California will make widespread cuts to state government operations, prisons, housing programs and health care workforce development in order to maintain its social safety net as it moves to close a multibillion-dollar budget deficit.
The $297.9 billion spending plan, announced on Saturday by Gov. Gavin Newsom, Senate President Pro Tem Mike McGuire and Assembly Speaker Robert Rivas, also relies on reserves and pauses some business tax credits to address a remaining revenue gap estimated at $56 billion over the next two years.
“This agreement sets the state on a path for long-term fiscal stability — addressing the current shortfall and strengthening budget resilience down the road,” Newsom said in a statement. “We’re making sure to preserve programs that serve millions of Californians, including key funding for education, health care, expanded behavioral health services, and combatting homelessness.”
The Legislature passed a budget more than a week ago to meet a statutory deadline, but it did not represent a final deal with Newsom as they continued to negotiate over whether to repurpose billions of dollars earmarked to increase payments for health care providers who treat low-income patients and whether to further delay minimum wage increases for health care workers, among other issues.
Their agreement — which the Democratic-controlled Legislature is expected to vote on through a series of bills this week ahead of the July 1 start of the new fiscal year — does claw back the funding intended for Medi-Cal provider rates. It pushes back the health care wage hikes until at least October and potentially until next year, depending on the strength of revenue collections in the coming months. Despite heavy opposition from labor unions, the move could save California hundreds of millions of dollars.