Newsom’s final budget buys time, but healthcare cuts still loom

After weeks of internal negotiations and with Gov. Gavin Newsom, California Democrats passed on Monday a nearly $352 billion budget that adds billions more to the state’s reserves, ensures no structural deficit for the next two years and delays a slew of healthcare cuts for some of California’s most vulnerable communities.

Newsom’s last budget is one of the final pins in his hat before his widely expected 2028 presidential run. The governor quickly signed the budget agreement Monday, touting it as proof that California’s policies are not only working, but are fiscally responsible.

“We choose to be responsible and bold,” Newsom said in a video released after he signed the 2026-27 budget. “To honor the dollar and honor the dream, to balance the books and to keep the big dreams.”

The final budget agreement resembles more closely the Legislature’s original proposal passed on June 15. In stark contrast to Newsom’s proposed budget, the Legislature chose to delay most healthcare cuts for those with Unsatisfactory Immigration Status (UIS) until 2027. UIS individuals include undocumented individuals, those in the country under asylum claims and refugees.

Newsom proposed in May to restrict dental benefits, implement a new $50 premium, move the UIS population to a different coverage model and drastically lower the limit that determines Medi-Cal eligibility.

Instead, legislative leaders chose to delay all of these cuts until 2027, essentially leaving them for the next governor to decide. Newsom, seemingly, felt this a viable option; others, not so much.

“This is a budget that bought time,” Sen. María Elena Durazo (D-Los Angeles) said during a Monday budget hearing. “Medi-Cal delayed, not resolved, not restored.”

Although delayed by another year, the entire UIS population in California will ultimately still be shifted to fee-for-service, the coverage option proposed by Newsom and accepted by the Legislature. 

While it still guarantees full-scope coverage, fee-for-service has been criticized for resulting in confusing and less enhanced case management and a loss of community support services. To balance this, the Legislature allocated $31 million for “care coordination services” that include language access, navigation services, outreach and more.

The next governor will also be tasked with deciding the Medi-Cal premium for UIS individuals, anticipated to be within $30 to $50 a month. 

Answering a call from child and family advocates, the budget adds 22,770 new child care slots across the state. Newsom signed legislation in 2021 to fund 200,000 new child care spots by 2025-26, although only 129,000 spaces had been funded before the final 2026-27 budget was released. 

Newsom’s proposed budget in May did not include any funding for the childcare spots.

The final budget also significantly expands Newsom’s proposed allocation for immigrant legal services. The budget signed by the governor includes around $100 million for these legal and support services, compared to the $20 million Newsom proposed in May.

Also pushed onto the next governor’s plate is a proposal to make the state’s biggest corporations pay into Medi-Cal if their workers rely on it. Introduced by the Senate, the Fair Share proposal received lukewarm support from the State Assembly and an outright rejection by Newsom.

Budget negotiations ultimately left it to Newsom's successor to figure out. The budget directs the next governor and the Department of Finance to develop and share options for a Fair Share tax by next March.