BURSTCalifornia Gov. Gavin Newsom (D) announced a $12 billion deficit on Wednesday in the May revision of his state budget proposal, casting blame on the Trump administration for creating an unpredictable economic environment.
The governor spent more than an hour outlining his $321.9 billion state spending proposal for the 2025-2026 fiscal year, which includes a $11.9 billion shortfall, as well as a $226.4 billion general fund and $15.7 billion in reserves.
Acknowledging that this is a considerable departure from his initial proposal in January, when he offered what was "in essence a balanced budget," Newsom stressed that "the economy of California was humming" with a surge in revenue of $7.9 billion.
"That has significantly changed since the actions of this administration," the governor declared during a Wednesday presentation of his May revisions.
Accusing President Trump of "assaulting" the country's economic growth engines, with his sights set on those of the Golden State in particular, Newsom described "a climate of deep uncertainty."
"California is under assault," he continued. "The United States of America, in many respects, is under assault because we have a president that's been reckless."
Although the revamped budget "does not forecast a traditional recession," the document reflects "changing national conditions" that economists characterize as a "growth recession," or a substantial slowdown in gross domestic product growth, per the proposal.
Shifts in the national outlook have had a knock-on effect on California's economy, particularly due to the considerable volume of commerce that passes through the Golden State's ports, the document stated.
Unlike the budgets of the past two fiscal years, which also involved deficits, this May revision includes widespread reductions to ongoing programs — with the goal of generating savings in future years, according to the proposal.
Chief among the cuts was $5 billion in "total solutions," such as an $86.5 million enrollment freeze on an expansion of "full-scope" California healthcare benefits for undocumented adults. Other reductions included $333.3 million in eliminating long-term care benefits for people with "certain statuses."
Decreases in spending were also proposed in the natural resources sector, in K-12 education and in environmental protection.
However, one addition to Newsom's May revision involved a 15-year extension of California's "cap-and-trade" emissions reduction program. The program, currently set to expire in 2030, reduces carbon pollution by encouraging emitters to invest in the development of clean technology.
Newsom's proposal to renew the cap-and-trade system came after Trump last month issued an executive order billed as "protecting American energy from state overreach."
In the order, Trump admonished states for advancing “burdensome and ideologically motivated ‘climate change’ or energy policies that threaten American energy dominance.”
He claimed that the Golden State in particular “punishes carbon use by adopting impossible caps on the amount of carbon businesses may use, all but forcing businesses to pay large sums to ‘trade’ carbon credits to meet California’s radical requirements.”
Following Trump's order, Newsom and top state Democrats announced that they would seek an extension of the program, which was signed into law by Republican Gov. Arnold Schwarzenegger in 2006.
To date, the cap-and-trade program's proceeds have financed almost $33 billion in investments statewide and have cut carbon emissions in an amount equivalent to removing 1.3 million gas-fueled vehicles from the road, according to Newsom's proposed May revisions.
The extension of the program to 2045 would also lead to the continuation of the California Climate Credit program, which would provide about $60 billion in utility bill credits to residents during those added 15 years, per the proposal.
Among the other revisions that Newsom presented as key additions to the budget proposal were two actions to reduce prescription drug costs and protect reproductive freedom.
The first measure would increase state oversight to increase transparency and cut costs associated with "pharmacy benefit managers," the middlemen who operate among drug manufacturers, pharmacies and insurers. Those actors, according to the governor's office, often increase costs in the prescription drug sector.
The second measure would expand the authority of CalRx to purchase brand-name drugs, granting the state more tools to respond to supply-chain disruptions or politically motivated restrictions on critical drugs, including abortion medications, according to the proposal.
Another of the revisions that Newsom characterized as critical to the state's future was a proposal to fast-track a critical water infrastructure program. That change would streamline California's Delta Conveyance Project, setting in motion overdue improvements to the broader State Water Project.
The State Water Project, a storage system that serves about 27 million residents and 750,000 acres of farmland, spans about two-thirds the length of California, with water releases coming from the Sacramento-San Joaquin Delta, the "Bay-Delta," region.
This is the system that Trump repeatedly targeted earlier this year for failing to bring enough water to quench Southern California’s devastating winter blazes.
Newsom's proposal would aim to protect the reliability of the State Water Project by simplifying permitting and eliminating certain deadlines from certain existing water rights permits. It would also confirm the authority of the Department of Water Resources to issue bonds for the project's costs, while expediting judicial review of potential legal challenges.
“For too long, attempts to modernize our critical water infrastructure have stalled in endless red tape, burdened with unnecessary delay," Newsom said in a statement prior to unveiling to revised budget proposal.
"We’re done with barriers — our state needs to complete this project as soon as possible, so that we can better store and manage water to prepare for a hotter, drier future," the governor added. "Let’s get this built.”
Acknowledging that "this is a tough budget," Newsom concluded his presentation on Wednesday by stressing that he is "mindful about vulnerability," and that he wanted to end his presentation on this theme as well.
"But I also want to end with agency," he added. "We're not victims, we're not bystanders. We can shape the future."