CHA News

Governor Newsom Proposes Health Care Cuts in Revised Budget to Tackle $45 Billion Deficit

What’s happening: The governor proposes a broad mix of solutions spanning a range of government programs, including diverting funding previously committed to Medi-Cal provider payment increases. 

What else to know: The Legislature will consider whether to approve the spending plan alongside any changes and has until June 15 to adopt a final budget for the 2024-25 fiscal year.  

State tax revenues have come in lower than expected, causing the deficit to swell to $45 billion. To balance the budget, the governor proposes billions of dollars in spending cuts and other solutions, such as drawing down the state’s reserves and seeking new revenues. 

Unlike previous rounds of right-sizing the budget, the updated budget proposes major reductions and other solutions impacting health care programs. These include: 

  • The diversion of managed care organization (MCO) tax funding dedicated to Medi-Cal provider payment increases 
  • An increase in the MCO tax 
  • Behavioral health funding cuts, primarily to recent infrastructure investments 
  • Health care workforce investment reductions 

In addition, the governor reiterated his commitment to statutory changes to the health care minimum wage law, Senate Bill 525. The bill language is likely to be released in the coming days or weeks and will likely include a one-month delay in initial implementation (from June 1 to July 1 this year), “trigger” language allowing the state to pause future minimum wage increases depending on state fiscal conditions, and technical changes, such as clarifying which entities are subject to the law. 

For more information, see the CHA summary of the revised budget proposal. For questions about the budget, email Ben Johnson, vice president, policy, at or Mark Farouk, vice president, state advocacy, at For questions about minimum wage implementation, email Erika Frank, vice president, legal counsel, at