Gov. Gavin Newsom said the budget bill pushed by the Trump administration through the Republican Congress will have “devastating” impacts on healthcare for millions of Californians. (Mark Schiefelbein / Associated Press)

As many as 3.4 million Californians could lose their state Medi-Cal health insurance under the budget bill making its way through the U.S. Senate, Gov. Gavin Newsom said Friday.

Newsom said the proposed cuts to healthcare in the “one big, beautiful bill,” a cornerstone of President Trump’s second-term agenda, could force the closure of struggling rural hospitals, reduce government food assistance for those in need and drive up premiums for people who rely on Covered California, the state’s Affordable Care Act health insurance marketplace.

“This is devastating,” Newsom said. “I know that word is often overused in this line of work, but this is, in many ways, an understatement of how reckless and cruel and damaging this is.”

Medicaid provides health insurance for about 1 in 5 Americans and generally uses income, rather than employment, as a condition for enrollment.

Roughly 15 million Californians, more than a third of the state, are on Medi-Cal, the state’s version of Medicaid, with some of the highest percentages in rural counties that supported Trump in the November election. More than half of California children receive healthcare coverage through Medi-Cal.

The Senate is still debating its version of the bill. But the current version would require many Medicaid recipients to prove every six months that they work, volunteer or attend school at least 80 hours per month. States would be required to set up their work eligibility verification systems by the end of 2026, just after the midterm elections. States that do not set up those systems could lose federal Medicaid funding.

Republican House Speaker Mike Johnson told reporters last month that the aim of the policy was to encourage poor Americans to contribute and “return the dignity of work to young men who need to be out working instead of playing video games all day.”

The nonpartisan Congressional Budget Office estimated this month that the requirements would cut about $344 billion in Medicaid spending over a decade and leave 4.8 million more people uninsured.

Health policy experts warn that work requirements can lead to people who are eligible, but can’t prove it, losing their benefits.

Newsom said 5.1 million people in California would need to go through the work verification progress and about one-third would “likely” meet the requirements.

The other two-thirds would “go through the labyrinth of manual verification,” Newsom said.

He said 3 million people in California could lose coverage through the new Medicaid work requirements, and 400,000 more could lose their insurance if they were required to re-verify their eligibility every six months. Newsom said that the state’s estimate was based on the number of people who dropped off Medicaid in New Hampshire and Arkansas after those states briefly implemented their own work requirements.

Last year, California became the first state in the nation to offer healthcare to low-income undocumented immigrants. The expansion, approved by Newsom and the Democratic-led Legislature, has cost the state billions and drawn sharp criticism from Republicans.

Assembly Minority Leader James Gallagher (R-Yuba City), who has previously called on Newsom to walk back that coverage, said on social media Friday that Newsom and Democratic legislative leaders had “obliterated” the healthcare system.

Newsom’s budget proposal in May proposed substantial cuts to the healthcare program for undocumented immigrants, including freezing new enrollment in 2026, requiring adults to pay $100 monthly premiums and cutting full dental coverage.

Lawmakers ultimately agreed to require undocumented immigrant adults ages 19 to 59 to pay $30 monthly premiums beginning July 2027. Their plan adopts Newsom’s enrollment cap but gives people three months to reapply if their coverage lapses instead of immediately cutting off their eligibility. Democrats agreed to cut full dental coverage for adult immigrants who are undocumented, but delayed the change until July 1, 2026.

In Congress, the GOP bill could also pose a serious threat to 16 struggling hospitals in 14 rural counties, which received a $300-million lifeline in interest-free loans in 2023, Newsom said.

He said the Republican members of Congress in California who supported the bill and represent rural parts of California, including Central Valley Rep. David Valadao (R-Hanford) and Rep. Kevin Kiley (R-Rocklin), are “gutting an already vulnerable system.”

Some senators are pushing to change a requirement that would require states to freeze and cut by half the tax they impose on Medicaid providers, slashing a key source of funding for rural hospitals.

