California Cannot Balance Its Budget on Hunger, Poverty, and Immigrant Exclusion
Governor Gavin Newsom’s May Revision acknowledges the devastating impact that federal policy H.R. 1 will have but does little to mitigate that harm for millions of Californians. While the proposal includes limited efforts to respond to the devastating impact of federal policy under H.R. 1, it ultimately fails to meet the scale of the crisis facing millions of Californians.
At a time when the federal government is dismantling critical anti-poverty programs, California has an opportunity to lead differently.
Instead of shielding Californians from H.R. 1’s cruelty, the Governor’s May Revision acquiesces to inhumane federal cuts to SNAP and maintains the cruel health care cuts proposed in January. As a result, it would cement the harm to Californians experiencing hunger and force older adults and people with disabilities to impoverish themselves to access Medi-Cal. Despite additional housing investments, the May Revision continues to treat California’s housing and homelessness crises as limited or optional investments.
While we welcome the inclusion of some progressive revenue measures in the May Revision—including a permanent business tax credit limit—these proposals amount to small concessions in the face of enormous harm. The Governor has acknowledged the crisis but has yet to meet it with the scale of action Californians need. With the Assembly, Senate, and Governor all putting forward progressive revenue solutions, the path is clear. California has the tools to protect families, strengthen critical programs, and lead the nation by investing in people instead of forcing vulnerable communities to absorb devastating cuts.
Western Center looks forward to working with the Legislature and Governor on a final budget that promotes and protects the well-being of all Californians, not just the wealthiest.
HEALTH CARE
The May Revision maintains the cruel health care cuts proposed in January and expands upon it by drastically reducing the Medi-Cal asset limit back to $2,000, which forces older adults and people with disabilities to impoverish themselves to access Medi-Cal. Under the guise of “structural balance,” the May Revision delays but maintains Medi-Cal cuts to humanitarian immigrants, increases already unaffordable premiums for certain immigrants, and introduces other Medi-Cal cuts.
Drastically reduce Medi-Cal asset test limit: The Governor proposes to drastically reduce the asset limit, which only impacts older adults and persons with disabilities, to $2,000 for an individual or $3,000 for a couple, effective January 1, 2027. This is expected to “save” $278.3 million in 2026-27 (including $62.6 million from loss in IHSS) and is based on 25,000 older adults and persons with disabilities losing coverage in first year and 37,000 in second year for a total of 62,000 people losing coverage in first two years. Last year’s budget action to reinstate the asset test was a step back but reasonable. The Governor’s proposal to return to $2,000 is punitive for those who manage to save minimal resources and is more draconian than some red states, including Nebraska, North Dakota, and South Carolina.
Delays but maintains cuts to 200,000 immigrants: Effective October 1, 2026, H.R. 1 excludes several categories of immigrants from federally funded full-scope Medi-Cal. Instead of using state funds as California has long done for other immigrants, Governor Newsom maintains his proposal to limit Medi-Cal coverage for refugees, asylees, certain domestic violence and trafficking survivors, Special Immigrant Visa holders from Afghan and Iraq, and more, effective July 1, 2027 (instead of 9 months earlier as originally proposed). The proposed budget would move these people to restricted-scope Medi-Cal, which forces people to wait until their health becomes a life-threatening emergency to get care.
Increases premiums to $50/month for certain immigrants (aged 19-59): The Governor proposes to increase last year’s budget action to impose $30 premium effective July 1, 2027 to $50 for a reduction of $427.3 million GF in 2027-28 and $314.3 million annually in 2029-30. This would make Medi-Cal even more unaffordable for low-income residents who are expected to pay more for less services.
Move all state-funded immigrants to fee-for-service: The May Revision proposes to move all immigrants eligible for state-funded Medi-Cal from managed care to fee-for-service to comply with federal guidance, impacting an estimated 2 million Californians. The move will “save” $583.8 million ($471.6 million GF) in 2026-27 and $1.5 billion ($1.2 billion GF) ongoing due to reduced administrative cost, utilization, and services, including community supports.
H.R. 1 implementation: The May Revision reflects higher cost associated with H.R. 1 implementation due to lower disenrollment, specifically a decrease of 478,000 in 2026-27 and 446,000 by 2029-30 compared to January estimates due to streamlining work requirement exemptions and updated federal guidance on 6-month renewals.
County Administration: The May Revision includes a one-time augmentation of $262 million ($74 million GF) in 2026-27, $33 million ($16.7 million GF) in each of 2027-28 and 2028-29 to support county workload for H.R. 1 implementation, which counties argue is only a third of what they need.
