California’s Budget Deal: Newsom Delays Deep Cuts While Targeting Immigrant Healthcare and Fast-Tracking Housing

JB Quinnon
Jun 29
3 min read

As California faces a $12 billion deficit, Governor Gavin Newsom and state Democratic leaders have signed a $321 billion budget that avoids sweeping spending cuts—for now. Instead, the deal leans heavily on reserve funds, strategic delays, and a bold push for housing development.

Budget Balancing Without Austerity?

Rather than slashing core services, lawmakers agreed to use nearly $7 billion from the state's rainy-day fund and another $6.5 billion from various reserve accounts. This approach allows California to maintain spending levels in education, public services, and homelessness prevention—at least in the short term.

But critics warn that this stopgap solution only delays the inevitable. Republican legislators and budget watchdogs argue the budget lacks transparency and postpones long-term structural reforms. They caution that California is repeating a cycle of overspending and deferring tough decisions.

Housing Deal Sparks Internal Tensions

What makes this budget particularly contentious is that it hinges on two housing-related bills that weaken certain California Environmental Quality Act (CEQA) rules. These changes aim to fast-track construction on large housing projects, especially in urban areas.

However, labor unions initially pushed back. Their concern? The CEQA rollback could lead to a wave of low-wage construction jobs and a loss of oversight. In response, the bills were amended to require prevailing wages for buildings taller than 85 feet or for 100% affordable housing projects. But smaller developments remain exempt from wage protections, raising equity concerns among worker advocates.

Newsom has made it clear: if the housing bills don’t pass, the entire budget may be delayed. It’s a risky move that’s already igniting debates within the Democratic Party.

Health Care Cuts for Undocumented Residents

While some social programs were spared, one group took a direct hit—undocumented immigrants. The new budget:

Freezes enrollment in Medi-Cal for undocumented adults starting January 2025
Introduces a $30 monthly premium for participants beginning in 2027
Eliminates dental coverage for these enrollees by mid-2026

These rollbacks mark a sharp turn from recent years when California was expanding coverage to undocumented populations. Advocates say the cuts disproportionately affect low-income immigrants who contribute to the state’s economy but remain politically vulnerable.

A Cautious Win or Deferred Crisis?

For now, California avoids draconian budget cuts—but the underlying deficit hasn’t disappeared. The state is betting that economic recovery, increased housing supply, and reserve fund strategies will provide enough breathing room to dodge deeper pain.

Yet the risk is clear: if revenue projections fall short or political gridlock delays housing reform, California could face a harsher fiscal reckoning in 2026.