Michelle Baass, the director of the California Department of Health Care Services, said that change could be “fatal for the many rural and critical-access hospitals that are already financially strained.”

Newsom said in aggregate, the cuts could threaten California’s progress in reducing the share of residents without health insurance, which stands at about 6.4%.

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This story originally appeared in Los Angeles Times.

California leaders reached a tentative agreement Tuesday on the state budget, which hinges on Gov. Gavin Newsom’s demand that the Legislature pass a housing reform proposal.

The eleventh-hour negotiations about the spending plan, which takes effect July 1, speak to the political challenge of overhauling longstanding environmental regulations to speed up housing construction in a state controlled by Democrats.

The party has been loath to do more than tweak the California Environmental Quality Act, or approve one-off exemptions, despite pressure from the governor and national criticism of a law that reform advocates say has hamstrung California’s ability to build.

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The proposal is among a series of policies Newsom and Democratic lawmakers are expected to advance in the coming days as part of the $321.1-billion budget. The deal reflects the Legislature’s resistance to the governor’s proposed cuts to reduce a $12-billion budget deficit expected in the year ahead, citing uncertainty about the scope of the state’s financial problems.

“We appreciate the strong partnership with the Legislature in reaching this budget agreement,” said Izzy Gardon, a spokesperson for Newsom. “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.”

The consensus comes after weeks of conversations about how to offset the deficit, caused by overspending in California, and start to address even larger financial problems anticipated in the future, including from potential federal policy changes.

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The tentative deal largely relies on borrowing money, tapping into state reserves, and shifting funding around to close the shortfall. By reducing and delaying many of the governor’s proposed cuts, the budget continues a practice at the state Capitol of sparing state programs from immediate pain while avoiding taking on California’s long-term budget woes.

Assembly Republican Leader James Gallagher (R-Yuba City) said the budget deal papers over the state’s financial problems.

“We’re in this situation because of overspending,” Gallagher said. “We’ve made long-term commitments to programs that Democrats have championed, and now, just like everybody warned, the money is not there to support them all, and they don’t want to cut back their program that they helped expand.”

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The cuts lawmakers and the governor ultimately agreed to will reduce the expansion of state-sponsored healthcare to undocumented immigrants and reinstate asset limit tests for Medi-Cal enrollees. The final deal, however, achieves less savings for the state than Newsom originally proposed.

The plan restores cost-of-living adjustments for child-care workers, which the governor wanted to nix, and rejects his call to cap overtime hours for in-home caregivers.

Democrats in the Legislature successfully pushed to provide another $500 million in funding for Homeless Housing, Assistance and Prevention grants. The governor originally resisted giving more money to counties, which he has chastised for being unable to show results for the billions of dollars in state funding they have received to reduce homelessness.

Assembly Budget Chair Jesse Gabriel (D-Encino) pushed back on the notion that the Legislature hasn’t done “real belt-tightening.” Lawmakers are trying to balance compassion and fiscal responsibility before making drastic cuts to safety net programs that Californians rely on, he said.

“That is the balance that we are trying to strike here with this budget of being responsible, of focusing on the work that we need to do regardless, but also understanding that there is a pretty high delta of uncertainty for a lot of reasons,” Gabriel said.

The budget also preserves Newsom’s plan to provide $750 million to expand the California Film and Television Tax Credit, a proposal supported by Hollywood film studios and unions representing workers in the industry.

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The tentative agreement is expected to serve as a precursor to more challenging financial discussions about additional reductions in the months ahead.

California expects to lose federal funding from the Trump administration and state officials predict a potentially greater funding dilemma in 2026-27.

Here are few key elements of the budget deal, detailed in summaries of the agreement and legislation:

A housing caveat

Described colloquially as a “poison pill” inserted into the budget bill, the agreement between the Legislature and Newsom will only become law if legislators send the governor a version of a proposal initially introduced by Sen. Scott Wiener (D-San Francisco).

Wiener’s bill is expected to lessen the number of building projects that would require a full environmental review under CEQA and make the process of developing environmental impact reports more efficient.

