CHA News

State Budget Negotiations Continue as Legislature to Submit Its Version of the Budget

What’s happening: The Legislature will send its version of the 2024-25 state budget, possibly addressing the managed care organization (MCO) tax issue, to the governor by the June 15 constitutional deadline.  

What else to know: A key issue to be resolved is whether to restore funding for Medi-Cal providers from the MCO tax with a delay from 2025 to 2026.  

With the June 15 deadline near, the Legislature is expected to pass its version of the 2024-25 state budget by the end of this week. Critically, this version reflects only an agreement between the Assembly and Senate, rather than a three-way agreement that includes the governor. Differences between the Legislature and the governor remain, meaning negotiations will continue through the end of the month on a final budget agreement, which must be in place by the start of the fiscal year on July 1.  

While the Legislature’s budget framework is largely similar to the governor’s May Revision — aiming to close the projected $45 billion and $30 billion shortfalls over the next two years — there are key differences, including in health care. Whereas the governor’s plan eliminated the vast majority of provider payment increases from the MCO tax, the Legislature restores this funding a year later than initially planned in 2026 and extends funding to new provider types. Additionally, the Legislature rejects components of the governor’s proposed elimination of health care workforce funding, with the aim of protecting existing awards. 

Final negotiations are expected to cover potential changes to Senate Bill 525 (2023) that would pause the health care worker minimum wage increases in future periods based on the state’s economic or fiscal performance. The Legislature’s plan implements (and sunsets) the suspension of the net operating loss tax deduction and business tax credit one year earlier than the governor proposed (2024 rather than 2025), which allays the current deficit but shifts the potential budget problem into subsequent years.  

If you have any questions or feedback on the proposed changes, contact Ben Johnson, vice president, policy, at