Governor Gavin Newsom is taking measures to manage California's financial strains, proposing to curtail healthcare services for undocumented immigrants as the state grapples with a $12 billion budget shortfall.
The Los Angeles Times reported that Newsom's proposal signifies a notable policy shift as he works to offset a financial gap intensified by tariffs imposed during the Trump administration.
As recently as January, California was anticipating a small budget surplus. However, by May, the state had plunged into a significant deficit.
Governor Newsom's response is to propose halting new enrollments for undocumented adults in the state's Medi-Cal program starting in the 2025-26 budget year.
This proposal marks a departure from California's previous pioneering stance, being the first state to provide healthcare access to all income-eligible immigrants only a year prior.
Existing Medi-Cal enrollees will not experience changes in their benefits. Coverage for limited plans focused on emergency and pregnancy services will remain intact for those currently enrolled.
Despite this assurance, the shift in policy highlights California's precarious fiscal situation, further strained by increased costs in pharmaceuticals and an influx of seniors joining Medi-Cal, contributing to the program's shortfalls.
In his revised budget, Governor Newsom also proposes reducing reliance on in-home supportive services. He plans to cap overtime and travel hours to 50 per week for low-income residents and individuals with disabilities, a move estimated to save $708 million.
Part of Newsom's narrative in explaining the fiscal plight is former President Trump's trade tariffs. He attributes much of the financial strain to these tariffs, which reportedly could cost California $16 billion in lost revenue.
Specifically, the tariffs are expected to burden taxpayers with an additional $7.8 billion in taxes and potentially lead to over 64,000 job losses.
Newsom's office has commented that the unpredictable nature of tariff imposition has made budget planning an arduous task for California. The financial instability stemming from these tariffs has been described as "extraordinary" and damaging to the state's ability to plan effectively.
In addition to domestic policy adjustments, California continues its legal battle against the tariffs through ongoing litigation. The state has pursued legal action and is preparing to file for a preliminary injunction in response to what it sees as harmful economic policies.
The financial fallout from these tariffs is further compounded by California's reliance on income tax from the wealthiest individuals. The state's budget proves vulnerable to the fluctuations of the stock market, given this dependence on the top 1% of earners.
Governor Newsom’s administration is not solely focused on tariffs. The governor has articulated how wildfires in Los Angeles have also taken an economic toll, leading to delayed tax deadlines and further fiscal challenges.
Governor Newsom’s critique of past federal administration policies underscores the complexity of California's economic landscape.
He views the state as being under "assault" due to what he characterizes as reckless policies, particularly in relation to tariffs and their wide-reaching effects on California's economic growth engines.
While adjusting state policies to address these fiscal challenges, the Newsom administration continues to focus on stabilizing the state’s economy.
A crucial element of this approach is adjusting expectations surrounding state-supported programs, such as limiting new enrollments in universal healthcare for undocumented immigrants.
