SACRAMENTO, Calif. — Democratic Gov. Gavin Newsom signed a nearly $352 billion spending plan Monday that delays some cuts to healthcare programs, increases funding for childcare and sets aside money to help speed up the state’s vote count ahead of the November election.
The plan, which avoids major cuts or significant new spending, is Newsom’s last before he leaves office in January and as he considers a presidential run. California’s spending priorities are likely to be under a microscope if he seeks the White House.
Newsom used the budget deal’s passage as a chance to highlight some of those priorities over his nearly eight years as governor. He released a video address touting state policies and spending to provide free meals at school, expand internet access, ramp up renewable energy production, and raise the minimum wage for fast food and healthcare workers.
He also noted the budget approved this year puts more money into state reserves, which he said shows the state’s fiscal prudence in the face of criticism that California lacks restraint when spending taxpayer dollars.
He tried to contrast California – which is the frequent target of attacks by GOP politicians including President Donald Trump – with Republican-led states and the federal administration.
“To every other state across our country – to Washington, D.C. – to anyone who’s been told that responsibility and ambition can’t share the same balance sheet: Come to California,” -Gov. Newsom
Budget includes limited tax increases
The budget aims to increase state revenues by billions of dollars by reforming a tax on healthcare providers, imposing a sales tax for certain software products and limiting tax breaks on large corporations. Newsom has generally opposed broad new tax increases during his time as governor but has approved more targeted measures. He’s against a one-time tax on billionaires pushed by a healthcare union that will go before voters this November.
Newsom and legislative leaders in the Democrat-dominated statehouse say their plan includes no deficit for the upcoming fiscal year and will help the state respond to Trump’s cuts to healthcare for low-income people.
“We have done a lot of work to mitigate harm, to protect vulnerable communities,” Assembly Budget Committee Chair Jesse Gabriel said at a hearing, though the Democrat acknowledged the state wasn’t “in a position to fully backfill those federal cuts.”
Republicans say the new laws are a temporary solution to the state’s budget woes because they focus too much on delaying spending and not enough on finding places to cut.
“The governor can claim he has a ‘balanced’ budget on his way out the door, but really, he’s just leaving us with his tab,” Republican Sen. Roger Niello said in a statement.
California previously faced tens of billions of dollars in budget deficits, forcing painful cuts such as a rollback last year on a promise to provide free healthcare to low-income immigrants without legal status. Nonpartisan budget analysts previously projected the state would see budget holes upward of $20 billion each year in the next few years. Newsom and the analysts sometimes differ in their estimations.
AI boom fueled higher revenue than expected
Tax revenues have also come in higher than expected mostly because of the booming stock market driven by enthusiasm over the artificial intelligence industry, according to the Legislative Analyst’s Office.
That revenue boost allowed lawmakers to stave off some cuts approved in last year’s budget, including slashing dental benefits for low-income immigrants without legal status and increasing premiums for those adults ages 19 to 59 enrolled in the state’s Medicaid program, known as Medi-Cal. Lawmakers agreed last year to require those recipients to pay $30 a month starting next year. Newsom proposed last month to increase that to $50 monthly, but the budget deal leaves the decision over the possible higher rate to the next governor.
Increasing access to childcare has been one of Newsom’s priorities over his tenure, and the budget funds nearly 23,000 new childcare spaces for the upcoming fiscal year.
Speeding up the state’s vote count
As California prepares for the November election, the deal includes $29 million for the Secretary of State office to help the state speed up its drawn out vote count by increasing staffing and upgrading technology. Another $10 million would go toward educating voters on the state’s election process, with half of that going to counties and the rest going to the state.
The state’s slow process for counting votes has been a target of criticism, and Trump and other Republicans have said without evidence that it fuels widespread fraud. The budget includes nearly $1 million to support efforts to fight misinformation about state elections.
The November contest will be closely watched because California has a handful of U.S. House seats that will be key to help determining control of the chamber as well as more than a dozen ballot measures and the race to replace Newsom.
Leaving major spending proposals up to next governor
As part of the budget deal, lawmakers kicked some of the state’s major spending decisions to Newsom’s successor. Democrat Xavier Becerra, a former state attorney general, and Republican Steve Hilton, a former Fox News host and adviser to conservative British politicians, are competing to replace Newsom.
The agreement, for example, delays a decision on how to change how the state spends revenue from its cap-and-trade program, which requires major emitters to reduce their pollution, buy allowances from the state or other businesses, or fund projects aimed at offsetting their emissions. State air regulators recently approved updates to the program that could halve a pot of money the state receives from allowance sales to fund climate, transportation and other initiatives.
Lawmakers also want to explore ways to penalize large companies for having employees enrolled in Medi-Cal, rather than on company-provided healthcare plans. Lawmakers plan to direct the Department of Finance to present the Legislature with options for how to do that.
The goal is to reduce costs for the state after Trump signed his signature spending legislation last year, which cut federal healthcare funding to help deliver tax breaks for individuals and businesses.
But any proposed penalties on corporations wouldn’t be approved until next year at the earliest, which disappointed some Democrats.
“This is a budget that bought time: Medi-Cal delayed, not resolved, not restored,” Democratic state Sen. María Elena Durazo said at a budget hearing Monday.
The deal would also shift management of the state’s Department of Education to the governor, which Newsom hopes will improve academic outcomes for students.