CalAIM reductions in Enhanced Care Management (ECM) and Community Supports (CS): The Governor proposes a reduction of $68.3 million GF in 2026-27 and more ongoing to refine eligibility criteria, service definitions, utilization management criteria, and payment adjustments for both ECM and certain CS services effective January 1, 2027.
Eliminate Medi-Cal Acupuncture Benefit: The Governor proposes to eliminate acupuncture benefit for adults effective January 1, 2027, for a reduction of approximately $5.4 million GF in 2026-27 and $13.1 million ongoing.
Medi-Cal “Efficiencies”: The May Revision includes a reduction of $68 million GF in 2026-27 increasing to $552 million in 2029-30 to establish utilization management for applied behavioral analysis and transportation, cutting some Medi-Cal plan quality incentives, and potentially more to come.
Covered CA funding: The May Revision increases funding from the Health Care Affordability Reserve Fund to expand the state premium subsidy program to enrollees up to 200% FPL, $300 million compared to $190 million in the Governor’s January budget.
HOUSING
At a time when families are struggling to remain housed, California must expand not scale back investments in the programs that keep people housed and help people exit homelessness permanently.
The Governor’s May Revision maintains January proposal’s investments in the Homeless Housing, Assistance and Prevention (HHAP) program, including $1 billion in flexible funding for local jurisdictions and a planned seventh round of HHAP funding totaling $500 million. These investments are critical, but funding alone is not enough without strong commitments to expanding affordable housing opportunities statewide.
The May Revision includes the following proposals:
Civil Rights Department Investment: The six positions would strengthen enforcement of housing discrimination laws and reduce delays for Californias seeking relief from discriminatory housing practices. Fair housing enforcement remains essential to advancing equitable housing opportunities and combating systemic discrimination in the housing market.
Infill Infrastructure Grant Program: This program would reappropriate $7 million previously awarded but uncommitted to the Infill Infrastructure Grant Program to support additional affordable housing and infrastructure projects.
Impact Fees: The Governor’s proposal would prohibit cities and counties from charging impact fees on affordable housing developments to reduce development costs with the goal of accelerating the construction of affordable homes.
Despite these additional housing investments, the May Revision should have gone further. We cannot continue to treat California’s housing and homelessness crises as limited or optional investments, especially as the cost of living keeps increasing. These crises demand sustained investments for equitable housing.
PUBLIC BENEFITS AND ACCESS TO JUSTICE
Governor Newsom’s May Revision acknowledges the devastating harm H.R. 1 will inflict on California families, but fails to make the investments necessary to prevent that harm from becoming reality. Most critically, the proposal refuses to expand the California Food Assistance Program to protect the hundreds of thousands of Californians losing access to CalFresh, effectively accepting widespread hunger and instability as the new status quo. While the budget includes limited one-time investments and modest increases in a handful of programs, those measures fall dramatically short of the scale of the crisis — leaving children, seniors, veterans, former foster youth, immigrants, and unhoused Californians to absorb the consequences of deep federal cuts and a worsening affordability emergency.
Failure to Invest in California Food Assistance Program: Critically, this proposed budget fails to invest in expanding the California Food Assistance Program to protect the hundreds of thousands of Californians losing access to CalFresh. This proposal fails to provide any assistance to the 72,000 humanitarian immigrants already losing assistance, or the 665,000 additional Californians who will start to lose aid in June when time limits are implemented.
This proposed budget, as written, accepts hunger as the new reality for an estimated 100,000 children. It accepts the loss of food and stability for thousands of veterans, former foster youth, seniors, and people already experiencing homelessness. And it accepts an estimated 4,000 avoidable deaths among California parents and older adults by 2040.
Failure to Invest in CalFresh Outreach: The proposal also fails to invest in the CalFresh Outreach Network, which keeps Californians connected to CalFresh food assistance. CalFresh Outreach allows California to maximize participation in CalFresh, which in turn maximizes both our federal drawdown and the CalFresh economic multiplier effect.
Insufficient Support for County Eligibility Workforce: The May Revision includes $30 million in one-time funding to support county administration workload in 2026-27, which counties argue is just a fraction of the funding required to meet the expected need to empower workers to minimize cuts and maximize the federal drawdown.
Insufficient Support for Food Banks: The May Revision includes $30 million for food banks; This investment is necessary but falls dramatically short of the $110 million in need that the food banks anticipate as they prepare for the next wave of federal cuts.
Maintains Cuts to In Home Supportive Services (IHSS): The May Revision maintains the proposed cuts to IHSS from the Governor’s January budget, which would eliminate the state’s share of IHSS Growth in assessed hours starting in 2027–28, shifting $233.6 million in costs to counties. With county budgets already under pressure, this cost shift would exacerbate fiscal instability at the local level and potentially limit care for IHSS recipients with growing care needs as they age or their conditions worsen. In addition, the May Revision continues the proposal to eliminate the IHSS Backup Provider System beginning in 2026-27. This system ensures that IHSS recipients with urgent care needs can get immediate support from a qualified provider, so their health and safety is not endangered.
