California budget comes down to the wire as Newsom, lawmakers face off over housing

San Francisco Chronicle​

27-06-2025

SACRAMENTO — California lawmakers are scheduled to pass a budget that rolls back health care benefits for undocumented immigrants and makes other cuts, even as they continue to negotiate with Gov. Gavin Newsom over housing policies that have so far prevented them from reaching a final deal.
The housing policies at issue would represent some of the most significant reforms to the state's landmark environmental law, the California Environmental Quality Act, known as CEQA, since its inception. They would grant broad exemptions to CEQA for homes and other buildings in already developed areas. The lawmakers who crafted the original proposals argue that the law has been abused by people trying to block development and that building more homes in already densely populated areas where people live and work is good for the environment. Newsom agreed, and has made his signature on the budget contingent on lawmakers agreeing to enact some of the CEQA exemptions.
But when the negotiated language was released earlier this week, it drew swift backlash, especially from labor unions. Lorena Gonzalez, who leads the California Labor Federation, criticized the proposal because she said it did not require high enough wages for construction workers who build the projects allowed under the bill.
For years, bills meant to kickstart housing construction have been stymied by labor unions' insistence on provisions that would effectively require that new homes be built by union workers or ones paid what developers often describe as prohibitively high wages.
The budget bill lawmakers plan to pass Friday contains a clause that would render it inoperative if lawmakers don't also approve much of the CEQA overhaul that Newsom has called for.
The budget deal makes up for a projected $12 billion shortfall in part by taking out billions of dollars in loans and taking money from the state's reserves. It also partially scales back the state's health care coverage for undocumented people who make less than 138% of the federal poverty level. It will freeze enrollment for the program starting next year and will charge undocumented people ages 19-59 $30 per month in premiums starting in 2027.
Growing health care costs, in addition to the economic toll from import taxes imposed by President Donald Trump, made the state's budget outlook particularly challenging this year.
'We had to make some very difficult decisions to balance this budget,' Erika Li, a top budget official for the Newsom administration, told lawmakers during a committee hearing earlier this week.
Republicans criticized some of the borrowing and budgeting techniques Newsom and lawmakers used to balance the budget, arguing there should have been more cuts given the economic uncertainty in the years ahead.
'This budget that we see today, to the extent that I can understand it, still has a large dose of hope for a miracle, and it is seemingly less likely,' Sen. Roger Niello, R-Fair Oaks, said during the committee hearing.
Cities and counties, meanwhile, have criticized the agreement for not providing more funding for reducing homelessness and implementing Proposition 36, which increased penalties for drug and theft crimes.
The budget does include a $750 million loan for struggling Bay Area transit agencies and an expansion of the state's film tax credit program to $750 million to try to keep the industry in California.