California Governor Proposes $322 Billion Budget with Medicaid Cuts

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Illustration representing California's proposed budget cuts and healthcare challenges.

News Summary

California Governor Gavin Newsom has proposed a revised budget of $322 billion, which includes controversial Medicaid cuts impacting undocumented immigrants amidst a $12 billion deficit. The plan outlines significant changes, such as freezing Medicaid enrollment for undocumented immigrants and introducing premiums for coverage. Advocacy groups criticize the cuts, fearing reduced access to essential health services. As discussions unfold in the state legislature, the focus will be on balancing fiscal responsibility with the healthcare needs of a diverse population.

California Governor Gavin Newsom Proposes $322 Billion Budget with Cuts to Medicaid for Undocumented Immigrants Amid $12 Billion Deficit

California Governor Gavin Newsom has unveiled a revised budget proposal amounting to $322 billion on May 14, 2025, in a bid to tackle a projected $12 billion deficit. The budget aims to address significant fiscal challenges impacting the state and includes controversial cuts affecting health care coverage for undocumented immigrants.

To mitigate the deficit, Newsom’s plan proposes to implement a freeze on Medicaid enrollment for immigrants without legal status starting January 2026. Under the revised policies, eligible low-income adults in this category would face a $100 monthly premium for coverage beginning in 2027. These changes are anticipated to save California approximately $5.4 billion by the 2028-2029 fiscal year.

The budget also outlines plans to discontinue using revenue from a declining tobacco tax to fund vital services such as dental, family planning, and women’s health care, which could result in savings of over $500 million annually. In addition, Newsom has proposed eliminating state health care coverage for certain weight loss medications starting January 2026, expected to yield a savings of $680 million by 2028-2029. Furthermore, spending caps on in-home domestic and personal care services for low-income residents and those with disabilities aim to reduce state expenditures by nearly $708 million for the upcoming fiscal year.

While these budget cuts are intended to reduce overall spending, they have drawn criticism from advocacy groups and some lawmakers. Planned Parenthood has condemned the cuts, indicating that this could lead to a one-third reduction in their budget at a time when many individuals rely on their services. Similarly, opposition from some Democratic lawmakers has emerged in response to the proposed reductions in health care support for vulnerable populations, including undocumented immigrants.

The proposal comes in the wake of several external pressures that have exacerbated California’s fiscal situation, including the economic repercussions of the Trump administration’s policies, a turbulent stock market, and a notable decline in global tourism. The governor has estimated that the state lost $16 billion in revenue due to federal tariff policies, which has heavily influenced the current budget constraints.

In terms of longer-term strategies, the governor has also proposed reauthorizing the state’s cap-and-trade program aimed at reducing emissions until 2045, with $1.5 billion allocated from this fund for firefighting efforts. Additionally, a plan to close another state prison by October 2026 aims to save $150 million annually, reflecting a shift in focus towards reallocation of resources.

The proposed budget marks a significant shift from Governor Newsom’s earlier commitment to universal health care for undocumented immigrants, which had been a top priority during his administration. Previously, California’s Medicaid program, known as Medi-Cal, provided coverage to over 1.6 million undocumented individuals in the current fiscal year.

The state legislature now faces the task of negotiating and finalizing the budget before the mid-June deadline. Policymakers will evaluate the proposed changes with a focus on balancing fiscal responsibility while addressing the needs of California’s diverse population.

As the budget discussions unfold, the impact of these proposed cuts on health care access and social services will remain a critical point of contention among lawmakers, advocacy groups, and constituents alike.