A budget deal reached by California Governor Gavin Newsom and state legislators reduces free health care for unauthorized immigrants while giving Hollywood $750 million in tax rebates.
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Spending plans totaling $321 billion for the fiscal year that starts on July 1 represent Newsom’s third consecutive year in deficit territory, requiring compromises between pro-business agendas and the leftist initiatives he has supported. The deal provides tax breaks for the film sector, avoids increased corporate taxes, and reduces spending on certain social programs.
Removing free health care for the majority of illegal immigrants is a key component of the budget. California was the first state to provide full coverage to all of its citizens, regardless of their immigration status, last year. However, the cost went up due to higher health care costs and more than anticipated demand.
In 2027, Newsom first suggested charging undocumented immigrants participating in Medi-Cal, California’s Medicaid-like program for low-income citizens, $100 per month. In the end, lawmakers and the governor decided to charge undocumented immigrants between the ages of 19 and 59 $30 and to stop accepting new enrollment for them in January. Additionally, the agreement terminates Medi-Cal users without documentation’s complete dental coverage in 2026. The governor’s administration estimates that the changes will save nearly $3.3 billion over the next three fiscal years.
Scott Wiener, the chair of the state senate’s budget committee, stated during a hearing on Wednesday that it is never simple to balance the budget given the deficit we faced. Newsom and lawmakers blamed President Donald Trump’s economic policies for the state’s $12 billion deficit.
According to Wiener, we did had to make some tough choices about Medi-Cal, and those choices still stand.
The adjustments follow reports of workplace immigration sweeps in Los Angeles and neighboring cities as Trump ramps up deportations in California. According to the Public Policy Institute of California, the state has the highest percentage of undocumented immigrants in the US, with over 2 million living there.
In order to save $885 million over the next few years, the budget also removes Medi-Cal coverage for well-known weight-loss medications like Ozempic and Wegovy.
In a victory for Hollywood studios still reeling from the 2023 writers strike, Newsom backed $750 million in incentives for the California Film and Television Tax Credit program while reducing health expenditure. Newsom’s request for $25 million to help finance a new semiconductor research facility in Silicon Valley was also approved by lawmakers.
San Francisco Bay Area transportation agencies obtained loans totaling $750 million to make up for budget deficits caused by dwindling ridership and rising operational expenses. Despite possible financial cuts from the Trump administration, California’s high-speed rail project managed to secure at least $1 billion in yearly support.
Although the budget’s primary elements are set, discussions are still ongoing over a plan to expedite the building of new homes. In order for Newsom to sign the budget, a separate bill to amend the California Environmental Quality Act—a law that opponents claim impedes home development—must be passed.
In a statement, Newsom spokesperson Izzy Gardon said, “We are grateful for the close collaboration with the Legislature in achieving this budget agreement.” The completion of legislation to reduce red tape and free up resources for housing and infrastructure development throughout the state is a prerequisite for the governor’s signing.
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