Insufficient investments in Childcare: The May Revision provides no new funding for childcare slots, which breaks a promise to provide 77,000 additional spaces for families this year.
The May Revision also dials back the cost-of-living adjustment (COLA) that was in the Governor’s January budget for DSS administered childcare programs. While the proposal does maintain some funding for a COLA, it is reduced by 30% compared to the January proposal.
Reductions to Adult Protective Services (APS): The May Revision claws back expansions to APS that were adopted in 2021-22. This includes reverting the eligibility for the program back to age 65 and older from 60 and older and cutting $70 million General Fund in 2026-27 and ongoing.
One-time Funding for Immigration Legal Services: The May Revision provides $20 million in one-time funding over two years to support immigration legal services. This is less than the $50 million requested by advocates for deportation defense and is subject to existing restrictions that prohibit the use of these funds for those with specified legal histories.
Increases funding for CalWORKs grants: Included in the May Revision is a 1.8 percent increase for CalWORKs Maximum Aid Payments effective October 1, 2026.
Revenues
Business Tax Credit Cap – A First Step: We applaud the Governor for pursuing a permanent cap on business tax credits, and we urge him to go further. This is just one step in the right direction. $850 million in year one is a drop in the bucket for California’s largest corporations, and we can do better to ensure they begin to pay their fair share.
California’s corporations make their profits by relying on our educated workforce, our roads, and our ports, and they pay wages so low that their own workers depend on CalFresh and Medi-Cal to survive. These same corporations just received a massive windfall of federal tax giveaways from H.R. 1, paid for with cuts to federal food assistance and healthcare. They can afford to pay their fair share in California, and to contribute to the programs their workers rely on.
We urge Governor Newsom to be bolder and braver in fighting to make California a state where we all benefit from the prosperity we create together. It is long past time to stand up against outdated, backward-facing budget cuts and instead invest in people and communities.
Other Proposed Revenue Solutions: The California Assembly is considering AB 1790, which would close the Water’s Edge tax loophole, and bring an expected $3.5 billion back into California. Instead of letting our most profitable corporations hide money in offshore accounts to avoid contributing their fair share, we can invest taxpayer dollars in things that generate real returns for our local economies: food security, healthcare, and housing stability.
The California Senate is advancing a budget proposal that protects access to healthcare by requiring large corporations to start contributing to the Medi-Cal costs of their workers. The Fair Share Contribution proposal is expected to generate $5 to $8 billion annually.
Budgeting for a Brighter Future
We urge the Governor, Assembly, and Senate to combine efforts to adopt a bold and progressive revenue package. At a time of deep economic inequality, our State Budget must reflect a clear commitment to safeguarding the systems Californians rely on. Adopting a comprehensive package of progressive revenue solutions and investing to protect our safety net from cuts would make California a more affordable, equitable state.
At a time when Californians are struggling to afford groceries, gas, rent, and healthcare, this budget worsens the affordability crisis by accepting cuts that will close grocery stores, eliminate jobs, and raise prices for everyone.
We look forward to working with the Assembly, Senate, and Governor to protect and strengthen California’s safety net programs through critical investments and revenue solutions that close the record-level wealth gap.
Our analysis and recommendations focus on stabilizing and investing in a state where everyone prospers, where all communities and individuals are given the support needed to not just survive but thrive. We are the most prosperous state in the nation. It is well past time that all Californians get a share of that prosperity.
For questions, contact:
General:
Brandon Greene, Director of Policy Advocacy – bgreene[at]wclp.org
Linda Nguy, Associate Director of Policy Advocacy – lnguy[at]wclp.org
Health:
Linda Nguy, Associate Director of Policy Advocacy – lnguy[at]wclp.org
Whitney Francis, Policy Advocate – wfrancis[at]wclp.org
Sandra Poole, Policy Advocate – spoole[at]wclp.org
Housing and Homelessness:
Benjamin Henderson, Policy Advocate – bhenderson [at]wclp.org
Brandon Greene, Director of Policy Advocacy – bgreene[at]wclp.org
Public Benefits/ Access to Justice:
Rebecca Gonzales, Policy Advocate – rgonzales[at]wclp.org
Keely O’Brien, Policy Advocate – kobrien[at]wclp.org
Whitney Francis, Policy Advocate – wfrancis[at]wclp.org
Brandon Greene, Director of Policy Advocacy – bgreene[at]wclp.org