NEWSOM’S FINAL BUDGET IS A LEGACY DOCUMENT, NOT A GOVERNING PLAN
Governor Gavin Newsom is not running for governor next year. He’s running for something else — history, probably, or the Democratic presidential bench he’s been cultivating for years. His final state budget, released in May, reads like a document written with that audience in mind more than the 40 million Californians who still have to live under it.
That’s not entirely unfair. Every governor’s last budget is a legacy statement. Jerry Brown ended his tenure warning about darkness and uncertainty, which turned out to be prescient. Newsom’s version projects a $1.8 billion General Fund reduction, an eliminated deficit through 2028, and nearly $30 billion in reserves. On paper, that’s a responsible close to a decade in office.
The problem is that the paper doesn’t fully account for what’s about to happen to California’s fiscal picture. H.R. 1 — the federal Republican budget bill — strips between $10 billion and $20 billion in annual federal funding from California, much of it through Medicaid. The state’s own budget acknowledges being “in an era of unprecedented federal hostility,” which is accurate, but acknowledges it the way a ship captain might acknowledge rough seas while assuring passengers the hull is fine.
State Sen. Tony Strickland’s response to the May Revision was blunt: the governor’s numbers are unreliable, and he’s waiting for the Legislative Analyst’s Office to weigh in with real figures. That kind of skepticism is easy to dismiss as partisan noise, but the LAO’s independent revenue forecast already found the state likely to collect about $25 billion more than previously projected over a three-year window — which means Newsom’s team is working with rosier revenue numbers and bleaker federal numbers simultaneously, and hoping the math works out.
What’s genuinely worth crediting in the budget is the housing package. Newsom signed sweeping CEQA exemptions and new affordable housing reforms, capping impact fees for developments seeking state funding and potentially reducing construction costs by tens of thousands of dollars per unit. California’s housing crisis is decades in the making, and getting CEQA reform across the finish line is legitimately hard. The $10 billion affordable housing bond, SB 417, is still pending, but there’s real momentum. On housing, the governor earned his headline.
On healthcare, the budget is more complicated. The proposal to shift undocumented Medi-Cal enrollees to fee-for-service saves money on paper. But it also creates what advocates are calling a two-tiered Medi-Cal system — one for immigrants, one for everyone else — which is exactly the kind of outcome California’s progressive identity was supposed to prevent. Newsom expanded healthcare to undocumented adults when times were flush, and now he’s walking it back when the federal government turns hostile. That’s not a policy failure unique to him. But it is a failure.
The budget deposits $9.7 billion into a Surplus Holding Account to buffer future years. That’s prudent. It’s also the kind of accounting move that lets a governor leave office claiming fiscal discipline while the structural problems — an over-reliance on volatile capital gains revenue, a Medi-Cal program that can’t survive federal hostility, a housing production system still too slow to meet demand — are left for whoever follows.
Becerra or Hilton will inherit a state with strong reserves and a brewing fiscal storm. The reserves are Newsom’s. The storm came from Washington. The incoming governor doesn’t get to choose which one arrives first.
Newsom’s legacy is real and complicated. He governed a state through a pandemic, a series of catastrophic wildfires, and a federal administration that treats California as an adversary. He made genuine progress on housing and clean energy. He also expanded programs the state couldn’t fully fund and is now managing the retreat. The final budget reflects all of that — impressive architecture, some structural cracks, and a foundation that the next occupant will have to reinforce.
History will sort out what that adds up to. The people who depend on Medi-Cal will find out sooner.