Last week, Governor Gavin Newsom released his revised spending proposal for the 2025–26 fiscal year. The blueprint calls for $321.9 billion in spending.
California’s projected budget deficit is $12 billion. Expected revenue for 2025–26 is $10.5 billion less than the January forecast. Newsom placed blame on what he called “the Trump slump” and the President’s whiplash trade policies in particular.
To address the shortfall, Newsom is proposing a pause in Medi-Cal expansion for undocumented immigrants beginning in 2026. His budget also proposes to reduce state worker salaries, close another prison, and shift cap-and-trade funds away from climate initiatives to cover Cal Fire projects.
Newsom has been dealt a bad hand. Federal cuts and uncertainty have complicated the outlook for California. But too often, his response to the pressure has been to cast blame. He frequently acts as a spectator to poor governance in California.
Both Cal Cities and the California State Association of Counties (CSAC) have had enough of the deflection. They were blunt in their criticism of Newsom’s spending plan.
“Hiding behind the effects of federal global trade policy, the Governor evaded accountability for failing to properly account for the costs of policy changes and programmatic expansions the state made,” said CSAC Chief Executive Officer Graham Knaus. “The Governor repackaged past budget actions and cost shifts as ‘flooding the zone’ with aid to local governments to address homelessness. Local governments across the state understand, now more than ever, that clever wording and finger pointing from the bully pulpit does not obfuscate the realities and challenges of direct service delivery.”
“Regrettably, the 2025-26 May Revision does not include critical funding for the Homeless Housing, Assistance, and Prevention (HHAP) Grant program, nor does it include funding for county governments to implement Proposition 36 (2024),” Knaus added. “The HHAP program, which provides flexible funding to counties, large cities, and continuums of care to address homelessness in local communities, has been funded in a piecemeal fashion, leaving local governments with no ongoing support to sustain these vital programs.”
To add insult to injury, Newsom took another jab at local governments during his budget presentation. When it comes to homelessness and housing, “it is not the state of California that remains the biggest impediment. The obstacle remains at the local level."
Those words prompted a rebuke from Cal Cities Executive Director and CEO Carolyn Coleman.
"California cities are not the obstacle to reducing and preventing homelessness," Coleman said. "This crisis has deep roots and won’t be resolved without a partnership between state and local governments.”
Both Cal Cities and CSAC also criticized the plan's lack of funding for the implementation of Prop 36, which is expected to raise costs for local governments.
When asked about it, Newsom gave a passive aggressive response.
"Counties have to do their job, and there are a lot of supervisors in the counties that promoted [Prop 36]. So, this is their opportunity to step up, fund it," he said. "There are city mayors that supported it. It's their opportunity to step up, fund it."
Newsom neglected to mention that the ballot measure was approved by 68% of voters.
The Governor’s budget does include historic levels of funding for firefighting and emergency response. There’s also a plan to streamline California Coastal Commission permitting approvals by aligning their timelines with other agencies, as well a proposal to accelerate the Delta Conveyance Project.
Cannabis enforcement measures would get a boost under the blueprint. The budget includes an additional $7.1 million in 2025–26, $4.9 million in 2026–27, and $6.1 million ongoing in 2027–28 for inspections and other activities to combat illicit cannabis operations.
On the education front, Newsom’s budget maintains funding for the implementation of universal transitional kindergarten, while cutting funds to the University of California and California State University systems each by 3% — down from the projected 8% cuts.
With Newsom’s plan unveiled, budget negotiations with the Legislature are set to begin. A budget must be passed by June 15.
For more details on Newsom’s budget proposal, click here.