Paired with another proposal that could exempt more urban housing developments from CEQA, the legislation could mark a significant change in state policy that makes it easier to build.

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Newsom is effectively forcing the Wiener proposal through by refusing to sign a budget deal without the CEQA exemptions. The proposal was still being drafted as of Tuesday evening.

The governor declared lofty goals to build more housing on the 2018 gubernatorial campaign trail, but he has failed to spur enough construction to meet housing demand and make homes more affordable.

New York Times columnist Ezra Klein effectively called out the inaction in California caused by the state’s marquee environmental law and a lack of political will in his recent book “Abundance,” which increased pressure on the governor and other Democrats to reconsider their approach and push for more substantial fixes this year.

The CEQA reform bill must be passed by Monday under the budget agreement, which omits a separate Newsom call to streamline the Delta tunnels project.

Changes to Medi-Cal funding

Medi-Cal cost overruns are causing major problems for the California budget. The challenges stem from a higher-than-expected price tag for the expansion of state-sponsored healthcare to all income-eligible undocumented immigrants and medical care for other enrollees.

Newsom’s budget proposal in May suggested substantial trims to the healthcare program for people who are undocumented. His plan included freezing new enrollment as of Jan. 1, requiring all adults to pay $100 monthly premiums, eliminating long-term care benefits and cutting full dental coverage. The changes offered minor savings in the year ahead but could save billions of dollars in future years.

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Lawmakers ultimately agreed to require undocumented immigrant adults ages 19 to 59 to pay $30 monthly premiums beginning July 2027. They plan to adopt Newsom’s enrollment cap but give people three months to reapply if their coverage lapses instead of immediately cutting off their eligibility.

Democrats agreed to cut full dental coverage for adult immigrants who are undocumented, but delayed the change until July 1, 2026.

State leaders agreed to reinstate much higher limits than the governor originally proposed on the assets Medi-Cal beneficiaries may possess and still get coverage. The new limits would be $130,000 for individuals and $195,00 for couples, compared to prior limits of a few thousand dollars.

They also adopted Newsom’s proposal to withdraw Medi-Cal benefits for specialty weight-loss drugs.

Shifting money around

The negotiations resulted in less general fund spending than the Legislature proposed in a counter to Newsom’s budget revision in May, dropping from $232 billion to an estimated $228 billion for 2025-26.

Officials are using more money from California’s cap-and-trade program, which sets limits on companies’ greenhouse gas emissions and allows them to buy pollution credits from the state, including $1 billion next year. They are also using $300 million from climate change bonds instead of the general fund to pay for environmental programs.

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Lawmakers and the governor agreed to delay a $3.4-billion payment on a loan to cover Medi-Cal cost overruns and increase the loan by another $1 billion next year.

The plan continues an agreement to take $7.1 billion from the state’s rainy day fund to help cover the deficit and taps into another $6.5 billion from other cash reserves to balance the budget.

Trump uncertainty

California leaders for months have warned about the so-called Trump effect on the state budget.

Financial analysts at UCLA predict that the state economy is expected to slow in the months ahead due to the effects of Trump’s tariff policy and immigration raids on construction, hospitality, agriculture and other key sectors.

Meanwhile, the state is warning that federal funding reductions to California could require lawmakers to adopt additional budget cuts in August or September, during a special session in the fall or early next year.

State officials expect future deficit estimates to range from $17 to $24 billion annually, according to an Assembly summary of the budget deal.

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More to come

The final budget agreement is being publicly released in bits and pieces this week through a series of trailer bills that appear online at random hours.

Lawmakers are expected to pass a main budget bill on Friday and approve additional legislation by Monday, before the July 1 deadline for the budget to go into effect. Some legislation, such as the CEQA housing exemptions, will not appear in print until the end of the week.

Other decisions, such as reauthorizing California’s cap-and-trade program, will be considered later in the year outside of the budget process.

