Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Michael P. Callagy, County Executive
Connie Juarez-Diroll, Chief Legislative Officer
Subject: FY 2025-26 May Revision and State/Federal Budget Update
RECOMMENDATION:
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Accept the June 2025 informational report on the 2025-26 state and federal budget updates.
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BACKGROUND:
On May 14, 2025, Governor Newsom released his revised budget proposal for the 2025-26 state fiscal year. The proposal includes $321.9 billion in total expenditures, of which $226.4 billion is General Fund spending. Although the Governor noted a modest surplus of $343 million in his initial January budget proposal, the political and financial landscape has changed significantly since then. A combination of factors, including but not limited to the impact of global trade policy (tariffs), the Los Angeles wildfires (tax implications), and rising costs for critical social services, is contributing to this budgetary issue. Now, in his May Revision, Governor Newsom includes several solutions to address an estimated $12 billion budget deficit, which notably does not account for any potential federal spending cuts currently under consideration by Congress.
Despite California making significant progress in the healthcare and social services arena over the past few years, the May revision implements substantial reductions across several government operations, pausing investments and scaling back or eliminating various initiatives for currently served populations.
To close the shortfall, the Governor proposes the following budgetary strategies:
* Reductions: $5 billion in total solutions for 2025-26, primarily affecting Medi-Cal and In-Home Supportive Services (IHSS).
* Revenue/Borrowing: $5.3 billion in total solutions for 2025-26, using Proposition 35 Managed Care Organization (MCO) taxes to support Medi-Cal cost increases.
* Fund Shifts: $1.7 billion in total solu...
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