Gov. Newsom, California lawmakers close to reaching budget deal

The California Legislature and Gov. Gavin Newsom are close to reaching a budget deal, multiple sources and legislative documents indicated on Tuesday night. The final negotiations happened behind closed doors between the governor and a handful of Democratic lawmakers. The legislature and governor have each presented their proposed state budgets for the upcoming budget year that starts next week. Their goal is to ultimately decide on how to use taxpayer dollars while also creating new state laws that could take effect in a matter of days. Lawmakers were being briefed as of late Tuesday afternoon. The state is grappling with a $12 billion budget shortfall. State budget watchers with Gov. Newsom’s administration and the legislature say the state’s financial situation will likely worsen, with larger deficits expected in the years to come. Budget deal documents circulating in the State Senate and Assembly show the spending plan is $321.1 billion total. Documents state there will be no new taxes on individuals, families, and small businesses. Lawmakers will officially vote on the plan on Friday. Here is some of what the deal includes: Healthcare for undocumented immigrants, with a new fee California will continue to provide healthcare for undocumented people through its MediCal system, but with new limits. The state is expected to spend about $12 billion on this program in the upcoming year, after underestimating how much it would cost last year to provide the care to 1.6 million low-income undocumented immigrants. Starting January 1, 2026, new undocumented adults will not be allowed to sign up for the care. Those who already have it will need to pay a $30-per-month premium. The budget deal specifies that children in the program cannot “age out,” and there will be a six-month grace period for those who fall off the rolls, according to budget documents. Housing and the California Environmental Quality Act The deal includes several proposals that attempt to ramp up housing production in the state by shielding some of it from the California Environmental Quality Act, which is known to stop or slow housing production across the state through lawsuits.This includes what budget documents describe as “negotiated components” of SB 607, which change parts of CEQA’s process for some housing development projects, and AB 609, which exempts new housing in some urban parts of the state from CEQA. No money for cities and counties to respond to homelessness This year, cities and counties will go without funds to respond to people living on streets and sidewalks. The budget deal includes $500 million for the state’s Homelessness Housing Assistance and Prevention Program not for this upcoming year, but for the 2026-2027 budget year. The program has been providing the state’s 13 largest cities and all 58 counties with billions of dollars over the last several years. Lawmakers and the governor have been trying to put stricter requirements on the funds, after an audit last year showed the state overall could not assess the effectiveness of the billions spent on the issue. Groups representing cities and counties, including the California State Association of Counties, have been calling for a steady stream of funding, instead of waiting each year to see how much or even if they will get the funds. Proposition 36 and crimeCalifornia voters in November overwhelmingly approved Proposition 36, a measure that ramped up the penalties for repeat thieves and drug dealers. The measure called for the establishment of a new treatment-mandated felony, which would allow offenders to have the felony expunged if they completed drug or mental health treatment. The budget includes $100 million one-time for the implementation of Proposition 36, including $50 million for behavioral health services, $20 million for the courts, and $15 million for pretrial services and $15 million for public defenders.No Delta Conveyance ProjectGov. Gavin Newsom, in his proposed spending plan, said he wanted to fast-track the Delta Conveyance Project, a 45-mile tunnel that would divert water from the Sacramento-San Joaquin Delta and send it to Southern California. Budget documents show that won’t be happening. It’s a win for Delta area lawmakers who have been adamantly opposed to the project. High-Speed Rail California lawmakers and the governor are going to wait to figure out how to fund the High-Speed Rail project. Documents show they plan to defer spending $1 billion a year on the project. The High-Speed Rail Authority recently said this funding would be key to keep the project going, as it faces cost increases and funding gaps and a likely loss of federal dollars. Tax Credit for Hollywood The budget deal ramps up the state’s tax credit for film and TV production from $330 million to $750 million, which the governor first pitched late last year. The tax credit is meant to keep the productions in the state, as many have been lured to other states and countries. Proposition 35 and the doctors who care for low-income peopleProp 35 was a measure backed by medical groups who have been trying to raise the reimbursement rates for doctors and other providers who care for lower-income patients. Voters overwhelmingly passed this in November. The rates have not seen the boost they’ve been hoping for, because the state legislature and governor continue to divert the money meant for that to other healthcare expenses.The deal includes $1.6 billion to raise base rates for provides. When the governor proposed to spend $1.3 billion to do this, he said it’s consistent with the rules. But the California Medical Association disagreed, noting the governor is trying to divert funds again and calling it a violation of voter trust. See more coverage of top California stories here | Download our app | Subscribe to our morning newsletter | Find us on YouTube here and subscribe to our channel

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