Governor Gavin Newsom reached a $321.1 billion budget agreement with the state legislature late on Tuesday, with large cuts of Medi-Cal that will result in the freezing of new illegal immigrant applicants from being accepted being added in.

While both the Governor and Legislature made significant cuts from other versions from earlier in the year, there is still a $12 billion budget deficit following the agreement. Many planned deep cuts were undone in the leadup to the final budget this week, including maintaining cost-of-living increases for child-care workers and undoing planned reductions to in-home caregiver hours. In fact, some areas actually saw significant budget increases, like an additional $500 million in homeless grants being pushed through.

The University of California and California State University both saw no cuts, albeit with some getting deferred payments until next year. Some, like Sonoma State University, will actually see another $45 million in grants awarded. The budget confirmed the closure of the California Correctional Center in Susanville, while doubling the film and television tax credit to $750 million.

While Newsom and many Democrats in the Legislature praised the bill, Republicans soundly denounced it, especially the extra $1 billion being pushed for California High-Speed Rail and cuts being made to Prop 36 funding.

“This is a misleading accomplishment that sacrifices public safety, and common sense in favor of political vanity projects,” expressed Assemblyman Tom Lackey (R-Palmdale). “This budget is a betrayal. Full stop. It pours billions into failed projects like the High-Speed Rail while ignoring the immediate needs of Californians. These jobs matter – but those workers could be put to better use on fire mitigation, road repairs, and real infrastructure that our communities actually need. But instead of responsible leadership, the Supermajority is too busy writing checks for dreams that died years ago.

Lackey continued: “As Los Angeles rebuilds from the devastating wildfires, the budget recklessly commits $1 billion to the Governor’s High-Speed Rail, while only offering a meager $200 million for wildfire prevention – a fraction of what the state spent in prior years. As family homes and neighborhood businesses are left in ashes, the Supermajority chooses to bankroll a mismanaged rail fantasy. This budget makes their priorities crystal clear – and voters’ priorities are not among them.

“Mere months ago, voters overwhelmingly passed Proposition 36 to reform sentencing laws and invest in drug treatment and rehabilitation. But while retail theft surges and fentanyl deaths rise, this budget fails to deliver on the core promise of Prop 36. Instead of the $400 million needed to support treatment and courts, the budget offers a patchwork of just $110–200 million – barely half of what is required.

“This budget is a shameful dismissal of California’s needs. It’s time we stop chasing flashy headlines and start fixing the issues that actually matter – public safety, and fire protection. This budget is not a true accomplishment.”

Cuts to Medi-Cal for illegal immigrants

However, there were a few areas where the GOP saw small victories. The largest of them was halting the expansion of illegal immigrants into Medi-Cal. While initially announced last month, lawmakers have been trying to save as much of it as possible, with the efforts largely futile.

While Medi-Cal was expanded to cover undocumented children in 2015 and undocumented seniors 50 and older in 2022, the governor expanded the program to cover all illegal immigrants last year ballooned the cost of Medi-Cal for all illegal immigrants under the program to $9.5 billion. The state received more than the intended number of recipients, causing a $6.2 billion deficit to open up.

In less than a year after expanding the program, Medi-Cal costs to the state shot up by $2.7 billion, as illegal immigrants were easily accepted and many did not contribute with taxes or by other means. As a result, Newsom was forced to sign a bill in April that paid off a $2.8 billion budgetary shortfall for Medi-Cal, allowing it to run through the end of the fiscal year at the end of June.

The $2.7 billion was only a stopgap however, with the real challenge coming with the revised 2025-2026 budget. The huge deficit forced his hand, and in May Newsom said that he would halt any more illegal immigrants from enrolling into the program starting in 2026. Those already in the program will not be kicked out.

This provision was kept along with illegal immigrants already enrolled needing to pay a Medi-Cal premium of $30 a month starting in 2027, a move that will likely cause many to leave the program. That amount was negotiated down from an original $100 a month. Full dental will likewise be removed, with that change coming in mid-2026. Coverage for specialty drugs, like weight loss drugs, will also be removed.

