CA Legislature passes record $325B budget with $10-$20B deficits ahead

(The Center Square) - The California Legislature passed a record $325 billion preliminary budget, with final details remaining to be hammered out before the start of the new fiscal year on July 1.

This record budget comes as polling finds a growing majority of Californians now support having lower taxes, in return for fewer government services. According to the nonpartisan Public Policy Institute of California, the majority of Californians supported higher taxes and more services in nearly every PPIC survey since the question was added in 2003 — that is until 2023.

Over the past decade, state spending has doubled while the population has remained largely flat. Officials say employees of the state now earn an average of $177,000, up 42% from 2019.

“This budget continues to overspend while hoping for a growth in revenue instead of cautiously preparing for the worst,” said state Sen. Roger Niello, R-Fair Oaks, who serves as vice chair of the Senate Budget and Fiscal Review Committee.

“A budget that is based on hope is a budget that is destined for despair," Niello told The Center Square in a statement.

California Gov. Gavin Newsom proposed more proactive cuts from the taxpayer-funded Medi-Cal public health care system, including benefits for illegal immigrants, only some of which were adopted by the Legislature.

The governor’s proposals included requiring illegal immigrants enrolled in Medi-Cal to pay $100 per month in premiums and barring new illegal immigrants 19 or older from enrolling in Medi-Cal starting in January 2026.

Newsom also called for re-instituting an asset test for Medi-Cal enrollment for seniors, ending Medi-Cal coverage for weight loss drugs such as Ozempic, ending in-home supportive services coverage for illegal immigrants, and limiting in-home supportive services overtime.

The adopted budget included most of the governor’s proposals, but did not address illegal immigrant Medi-Cal premiums.

The Legislature’s analysis of the adopted budget estimates that pausing new illegal immigrant enrollment in Medi-Cal will save up to $3.3 billion per year, while ending weight-loss drug coverage for Medi-Cal will save up to $680 million per year, and reinstating Medi-Cal asset limits for seniors at $130,000 will save up to $510 million per year.

According to the state-funded Legislative Analyst’s Office’s Memorial Day weekend report on state finances, the state faces “persistent future deficits” of $10 billion to $20 billion per year — even after incorporating the savings from the governor’s proposed budget.

“To balance the budget going forward, the Legislature will likely need to adopt additional solutions that increase ongoing revenues or reduce ongoing spending — both of which involve the most difficult and consequential trade-offs for policymakers,” wrote the LAO.

As the new budget for the fiscal year hits yet another record, it’s unclear how lawmakers will seek to address the state’s worsening financial position, especially with voters’ polled preference for lowering taxes and reducing state services.