California leaders approve budget to close $12bn deficit in blow to progressive causes
California lawmakers on Friday approved a budget that pares back a number of progressive priorities, including a landmark healthcare expansion for low-income adult immigrants without legal status, to close a $12bn deficit.
It's the third year in a row the nation's most populous state has been forced to slash funding or stop some of the programs championed by Democratic leaders. This year's $321bn spending plan was negotiated by legislative leaders and the Democratic governor, Gavin Newsom.
Newsom is expected to sign the budget. But it will be void if lawmakers don't send him legislation to make it easier to build housing by Monday.
The budget avoids some of the most devastating cuts to essential safety net programs, state leaders said. They mostly relied on using state savings, borrowing from special funds and delaying payments to plug the budget hole.
California also faces potential federal cuts to healthcare programs and broad economic uncertainty that could force even deeper cuts. Newsom in May estimated that federal policies – including on tariffs and immigration enforcement – could reduce state tax revenue by $16 bn.
'We've had to make some tough decisions,' Mike McGuire, the senate president pro tempore, said on Friday. 'I know we're not going to please everyone, but we're doing this without any new taxes on everyday Californians.'
Republican lawmakers said they were left out of budget negotiations. They also criticized Democrats for not doing enough to address future deficits, which could range between $17bn to $24bn annually.
'We're increasing borrowing, we're taking away from the rainy day fund, and we're not reducing our spending,' said Tony Strickland, a Republican state senator, prior to the vote. 'And this budget also does nothing about affordability in California.'
Here's a look at spending in key areas:
Under the budget deal, California will stop enrolling new adult patients without legal status in its state-funded healthcare program for low-income people starting in 2026. The state will also implement a $30 monthly premium in July 2027 for immigrants remaining on the program, including some with legal status. The premiums would apply to adults under 60 years old.
The changes to the program, known as Medi-Cal, are a scaled-back version of Newsom's proposal in May. Still, it's a major blow to an ambitious program started last year to help the state inch closer to a goal of universal health care.
A Democratic state senator, María Elena Durazo, broke with her party and voted 'no' on the healthcare changes, calling them a betrayal of immigrant communities.
The deal also removes $78m in funding for mental health phone lines, including a program that served 100,000 people annually. It will eliminate funding that helps pay for dental services for low-income people in 2026 and delay implementation of legislation requiring health insurance to cover fertility services by six months to 2026.
But lawmakers also successfully pushed back on several proposed cuts from Newsom that they called 'draconian'.
The deal secures funding for a program providing in-home domestic and personal care services for some low-income residents and Californians with disabilities. It also avoids cuts to Planned Parenthood.
Lawmakers agreed to let the state tap $1bn from its cap-and-trade program to fund state firefighting efforts. The cap-and-trade program is a market-based system aimed at reducing carbon emissions. Companies have to buy credits to pollute, and that money goes into a fund lawmakers are supposed to tap for climate-related spending.
Newsom wanted to reauthorize the program through 2045, with a guarantee that $1bn would annually go to the state's long-delayed high-speed rail project. The budget doesn't make that commitment, as lawmakers wanted to hash out spending plans outside of the budget process. The rail project currently receives 25% of the cap-and-trade proceeds, which is roughly $1bn annually depending on the year.
Legislative leaders also approved funding to help transition part-time firefighters into full-time positions. Many state firefighters only work nine months each year, which lawmakers said harms the state's ability to prevent and fight wildfires. The deal includes $10m to increase the daily wage for incarcerated firefighters, who earn $5.80 to $10.24 a day currently.
The budget agreement will provide $80m to help implement a tough-on-crime initiative voters overwhelmingly approved last year. The measure makes shoplifting a felony for repeat offenders, increases penalties for some drug charges and gives judges the authority to order people with multiple drug charges into treatment.
Most of the fund, $50m, will help counties build more behavioral health beds. Probation officers will get $15m for pre-trial services and courts will receive $20m to support increased caseloads.
Advocates of the measure – including sheriffs, district attorneys and probation officers – said that's not enough money. Some have estimated it would take around $400m for the first year of the program.
Newsom and lawmakers agreed to raise the state's film tax credit from $330m to $750m annually to boost Hollywood. The program, a priority for Newsom, will start this year and expire in 2030.
The budget provides $10m to help support immigration legal services, including deportation defense.
But cities and counties won't see new funding to help them address homelessness next year, which local leaders said could lead to the loss of thousands of shelter beds.
The budget also doesn't act on Newsom's proposal to streamline a project to create a massive underground tunnel to reroute a big part of the state's water supply.
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