While most of the cuts were left intact, many in the GOP still blasted the agreement, as Medi-Cal funding for illegal immigrants would be left in-tact.

“It’s fiscally irresponsible to continue to fund Medi-Cal for people without documentation,” noted Senator Roger Niello (R-Fair Oaks). “It just seems to be unaffordable whether we have a surplus of funds or not, and it also seems to attract more undocumented immigrants into our state to receive funding like this, that is not available in just about every other state in the union.”

Conversely, many Democrats and immigrant advocates slammed the cuts, saying that open health care for illegal immigrants was needed despite Newsom and budget experts saying last month that too many illegal immigrants joined the program and that it was causing a rapid loss of state funds as a result.

“At a time when immigrant communities are facing relentless attacks by the federal government and Congress is threatening to slash safety net programs, we need the governor and state leaders to chart a different course and match their rhetoric in support of immigrants with meaningful action. Protecting immigrants means protecting their access to healthcare,” added California Immigrant Policy Center Analyst Carlos Alarcon. “We call upon state leaders to adopt a budget that reflects our values of equity and inclusion for all, regardless of immigration status. We need revenue generating solutions, not discriminatory targeting of vulnerable communities. We will continue to fight to restore the Medi-Cal cuts included in this budget.”

Assembly and Senate Budget Committees are expected to meet on Wednesday and Thursday to go over the new budget, with a vote expected on Friday and Governor Newsom expected to sign off on the new budget by the end of the month.

In summary The budget deal between Gov. Gavin Newsom and the Legislature forgoes or delays many of Newsom’s proposed cuts but the deficit is only likely to grow.

Gov. Gavin Newsom backed off some of his proposed cuts to health care programs in a state budget deal he reached with legislative leaders late Tuesday, but California will move forward with his plan to limit services to undocumented immigrants as the state faces a growing deficit.

The $321 billion spending plan is expected to go before the Legislature for approval later this week, ahead of the July 1 start of the fiscal year. With health care costs rising faster than expected, the state economy battered by new tariffs and further federal funding cuts looming, officials confronted a $12 billion shortfall that has forced difficult conversations about California’s spending.

Officials did not formally announce the deal as they continue to haggle over the details of a provision that could streamline construction of housing projects near public transit and denser development in cities. Newsom demanded the language, which has encountered resistance from the state Senate.

“We appreciate the strong partnership with the Legislature in reaching this budget agreement,” 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.”

Though the Legislature already passed its own version of the budget earlier this month to meet a constitutional deadline, it relied more on borrowing and less on program cuts than Newsom, who sought to reverse course on recent major expansions of subsidized health care in order to stabilize California’s long-term finances.

The budget agreement foregoes or delays many of his proposals. Legislative leaders argued against prematurely kicking people out of a vital safety net as they search for other solutions to address a persistent revenue gap that is projected to reach more than $20 billion annually in the coming years.

With officials ultimately agreeing to fewer spending reductions — reflecting a hope by many legislators that California’s economy will eventually rally — the state will pull about $7 billion out of its rainy-day fund and $6.5 billion from other cash reserves to balance the budget next year.

Nevertheless, the plan freezes enrollment by adults without legal status in Medi-Cal, the state’s health insurance program for the poor, starting in January. After California finished gradually opening up the program to that population last year, more new patients enrolled than expected, contributing to about $6 billion in cost overruns that required an emergency appropriation to Medi-Cal this spring.

The budget deal also eliminates dental coverage for those who remain enrolled, starting in July 2026, and creates a $30 monthly premium for undocumented Medi-Cal patients between the ages of 19 and 59 that will take effect in July 2027.

But it rejects the governor’s proposed cuts to their long-term care benefits, as well to overtime pay for home health aides and funding for reproductive health providers, and does not reinstate a strict asset test that could have pushed thousands of newly eligible older and disabled Californians off of Medi-Cal again.

