By Joe W. Bowers Jr., California Black Media
California lawmakers and Gov. Gavin Newsom have approved a $321.1 billion state budget for the 2025–26 fiscal year, closing a $46.8 billion shortfall through a combination of cuts, delays, and revenue shifts. Newsom signed the spending plan on June 27, following months of negotiations marked by divisions over environmental reforms, education funding, and health care access for undocumented Californians.
“This budget delivers on our core values – protecting public education, expanding access to health care, and supporting Californians most in need — while ensuring the state remains fiscally responsible,” Newsom said in a bill signing statement.
While the budget protects key programs — education, housing, and health care — vital to Black Californians, it also imposes new Medi-Cal restrictions that limits access for undocumented adults and low-income seniors.
What Happened in the Legislature
The budget deal came together after legislative leaders agreed to tie the Governor’s signature to the passage of either Assembly Bill (AB) 131 or Senate Bill (SB) 131 — housing reform bills that include exemptions to the California Environmental Quality Act (CEQA). These controversial trailer bills evolved separately from the main budget bill, SB 101, which the Legislature passed on June 13.
Lawmakers reconvened on June 27 to pass AB 102, the primary budget implementation bill, along with over twenty trailer bills. The final package reflects changes demanded by Newsom following updated revenue projections and continued policy negotiations.
Senate President pro Tempore Mike McGuire (D-Healdsburg) called the budget “tough but thoughtful.” He said, “We protected our progress while taking a responsible approach to balancing the books.”
Senate Budget Chair Scott Wiener (D-San Francisco) acknowledged the difficulty of the cuts. “There’s a lot to like in this budget, but we also had to make hard choices. We can’t sugarcoat that,” Wiener said during a Senate debate.
Assembly Budget Chair Jesse Gabriel (D-Encino) described the agreement as “a fiscally responsible budget that protects essential services, continues historic investments in education and health care, and avoids mass layoffs or draconian cuts.”
Assembly Speaker Robert Rivas (D-Salinas), in a statement issued through the Governor’s office, said the budget “reflects the values and priorities of California’s working families.”
Protecting Education and Health Care
The budget directs $114.6 billion in Proposition 98 funds to TK–14 public schools, including a 2.3% cost-of-living adjustment (COLA) for the Local Control Funding Formula (LCCF) and $1.7 billion in discretionary block grants for student needs.
Education investments include $300 million for teacher stipends, $160 million to implement Universal School Meals, $200 million for literacy-focused professional development, $150 million for career technical education, $70 million for the Teacher Residency Grant Program, and more than $100 million to support schools recovering from the 2025 Los Angeles wildfires.
In higher education, the budget preserves base funding for the University of California and California State University systems — support that had been at risk under Newsom’s earlier proposals. The Middle Class Scholarship remains funded at 35% of award levels. Community colleges will receive $100 million for enrollment growth and $60 million for student support.
Medi-Cal saw some of the most contentious changes. Beginning July 1, 2027, undocumented adults ages 19 to 59 covered under state-only Medi-Cal will be required to pay a $30 monthly premium. Starting January 1, 2026, enrollment for this group will be frozen, with a six-month grace period for those who disenroll. The budget also reinstates a $130,000 asset test for Medi-Cal eligibility, reversing recent reforms designed to help low-income seniors and people with disabilities.
Sen. Laura Richardson (D-Inglewood), Assistant Majority Whip and a member of the California Legislative Black Caucus (CLBC), supported the plan but raised concerns about equity. “We must continue to monitor how these changes affect our communities on the ground. The promise of care and opportunity should not come with new barriers,” Richardson said.
Still, Republicans Criticized the Process and Results
Republicans argued that the budget relied too heavily on accounting tactics and failed to address key infrastructure and public safety priorities.
Assemblymember Heath Flora (R-Ripon) said, “AB 102 continues unstable spending levels and provides insufficient funding for Prop 36, provides no funding for wildfire prevention or surface water storage.”
Assemblymember Carl DeMaio (R-San Diego) added, “This is a phony budget. It’s a budget with accounting gimmicks… something Enron would do. We ought to respect the votes of Californians for Prop 36 by fully funding it.”
The budget provides $85 million for Prop 36, but Republicans contend that meeting the initiative’s goals would require closer to $400 million.
The Budget Reflects Priorities — But Also Pressure
Assemblymember Isaac Bryan (D-Ladera Heights), vice chair of the CLBC, highlighted the realities of budget-making during economic stress. “This budget is not perfect,” Bryan said during floor debate. “There are things I fought to keep that were cut. But I also fought to prevent deeper cuts that would have harmed people we all represent.”
Despite trade-offs, legislative Democrats maintained that they upheld core investments. Housing provisions include $500 million for the Homeless Housing, Assistance, and Prevention (HHAP) program, $100 million for encampment resolution, $300 million for the Dream for All homebuyer program, and $500 million in state low-income housing tax credits.
The $46.8 billion shortfall was driven by several factors: lower-than-expected revenues, higher costs in programs like Medi-Cal, and disaster-related spending from the Los Angeles wildfires. The state also had to close a $12 billion gap that emerged between January and June, as new revenue projections upended the Governor’s initial plan, which had shown a balanced budget.
California’s reserves, including the Rainy Day Fund, now total $15.7 billion, offering some protection against future downturns. Still, the budget leans heavily on one-time solutions — such as delays, deferrals, and borrowing — raising concerns about its long-term structural stability.
During debate, lawmakers noted that further adjustments may be needed as Congress continues to debate the “Big, Beautiful Bill,” that could significantly affect California’s share of federal funding and force lawmakers to reopen the budget for further cuts.