California budget deal: Here’s who won and who lost in $300 billion spending plan

Social safety net programs emerged as one of the big winners of a budget deal hammered out between Gov. Gavin Newsom and lawmakers with both sides compromising on some fronts to get to the nearly $300 billion budget agreement right under the deadline.

Lawmakers agreed with the governor to delay the minimum wage hike for health care workers and Newsom made concessions on other items, including acquiescing to legislators’ desire to keep flowing $1 billion in state money to combat homelessness in a new round of funding.

The measures were agreed to in a budget deal announced over the weekend to fill a nearly $47 billion shortfall.

Newsom listened to leaders and allies in the Democratic-controlled Legislature on several fronts to cobble together the agreement. In some areas lawmakers went further than Newsom and offered more ways to save money, while in others they rejected the governor’s budget proposals.

Here are some winners and losers from the 2024-25 budget deal:

WINNERS

Subsidized child care: In a tough budget year, Newsom wanted to hit pause for an indefinite period toward achieving an agreed-upon 200,000 subsidized child care slots in the state by 2026.

The proposal would have frozen the number of available slots at 119,000 and also clawed back funding for some 11,000 additional slots already authorized, saving $1.4 billion over two years.

The final agreement funds the approximately 11,000 new slots that had already been awarded and pauses additional expansion of slots by two years, after which additional slots will be subject to future budget appropriations.

Child care providers applauded the agreement. Some 40,000 are represented by the Child Care Providers United (CCPU).

“The voices of child care providers, parents, and leaders of the Legislative Women’s Caucus are clearly reflected in the budget agreement, which protects California’s progress on supporting working families’ child care access and early education for our youngest learners,” Rasiene Reece, a child care provider in Victorville, said in a statement from the union.

“A stronger economy and a healthier state budget are only possible when the state’s lowest-paid workers, including those working irregular hours, have a safe place for their children to learn during work shifts,” Reece said.

Middle Class Scholarship recipients: Funding for the state’s Middle Class Scholarship program will continue for students seeking to attend four-year schools with the agreement maintaining $637 million in ongoing funds and $289 million in one-time money.

The deal calls for an ongoing reduction of $110 million for the program starting in 2025-26.

Thousands of California students from middle class families would have had a tougher time attending four-year schools had Newsom and state lawmakers not been able to agree as their separate budget proposals were $826 million apart on how much money should be allocated for the Middle Class Scholarship program.

Newsom’s plan called for $100 million in the scholarship pot after his proposed trims. The Legislature wanted $926 million, aiming to continue what was previously planned and including a one-time $289 million addition for the next two years.

The scholarship is open to undergraduates and students seeking teaching credentials at state universities with family income under $217,000.

City and counties homelessness efforts: $1 billion will continue in a sixth round of funding to help cities and counties combat homelessness tied to accountability measures. Newsom said previously he would listen to legislators on the issue and had not included the funds for the next round.

The governor’s revised budget in May had not set $1 billion aside for a sixth round of funding for the Homeless Housing, Assistance and Prevention program, or HHAP, which provides flexible grant dollars to cities, counties and for care across the state.

The budget approved by the Legislature had included the money.

In the final deal announced Saturday morning between Newsom, Senate President pro Tempore Mike McGuire and Assembly Speaker Robert Rivas, another round of $1 billion in grants will continue in 2024-25 but will be tied to increased accountability measures.

Local leaders had encouraged the administration and lawmakers to keep the homelessness money coming, calling it a lifeline. They expressed relief when the deal was announced.

“Cities like mine depend on the state homelessness dollars that had previously been considered for elimination and the fact that they have been restored – and at their current level – will allow us to continue to tackle the biggest issue in the state, which is homelessness,” San Diego Mayor Todd Gloria, chair of the California Big City Mayors coalition, told The Sacramento Bee Saturday.

Losers

Health care workforce: Minimum wage hikes for health care workers will be delayed and there will be a reduction of about $746 million for health care workforce programs.

Newsom last year signed into law a bill that created a framework for the wage hikes that the Department of Finance projected would cost $4 billion to implement. In January, he proposed setting up a “trigger” that would make the increases subject to funding availability.

The agreement includes the trigger to implement the health care worker minimum wage increases pursuant to Senate Bill 525 by Sen. María Elena Durazo, D-Los Angeles, which created a framework for the wage hikes.

The deal also includes “statutory changes to exempt state facilities and other implementation clarifications,” according to the agreement.

Prisons: A trim of $750 million to the California Department of Corrections and Rehabilitation (CDCR) is part of the final budget agreement. Newsom had already proposed saving $82 million by deactivating 46 housing units at 13 prisons.

Progressive Democrats had been urging cuts to prison spending to keep social safety net programs intact.

The $750 million in reductions apply over a three-year budget window of 2022-23, 2023-24, and 2024-25 – the bulk of the savings coming in the next fiscal year, according to an Assembly floor report.

Actual impact as yet unclear

Ongoing state operations reductions: Lawmakers and the governor have agreed to trim state operations – cuts to nearly all department budgets – by nearly 8% for an overall expected savings of approximately $3 billion a year.

The reduction involves all categories of spending, including personnel, operating costs and contracting to achieve the savings, the agreement notes.

The cuts to state operations would build on a December budget letter Newsom’s Department of Finance sent to all state departments and agencies that enacted a current year budget freeze in anticipation of the looming deficit.

The precise contours of those reductions will not be known for several months.

The nonpartisan Legislative Analyst’s Office previously cautioned lawmakers that savings from the cut to state operations may not materialize and that would pose a larger deficit in the next budget year.