Gov. Gavin Newsom addresses the media during a press conference unveiling his revised 2025-26 budget proposal at the Capitol Annex Swing Space in Sacramento on May 14, 2025. Photo by Fred Greaves for CalMatters

Public transit agencies and the University of California and California State University also avoid funding cuts under this spending plan, though some of the money for the university systems is deferred and they will be required to take out zero-interest loans from the state’s general fund in the meantime. The deal includes $45 million to help the struggling Sonoma State University, in Senate President Pro Tem Mike McGuire’s district, to turn around its financial woes.

Money for housing, film tax credits

The Legislature successfully pushed to keep $620 million in tax credits and loans for affordable housing construction, and to add $100 million in one-time funding for counties to begin implementing Proposition 36. Local government and law enforcement agencies have argued they need far more help to enforce the measure, which was overwhelmingly approved by voters last fall to increase penalties and mandate treatment for certain drug crimes. Newsom remains opposed to that approach, which he contends would return California to an era of mass incarceration.

The budget deal maintains his proposal to close a fifth state prison by next October, which could save an estimated $150 million annually, and more than doubles the size of California’s film and television tax credit to $750 million, another gubernatorial priority as production flees the state.

The plan also relies on other internal fund shifts, including directing $1 billion raised from greenhouse gas polluters through cap-and-trade auctions to pay for firefighting and vegetation management projects. Some lawmakers had objected to using money intended to address climate change this way.

The fate of that cap-and-trade system, which Newsom had proposed to reauthorize through the budget, and his controversial push to fast-track the Delta tunnel are among several significant policy questions left unresolved in the agreement. They could still be addressed in follow-up budget bills in the coming weeks or through the regular legislative process by the end of the summer.

The governor also has yet to agree to a legislative proposal to lend up to $1.75 billion to local governments in Los Angeles and San Francisco Bay Area transit agencies dealing with their own budget crunches.

And all of this could be revisited again later this year or early next year as California warily eyes a major federal tax bill, still being negotiated in Congress, that could result in deep cuts to health care and food aid funding. Liberal state legislators and advocacy groups are turning up the pressure to raise state taxes to offset those losses, something Newsom has previously vehemently opposed.

In summary A state budget is headed to Gov. Gavin Newsom for his signature, but it won’t take effect unless the Legislature makes changes to housing and infrastructure development rules that he has demanded.

After days of confusion in which a deal with Gov. Gavin Newsom threatened to unravel over his demand to include new housing and infrastructure regulations, the California Legislature passed an updated state budget on Friday.

With the start of a new fiscal year looming on July 1, budget negotiations — already challenged by a $12 billion and growing deficit — dragged on this week as Newsom and legislative leaders struggled to reach an agreement on waiving state environmental reviews for priority projects.

The details of that proposal were only made public Friday morning, hours before the budget vote, despite a poison pill that would invalidate the entire $321 billion spending plan if the Legislature does not also approve the infrastructure proposal, Senate Bill 131. Lawmakers are expected to take it up on Monday, alongside the housing measure Newsom sought, Assembly Bill 130, which was unveiled and then amended this week following fierce blowback from organized labor.

Officials involved in those negotiations have been loath to explain why the budget process staggered to such an odd and protracted conclusion this year, even as California is now set to adopt sweeping changes to how it builds without much public notice. Senate President Pro Tem Mike McGuire and Assembly Speaker Robert Rivas refused to speak with reporters after the vote.

“I’m not going to comment on the process or any of that,” state Sen. Scott Wiener, the San Francisco Democrat who leads the Senate budget committee and was a driving force behind the infrastructure proposal, told CalMatters on Friday. “The people of California, I don’t think they care much about the timing. They just want us to deliver on making their lives more affordable.”

The Legislature, which already passed its own version of the budget earlier this month to meet a constitutional deadline, voted along largely partisan lines to approve the deal with Newsom. It will freeze enrollment of undocumented immigrants in California’s health care program for the poor, but relies on reserves and internal borrowing to avoid many other cuts to services that Democratic legislators opposed.

Republicans criticized the secretive deliberations and last-minute changes, noting that even some Democrats publicly complained this week about being sidelined from discussions with hugely consequential policy implications.

