What’s happening: On Jan. 10, the governor released his $209 billion state general fund budget for 2024-25. The spending plan includes a nearly $38 billion (18%) deficit before accounting for solutions.
What else to know: The governor proposes to close the deficit without major cuts to health care programs. The budget still needs to make its way through the Legislature, and the May revision will deliver new and more up-to-date revenue tallies.
The release of the governor’s January budget formally kickstarts the budget process for the 2024-25 state fiscal year, which generally culminates with approval of a final budget by the end of June.
The governor’s budget projects a deficit of $38 billion, $30 billion lower than had previously been projected by the Legislature’s budget office. The governor’s lower deficit is due to higher projected tax collections and a proposed rebasing of K-12 education funding.
The governor proposes to solve the budget deficit through a mix of solutions, including:
- Utilizing $13 billion in reserves
- Reducing spending by over $8 billion (most notably in the areas of climate change and transportation)
- Borrowing from other state funds and raising revenues to total over $5 billion, including a proposed $1.5 billion increase in the managed care organization (MCO) tax
- Delaying over $5 billion in spending, including $1 billion for transportation, over $600 million for recently enacted reimbursement rate reforms for developmental services providers, $375 million for behavioral health infrastructure programs, and $329 million for health care workforce programs
Health care programs, including recent investments supporting the California Advancing and Innovating Medi-Cal reforms, the expansion of Medi-Cal coverage to undocumented immigrants, behavioral health infrastructure, and provider payment increases under the MCO tax, were largely spared painful cuts.
The budget maintains the state’s commitment to increase Medi-Cal provider payments by roughly $2.7 billion on an annual basis. The exact nature of the proposed payment increases remains unclear, but more information is expected in the coming days and weeks.
Finally, the budget restates the governor’s commitment to add “trigger language” that makes annual increases in California’s new health care worker minimum wage contingent on the availability of state funding for the state’s portion of the associated costs (as well as other potential technical changes to the law).