California reaches $321 billion budget deal boosting hollywood

By Eliyahu Kamisher and Andrew Oxford, Bloomberg

California Governor Gavin Newsom and state lawmakers struck a budget agreement that provides $750 million in tax credits for Hollywood while scaling back free health care for undocumented immigrants.

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The $321 billion spending plan for the fiscal year that begins July 1, marks Newsom’s third consecutive year facing a deficit, forcing trade-offs between the progressive policies he has championed and pro-business priorities. The agreement avoids higher levies on corporations and includes tax incentives for the film industry as well as cuts to some social programs.

A central feature of the budget is the rollback of free health care for most undocumented adults. Last year, California became the first state to offer comprehensive coverage to all residents regardless of immigration status. But greater-than-expected demand and higher health-care costs increased the expense.

Newsom initially proposed a $100 monthly fee for undocumented adults enrolled in Medi-Cal, California’s version of Medicaid for low-income residents, beginning in 2027. Lawmakers and the governor ultimately settled on a $30 charge for undocumented immigrants ages 19 to 59, and agreed to freeze new enrollment for that group starting in January. The deal also ends full dental coverage for undocumented Medi-Cal recipients in 2026. The cuts are expected to save more than $3.3 billion over the next three fiscal years, according to the governor’s office.

“It is never easy to balance the budget with the deficit we faced,” Scott Wiener, chair of the state senate’s budget committee, said during a hearing on Wednesday. The state faced a $12 billion shortfall, a hole Newsom and legislative leaders blamed on President Donald Trump’s economic policies.

“We did have to make some difficult decisions around Medi-Cal and those decisions remain,” Wiener said.

The changes come as Trump intensifies deportations in California, with workplace immigration raids reported in Los Angeles and nearby cities. California is home to about 2 million undocumented immigrants — the largest share in the nation, according to the Public Policy Institute of California.

Budget Items

The budget also eliminates Medi-Cal coverage for popular weight loss drugs such as Ozempic and Wegovy, a move expected to save $885 million in the coming years.

While cutting back on health spending, Newsom supported $750 million of credits for the California Film and Television Tax Credit program — a win for Hollywood studios still recovering from the 2023 writers’ strike. Lawmakers also approved Newsom’s request for $25 million to help fund a new semiconductor research facility in Silicon Valley.

Transportation agencies in the San Francisco Bay Area secured $750 million in loans to offset budget shortfalls tied to declining ridership and increased operating costs. California’s high-speed rail project — facing potential funding cuts from the Trump administration — also secured ongoing annual support of at least $1 billion.

While the main components of the budget are in place, negotiations continue over a proposal to streamline housing construction. Newsom has made his signature on the budget contingent on passage of a separate bill to overhaul the California Environmental Quality Act, a law critics say hinders housing development.

“We appreciate the strong partnership with the Legislature in reaching this budget agreement,” Newsom spokesperson Izzy Gardon said in a statement. “The Governor’s signature is contingent on finalizing legislation to cut red tape and unleash housing and infrastructure development across the state — to build more, faster.”

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