WASHINGTON, DC - FEBRUARY 23: California Governor Gavin Newsom attends an event with fellow governors in the East Room of the White House on February 23, 2024 in Washington, DC. President Joe Biden, first lady Jill Biden and Vice President Kamala Harris all addressed the state and territory leaders who are in Washington for the annual National Governors Association Winter Meeting. (Photo by Chip Somodevilla/Getty Images)
Sacramento, California – Governor Gavin Newsom today released the May Revision of his 2025–26 state budget, unveiling a balanced and forward-looking plan that addresses a projected $11.95 billion shortfall while reinforcing key priorities like housing, education, and infrastructure. The revised budget comes amid what Newsom dubbed the “Trump Slump” — a period marked by market volatility, declining international tourism, and tariff disruptions that have dealt a $16 billion blow to California’s revenues.
“California’s fundamental values don’t change just because the federal winds have shifted,” Newsom said. “Even as the Trump Slump slows the economy and hits our revenues, we’re delivering bold proposals to build more housing, lower costs for working families, and invest in our kids.”
To stimulate housing production, the Governor is proposing a sweeping legislative package aimed at slashing red tape and accelerating development. The plan would streamline Coastal Commission approvals, prioritize infill and transit-oriented housing to reduce pollution, and reform CEQA for urban development. A housing and infrastructure bond is also proposed to fast-track homebuilding across the state.
On health care, the revised budget targets transparency and cost reduction. Newsom’s proposal would make California the first state to license and regulate Pharmacy Benefit Managers (PBMs), key players in the pharmaceutical supply chain. It also expands the authority of CalRx to procure brand-name drugs and safeguard access to essential medications like mifepristone, amid politically driven threats to reproductive health care.
Amid rising climate threats, the budget fast-tracks modernization of the State Water Project via the Delta Conveyance Project. Streamlined permitting and reduced litigation timelines aim to secure water access for 27 million Californians while preparing for increasingly extreme droughts and floods.
Education remains a top priority. The revised budget fully funds universal transitional kindergarten for all four-year-olds, ensures free school meals for all students, and expands before-school, after-school, and summer programs. A $545 million investment in literacy initiatives will focus especially on multilingual learners.
In public safety, the budget includes historic investments in firefighting and emergency response to address intensifying wildfire risks. Additionally, a new tax cut for military retirees recognizes their service and supports their financial well-being.
The proposal also calls for the creation of a new state agency to better coordinate housing and homelessness programs. It continues to fund California’s Cap-and-Invest climate initiative, which includes high-speed rail and a utility credit expected to return up to $60 billion to Californians by 2045.
Despite economic headwinds, Newsom’s budget underscores a commitment to progressive governance and long-term resilience.
