California budget experts say Gavin Newsom’s spending plan doesn’t go far enough
Gov. Gavin Newsom’s proposed budget for the upcoming fiscal year does not go far enough to support programs that would help people afford the increasing cost of living at a time when incoming president Donald Trump is expected to slash federal funding for California, according to experts at a liberal-leaning budget watchdog group.
The governor unveiled a $322 billion balanced budget plan last week that included a small $363 million surplus and a projected $16.5 billion boost in revenue for the fiscal year that begins July 1 and ends June 30, 2026.
It’s far from the previous year, when Newsom had to work with lawmakers to fill a $47 billion deficit. This year’s plan also draws $7 billion from the rainy day fund, provoking criticism from Republicans worried about looming deficits in coming years.
While Newsom’s draft budget funds some signature programs like transitional kindergarten, a state-funded transition program for 4-year-olds.
It does not include plans for any “significant revenue raisers” that would allow for more investments in programs like affordable housing and health care that “would help Californians afford the basics,” according to Kayla Kitson, a tax expert at the California Budget and Policy Center.
Center experts gave a presentation Friday on Newsom’s proposed budget, which is a draft of the spending plan the Legislature must pass by June 15.
Kitson suggested that one way for the state to generate more revenue was to end programs that grant tax breaks to corporations and wealthy people. The incoming Trump administration is expected to push to extend its 2017 tax cut law.
“We have previously, many times, highlighted how the state loses tens of billions of dollars each year to tax breaks that are mostly not reauthorized each year through the budget process,” Kitson said. “So policymakers should really take a hard look at these and eliminate or reform inequitable and ineffective breaks.”
She pointed towards corporate tax structure as one example. “There are lots of ways that corporations are able to avoid their state taxes, and that includes things like moving money offshore to avoid taxes,” Kitson said.
Another target was Newsom’s plan to double the amount available for the state film and television tax credit to $750 million, which she said would not show any immediate return on investment until years after production has wrapped.
“The governor has proposed a balanced budget that emphasizes fiscal sustainability and a lean and efficient government,” said Newsom spokesperson Tara Gallegos.
The ongoing wildfires, estimated to be the most destructive in U.S. history, will also cost the state, which has committed to delaying tax filings for impacted victims. Trump and some congressional Republicans said they seek to delay federal aid for California or condition it, prompting Newsom to expand the special legislative session to include funding for wildfire response.
The overall budget does include $6.4 billion for more mental health housing and treatment beds via Prop. 1, which voters approved last March, but did not include any new investments in affordable housing or more money for low-income housing credits.
Monica Davalos, an expert on homelessness, housing and health, called it “alarming” at a time when such housing programs face funding cliffs and Republicans signal a desire to curtail the federal Affordable Care Act.
Newsom’s proposed spending plan maintains funding to clear homeless encampments and move people into shelters, but does not include new funds for the Homeless Housing, Assistance and Prevention program, which grants homelessness dollars to local governments.
He previously withheld $1 billion in HHAP funding after he said cities were not being aggressive enough in tackling homelessness, but eventually relented.
The governor’s spending plan reflects that shift towards accountability and administrative reform, Davalos said, through its creation of a Homelessness and Housing Agency that will streamline programs. The administration submitted a reorganization plan to the Little Hoover Commission, an independent state oversight agency, and will publish details later this spring.
“A lot of this funding that localities have gotten is, you know, a good part of the reason why our systems are serving more Californians than ever before,” Davalos said. “But the problem still lies that more Californians are falling into homelessness today than can be housed by our systems.”
Correction: A previous version of this story misstated Monica Davalos’ title. She is an expert on homelessness, housing and health.
This story was originally published January 17, 2025 at 2:50 PM with the headline "California budget experts say Gavin Newsom’s spending plan doesn’t go far enough."