“I have been involved in more than a dozen public-sector budgets,” state Sen. Roger Niello, a Roseville Republican, said on the Senate floor. “I have to say, this is the worst experience that I’ve had relative to navigating frustrations of the lack of transparency.”

But Assemblymember Jesse Gabriel, an Encino Democrat who leads the Assembly budget committee, laughed off the drawn-out dealmaking, which he compared to one of his pregnant staffers.

“She was actually due to give birth five days ago, and so we’ve been having a debate in our office about which would come first: budget or baby,” Gabriel said on the Assembly floor. “Right now it looks like budget is going to win.”

California’s landmark environmental law at stake

The high-stakes showdown began last month, when Newsom endorsed two contentious pro-development bills by Bay Area Democrats and announced that he would fold them into the budget. Both make changes to the California Environmental Quality Act, which requires governments to study the environmental impacts of new housing and infrastructure projects they approve.

The five-decade-old law is sacrosanct to environmentalists, but critics argue that it has driven up the cost of building in California because studies and subsequent legal challenges, sometimes brought by construction unions or other groups that want concessions from developers, can take years to resolve. Newsom has framed his approach as a crucial reform to fix the state’s housing affordability crisis.

While the leadership of the Assembly got on board, the proposals were met with more skepticism in the Senate, where there is a growing rift among Democrats over whether simplifying project approvals without setting terms for affordable housing and labor standards is a giveaway to developers.

State Sen. President Pro Tempore Mike McGuire speaks during a floor session at the state Capitol in Sacramento on April 4, 2024. Photo by Fred Greaves for CalMatters

That prolonged the budget negotiations, even as Newsom and legislative leaders reached a difficult compromise on spending cuts.

When the budget bill eventually went into print on Tuesday, so that legislators would have enough time to pass it before July 1, officials were still haggling over the details of the infrastructure proposal. To ensure discussions would continue, Newsom demanded the inclusion of an unusual line stating that the budget “shall be inoperative and repealed” if SB 131 is not signed into law by June 30 at 11:59 p.m., though the measure was empty at that point.

The version that finally landed on Friday reduces the number of documents that projects must provide for their environmental reviews. It also eliminates the reviews entirely when cities rezone neighborhoods to meet their state-mandated housing goals, as well as for building a potpourri of other projects: farmworker housing, sewer systems in disadvantaged communities, broadband internet, public parks and trails, rural health clinics, food banks, advanced manufacturing facilities, day care centers and stations for the high-speed rail project.

‘Critical’ housing reforms

The related housing measure, intended as a grand political bargain to speed up construction in cities, threw another late wrench into the budget process.

It would exempt most new apartment buildings in already developed urban areas from environmental reviews, provided they meet local zoning rules. To secure support from organized labor, the bill originally created new wage floors for projects taking advantage of the law.

But powerful unions representing construction workers revolted after the proposal was introduced this week Their members crowded into hearings at the Capitol, casting it as a betrayal that would undercut higher “prevailing wage” standards that have long existed for publicly funded projects. Many Democratic lawmakers, who are closely allied with organized labor, eviscerated the measure.

Newsom and legislative leaders scrambled to contain the fallout. Amendments to the bill late Thursday stripped out the wage provisions while requiring projects taller than 85 feet or those that have 100% affordable units to offer prevailing wages if they want to access the expedited approval process. But that means many small apartment projects could sidestep environmental reviews without having to pay higher wages of any kind.

The bill retains another provision that unions asked for, giving them the right to take contractors to court for workers compensation, insurance and payroll tax violations.

Newsom praised the development proposals on Friday as a “triumph” and “one of the most significant housing reforms in California history” — so important to fixing the state’s shortage of affordable homes that they needed to be pushed through as quickly as possible.

“I did it because it’s critical and it’s essential that it was done,” Newsom told reporters in a virtual press conference. “We’ve got to get out of our own damn way.”

Ben Christopher contributed reporting to this story.