SACRAMANDO, Calif. (AP) — California will reduce state Medicaid coverage to immigrants without legal status, eliminate coverage for certain weight loss pills, and use funds from key climate plans to help fund state fire responses under a $3.22 billion budget proposal announced Wednesday by Gov. Gavin Newsom.
The Democratic governor’s plan is designed to fill an estimated budget loophole that he attributes to the Trump administration’s economic policy, a turbulent stock market that leads to a decline in incomes for wealthy taxpayers and a decline in global tourism.
“The fundamental value of California is not just because of the federal wind,” Newsom said in a statement. “Even if Trump is sluggish with the economy slowing down and making money into our income, we will make bold suggestions to build more housing, reduce the cost of working families, and invest in our children.”
California requires that the state of California balance its budget annually. Newsom first released a plan in January without the expected shortage. His amendment proposal is now to be conducted with state lawmakers, who must negotiate in mid-June before they can pass the final budget law.
Here are some suggestions from Newsom:
Healthcare and Public Services
Newsom plans to freeze admission to low-income adult immigrants without legal status and require qualified adults to pay a monthly premium of $100. He said the proposed changes to the plan would save the state $5.4 billion in the 2028-2029 fiscal year.
Newsom also wants to stop using the income from tobacco taxes to pay for dental, family planning and women's health providers. A state Treasury spokesman said that between 2017 and 2024, revenue from taxes was close to 40%, and payments could no longer be made without using the general fund. The proposal saves at least $500 million a year.
But that will also cut California’s family planning budget by one-third, the organization said. The group is very critical of the proposed cut.
“It’s cruel, frankly, especially during this time, we’re also fighting at the federal level,” said Jodi Hicks, president and CEO of the California Family Planning Branch.
The governor also recommended eliminating state health care coverage for certain weight loss medications starting from January 2026, which would save $85 million in the upcoming fiscal year to $680 million in the 2028-2029 fiscal year.
The state will also postpone repayment of $3.4 billion in loans from state Medicaid providers, according to Newsom's plan.
Newsom plans to provide spending on providing family and personal care services to some low-income residents and disabled people by limiting overtime and travel time for workers (50 hours a week) to some low-income residents and disabled people. The move will reduce spending by nearly $708 million in the upcoming fiscal year.
environment
Newsom hopes to reauthorize the state's cap and trade plans by 2045. The plan aims to reduce emissions from industrial sources through market-based mechanisms and will expire in 2030.
Funds generated through the points auction required for pollution enter the funding of lawmakers using climate-related spending and the state’s high-speed rail projects.
Newsom proposed to invest $1.5 billion from the fund from the state fire department. He said the shift would help ensure that carbon emitters help pay for the state’s response to the fires that have intensified climate change.
His proposal will also ensure that the state's long-term extended high-speed rail project will be $1 billion a year. The project now receives 25% of the cap fund fund, with the project earning less than a billion dollars a year based on the year.
Environmental groups have called on Newsom to support it, aiming to get fossil fuel companies to pay states for damages related to climate change. The money will be used in part to support the state’s response to climate-driven natural disasters.
Newsom also announced a plan to simplify a project to create a sprawling underground tunnel to reschedule water supply in the state.
public security
Newsom proposes to close another state prison by October 2026 to save $150 million. Newsom has approved the closure of three prisons since 2019. The state's prison population has declined over the years, even as voters passed a tough voting measure last year that could imprison more people. Newsom does not specify which facility will be closed.
The budget proposal does not include funds to implement the initiative approved by voters, which makes the re-entry felony again for repeat offenders, adding fines for certain drug charges and empowering judges to order treatment for those with multiple drug charges.
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Associated Press writer Trân Nguyễn contributed to the report.
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Austin is a member of the Associated Press/Reports Corps of the U.S. State Legislative News Initiative. The U.S. Report is a nonprofit national service program that places journalists in local newsrooms to report secret issues. Follow Austin on X: @sophieadanna
