California’s newest $322 billion budget prioritizes Hollywood and high-speed rail while cutting healthcare for illegal immigrants as the state faces a staggering $21 billion structural deficit.
Key Takeaways
- California’s $322 billion budget for 2025-2026 was signed into law on June 30 after Governor Newsom secured housing and infrastructure reforms.
- The budget allocates $750 million in tax credits to Hollywood and guarantees $1 billion annually until 2045 for the state’s controversial high-speed rail project.
- To address a $12 billion deficit, the state is cutting health benefits for illegal immigrants, including implementing a $30 monthly fee and freezing new enrollment in Medi-Cal.
- Full dental coverage for undocumented Medi-Cal recipients will end in 2026, saving over $3.3 billion over three fiscal years.
- Despite serious financial challenges, California continues prioritizing entertainment industry subsidies and transportation projects over fiscal responsibility.
California’s Budget Priorities Raise Questions
California’s legislature and Governor Gavin Newsom have approved a massive $322 billion budget for the 2025-2026 fiscal year that reveals troubling priorities amid growing financial troubles. The budget, signed on June 30 after negotiations that included Newsom’s demanded reforms to housing and infrastructure, represents the third consecutive year California has faced significant deficits. With a current $12 billion budget gap and projections showing a structural deficit of $21 billion, the state’s financial decisions highlight a concerning pattern of spending on progressive pet projects while making cuts that impact healthcare services.
The budget demonstrates California’s continued commitment to the entertainment industry with $750 million allocated for the California Film and Television Tax Credit program. This substantial handout comes as many production companies have been leaving the state for more affordable locations. Meanwhile, critical infrastructure like water storage, wildfire prevention, and road maintenance continue to suffer while billions flow toward the state’s controversial high-speed rail project, which will now receive a guaranteed $1 billion annually from cap-and-trade revenues until 2045.
Do illegal immigrants get free health care if they pay $30 a month. Slap in the face of taxpayers and why we need every immigration law enforced in CA https://t.co/yn0kk0bQ1u
— Brandon S (@BSaarX) June 25, 2025
Healthcare Cuts for Illegal Immigrants
After years of expanding health benefits to illegal immigrants regardless of legal status, California is finally being forced to make cuts as costs spiral out of control. The new budget implements a $30 monthly fee for undocumented immigrants ages 19 to 59 enrolled in Medi-Cal and freezes new enrollment starting January. Additionally, full dental coverage for undocumented Medi-Cal recipients will end in 2026. These moves are expected to save over $3.3 billion over the next three fiscal years, highlighting how fiscally unsustainable these programs have become.
“It is never easy to balance the budget with the deficit we faced,” stated Scott Wiener, chair of the state senate’s budget committee, said during a hearing on Wednesday.
In another cost-cutting measure, the budget eliminates Medi-Cal coverage for weight loss drugs like Ozempic and Wegovy, saving $885 million. These healthcare adjustments represent a significant pivot for a state that has consistently expanded benefits regardless of cost concerns. However, rather than addressing the root causes of California’s financial problems, these moves merely slow the bleeding while maintaining funding for questionable priorities like the high-speed rail project that has faced years of delays and cost overruns.
Transportation and Infrastructure Spending
Transportation funding remains a major focus in the budget, with San Francisco Bay Area transportation agencies receiving $750 million in loans to address budget shortfalls. The high-speed rail project, originally sold to voters in 2008 with a $33 billion price tag and promises of completion by 2020, has now ballooned to projected costs exceeding $128 billion with no end in sight. Despite this fiscal disaster, the new budget guarantees it will continue receiving at least $1 billion annually from cap-and-trade revenues for the next two decades.
“We did have to make some difficult decisions around Medi-Cal and those decisions remain,” said Wiener.
The budget also includes $25 million for a new semiconductor research facility in Silicon Valley, an attempt to revitalize California’s tech manufacturing sector. However, this modest investment pales in comparison to the exodus of tech companies and manufacturers that have left the state in recent years due to high taxes, burdensome regulations, and quality of life concerns. Until California addresses these fundamental issues, token investments will do little to reverse the trend of businesses relocating to more business-friendly states.
Housing Reform Remains Contentious
Governor Newsom made his signature on the budget contingent on passing a bill to overhaul the California Environmental Quality Act (CEQA), which has been widely criticized for enabling frivolous lawsuits that block housing construction. This reform represents a rare acknowledgment from Democratic leadership that the state’s housing crisis is largely self-inflicted through excessive regulation. However, it remains to be seen whether the proposed changes will meaningfully address the state’s severe housing shortage or simply create new regulatory hurdles under different names.
“We appreciate the strong partnership with the Legislature in reaching this budget agreement,” Newsom spokesperson Izzy Gardon said in a statement.
As California continues to face population decline, with nearly 400,000 residents leaving in recent years, this budget does little to address the underlying issues driving people away. With continuing tax increases, deteriorating public services, and prioritization of special interests over fiscal responsibility, California’s financial challenges are likely to worsen. The $21 billion structural deficit looming over the state suggests that even more difficult decisions lie ahead, yet leadership continues to fund progressive priorities while making only modest adjustments to unsustainable programs.
