SACRAMENTO — Gov. Gavin Newsom’s 2025-26 revised budget proposal reneges on his signature policy to provide free healthcare coverage to all low-income undocumented immigrants as costs exceed expectations and the state anticipates challenging economic times ahead.
Newsom’s office said the governor’s spending plan, which will be released late Wednesday morning, calls for requiring all undocumented adults to pay $100 monthly premiums to receive Medi-Cal coverage and for blocking all new adult applications to the program as of Jan. 1.
The cost share will reduce the financial burden on the state and could lower the total number of people enrolled in the healthcare program if some immigrants cannot afford the new premiums. Freezing enrollment may prevent the price tag of the program from continuing to balloon after more people signed up for coverage than the state anticipated.
The governor’s office said the changes will save a combined $5.4 billion through 2028-29, but did not detail the cost savings in the upcoming fiscal year that begins July 1.
Newsom is expected Wednesday to project a deficit for California in the fiscal year ahead, which includes higher than expected Medi-Cal costs, and more significant shortfall estimates in the following years. In the current budget year, the governor and lawmakers approved a $2.8-billion appropriation and took out a separate $3.4-billion loan just to pay for extra expenses for Medi-Cal through June.
The rising costs have drawn criticism from Republicans and added pressure on Democrats to consider scaling back coverage for immigrants. A recent poll found strong support among California voters for offering free healthcare to undocumented children. Just over half of voters supported providing the healthcare to eligible immigrants 50 years old or above, and a plurality — 49% — favored providing the coverage to adults between the ages of 18 and 49.
Medi-Cal, the California offshoot of the federal Medicaid program, provides healthcare coverage to eligible low-income residents. After the Republican Congress this year passed a budget blueprint that includes billions of dollars in spending reductions, fears also persist that cuts to federal Medicaid funding may be looming.
California became the first state in the nation to offer healthcare to all income-eligible immigrants one year ago after the expansion was approved by Newsom and the Democratic-led Legislature.
Gov. Jerry Brown, a Democrat, signed a bill in 2015 that offered Medi-Cal coverage to all children younger than 19.
Newsom grew the Medi-Cal coverage pool to include all income-eligible immigrants in California under a multiyear expansion by age categories that began in 2020 and concluded in 2024.
California’s new budget shortfall comes in addition to $27.3 billion in financial remedies, including $16.1 billion in cuts and a $7.1-billion withdrawal from the state’s rainy day fund, that lawmakers and the governor already agreed to make in 2025-26.
The nearly $40-billion total deficit marks the third year in a row that Newsom and lawmakers have been forced to reduce spending after dedicating more money to programs than the state has available to spend. Poor projections, the high price tag of Democratic policy promises and a reluctance to make long-term sweeping cuts have added to the deficit at a time when the governor regularly touts California’s place as the fourth-largest economy in the world.
On Tuesday afternoon, Newsom’s office said President Trump’s tariff policies have also hurt California’s financial standing and projected that the state will lose out on $16 billion in revenue from January 2025 through June 2026 because of the levies on imported goods and the effect of economic uncertainty on the stock market.
