California lawmakers are nearing a deal to approve the state’s $321.1 billion budget and closing a $12 billion shortfall.
The tentative agreement between Gov. Gavin Newsom and Democratic leaders in the Legislature will only go through if lawmakers support a bill to make it easier to build housing.
Flashback: California finds itself in financial straits for the third year as it tries to close the $12 billion deficit.
- In his May budget revision, Newsom proposed cutting free healthcare for illegal immigrants in order to shore up a $6.2 billion Medi-Cal shortfall.
- He also proposed cutting Medi-Cal benefits for weight loss treatments and overtime hours for in-home supportive service workers, among other items.
The big picture: In order to get Newsom to sign the budget, lawmakers will have to pass bills that would overhaul the California Environmental Quality Act (CEQA) to boost housing production.
- That proposal includes two bills that would decrease the number of projects that would require a full environmental review under CEQA and exempt some urban housing developments from CEQA.
- The tentative agreement would see the state pull around $7 billion from its rainy-day fund and $6.5 billion from other reserves to balance the budget.
Zoom in: Under the deal, California will not cut the Medi-Cal program that provides illegal immigrants with healthcare. It will be changed, however, as illegal immigrants will have to pay a $30 per month fee. New illegal immigrants will not be allowed to sign up for Medi-Cal starting next year.
- The deal does not include Newsom’s request to expedite the Delta Tunnel project, which would divert water from the Sacramento River to Southern California.
- Newsom’s request to increase Hollywood’s tax credit made it in the deal. The tax credit for film and television production will increase from $330 million to $750 million.
- High-Speed Rail is a loser in the deal, with lawmakers deciding to defer $1 billion per year in spending.
- Further, the deal does not include any money for the HOmelessness Housing Assistance and Prevention Program, instead deferring $500 million for cities and counties to Fiscal Year 2026-2027.
What they’re saying: “We appreciate the strong partnership with the Legislature in reaching this budget agreement,” said Newsom spokesperson Izzy Gardon. “The governor’s signature is contingent on finalizing legislation to cut red tape and unleash housing and infrastructure development across the state – to build more, faster.”
