizing the budget for being inconsistent, unsustainable, and spending $5.5 billion more than the governor’s revised plan. To cover the $12 billion deficit, the budget will rely on $7.8 billion in borrowing, $1 billion in deferred payments, and a $3.5 billion budget reduction.
“We should achieve budget balance without depleting reserves,” Dixon stated, noting that the budget proposal would result in an almost $6 billion increase in deficits for the 2028-29 fiscal year, including approximately $12.4 billion for California healthcare, regardless of residents’ immigration status.
“I am pleased that $221.6 million in appropriations will help 3,000 seasonal California firefighters transition to full-time positions, ensuring we have well-trained firefighters when wildfires strike,” she said. “Another highlight is the rejection of the governor’s proposal to cut overtime pay for IHSS home care workers, which is crucial for families with severely disabled individuals.”
Public Policy Institute of California (PPIC) polls conducted since 2003 show a shift in public opinion regarding taxation and services in the state. While Californians previously leaned towards supporting higher taxes for more services, recent years have seen a reversal, with 55% of Californians currently favoring lower taxes and fewer services, including over 30% of Democrats. More respondents believe that California is heading in the wrong direction.
A survey conducted from May 22-29 following the governor’s budget revision found that 43% of adults and 46% of potential voters considered the state budget a major issue. The majority of Californians opposed using $7.1 billion in emergency funds to balance the budget and instead leaned towards supporting expenditure cuts, increased revenue, and issuing bonds.
Most people prioritize healthcare, public services, and K-12 education in California’s government spending. However, 58% of respondents oppose providing healthcare insurance to undocumented immigrants, a significant shift from two years ago. ◇