Gov. Gavin Newsom unveils his final state budget. Here are 8 key takeaways

Gov. Gavin Newsom presented his final budget proposal Thursday, leaning on a surge of artificial intelligence revenue to close California’s deficit while positioning the state as a counterweight to President Donald Trump. The plan sets up fights over healthcare for immigrants, county funding and structural deficits the next governor could inherit.

Here are eight key takeaways:

• Newsom said he’s following in the footsteps of former Gov. Jerry Brown, with a plan to set the next governor up for success. “We’re cutting deficits, not corners,” he told reporters.
• His plan cuts general fund spending by $1.8 billion and, over the next two fiscal years, raises about $8 billion in new revenues through corporate tax credit limits and new taxes on software.
• Republican Senate Budget Committee Vice Chair Roger Niello said the plan will still leave the next governor with ongoing structural deficits starting in 2028. He expressed concern that if the AI bubble bursts, so does the state’s budget plan. “This stock market looks a lot like the dot-com crash of 25 years ago,” Niello said. “Stock markets never go up forever. And the further they go up in terms of inflated values, the harder the fall. And I’m very concerned.”
• Medi-Cal premiums — currently slated to begin in 2027 — for undocumented immigrants, DACA recipients and other visa holders would rise by $20 to a new $50 monthly premium. Newsom also proposed reinstating asset test limits for Medi-Cal applicants — moves advocates say will push older adults and immigrants off the rolls.
• To offset federal cuts, Newsom proposed a $300 million fund aimed at keeping $0 monthly health plans available for lower-income Californians after Affordable Care Act tax subsidies expired last year. The California Budget and Policy Center predicted as many as 2 million Californians could still lose health coverage.
• Counties say they’re being shortchanged in Newsom’s budget. The California State Association of Counties said that Newsom committed just $262 million in one-time funds against a $600 million annual need to handle the additional administrative workload from the Trump administration’s changes to Medi-Cal eligibility. “There is not funding for hospitals, there is not funding for indigent care, there is not even remotely close to sufficient funding for the eligibility work that is needed to keep people on Medi-Cal,” said CSAC CEO Graham Knaus.
• Newsom’s proposed budget also requires community college and K-12 schools offer 14 weeks of paid pregnancy disability leave for employees — a significant expansion of the state’s parental leave policy for state employees. Costs will be absorbed within a discretionary cost-of-living adjustment provided in the budget proposal.
• The California Student Aid Commission’s $503,000 request for cybersecurity needs — including a backup server and IT staffing — was excluded from the revised budget, even as the agency warned a cyberattack on its sole server could cut off 2.2 million students from financial aid systems for weeks.

This story was originally published May 15, 2026 at 1:32 PM with the headline "Gov. Gavin Newsom unveils his final state budget. Here are 8 key takeaways."