SACRAMENTO – (INT) - Gov. Gavin Newsom said Wednesday (May 14th) that California is facing a shortfall of $12 billion for the upcoming budget year.

Newsom’s office laid blame for the deficit on economic uncertainty caused by President Trump’s policies and likely cuts to Medicaid. The overall budget, if passed by the Legislature by June 15th, would top $321 billion.

• The Governor’s Proposed Budget claims that new federal tariffs and rising Medi-Cal costs have created a budget shortfall of about $16 billion over two years. It also says the budget doesn’t yet include deep cuts that Congress is still considering.

• The Proposed Budget also states tariffs are the reason the state’s corporate tax, which is income, changed from growing by 4% to dropping by 2% in 2025. At the same time, Medi-Cal spending has gone up and is now higher than the state’s income.

• The current budget plan includes a mix of spending cuts, borrowing, raising revenue, and moving money around to close the gap. Half of the $16 billion in lower spending come from the health and human services area.

Starting in 2026, California would stop allowing undocumented adults 19 years or older to sign up for full state-funded health coverage. That would save $86.5 million in 2025-26, and 3-point-3 billion dollars by 2028-29.

There was positive reaction to the governor’s May revision.

UC President Dr. Michael Drake thanked Governor Newsom for recognizing the value of the University of California’s contributions. The Governor has reduced the University’s cut from 8 percent to 3 percent, “demonstrating his strong commitment to California’s students”, Dr. Drake said.

Story Date: June 1, 2025