Gov. Gavin Newsom signed into law a series of bills to enact the state budget for the fiscal year beginning July 1, a $321 billion spending plan that erased a projected $12 billion deficit largely through delayed cuts and dollars borrowed from a variety of state special funds.
It May Not Be Over: Analysts believe that state leaders will face large deficits for the next several years and have noted those shortfalls could be exacerbated by the ultimate impact of federal spending legislation that is being debated. In fact, many lawmakers believe they may need to return to Sacramento this fall in special session to address new budget concerns.
Taxes Avoided: The budget did not include new broad-based taxes, though labor groups urged lawmakers in the days leading up to the June 15 budget deadline to adopt a wide array of business-focused taxes. This discussion is likely to return if, as expected, deficit pressures persist.
Support for California’s Film & Television Industry: Legislators and the Governor agreed to increase the film and television tax credit program to $750 million annually, more than doubling the current allotment to encourage more industry projects to remain in California.
Semiconductor Research: The enacted budget includes a request from the governor for $25 million to help fund a new semiconductor research facility in Silicon Valley. The facility is expected to spark more than $1 billion in research funding and create more than 200 direct jobs over the next decade.
Changes for Medi-Cal Program: The state’s version of Medicaid, Medi-Cal, faced significant cost pressures. Legislators agreed to introduce $30 monthly premiums for adult undocumented immigrants beginning in 2027, along with a freeze on new enrollment of this population beginning in January.
Important Work on Streamlining Housing: The governor formally linked two housing production bills to the state budget, making his signature on the spending plan contingent on their passage. The bills seek to provide relief from some provisions of the California Environmental Quality Act (CEQA) for some urban housing development. CalChamber has urged lawmakers to continue working on provisions in one of the housing bills (Assembly Bill 130) related to fees based on the “vehicle miles traveled” (VMT) from housing development.
Unfinished Business: Unfortunately, the state budget agreement does not include two key elements to securing long-term economic growth. Legislators declined the governor’s request to streamline permitting and litigation rules covering the proposed Delta Conveyance Project, a long-discussed plan to allow water to bypass the Sacramento-San Joaquin Delta in its journey from Northern to Southern California. The budget also failed to include a “clean” 15-year extension of California’s landmark cap-and-trade program, which will otherwise expire in 2030. Both proposals are key CalChamber priorities.
