By Shane LaVigne, LaVigne Strategies
On May 14, 2025, Governor Gavin Newsom unveiled California’s revised state budget, confronting a projected $12 billion deficit. The shortfall, according to the Governor, is attributed to several factors, including the economic impact of President Donald Trump’s tariff policies, which have disrupted global commerce and reduced state revenues by an estimated $16 billion. Additionally, rising healthcare costs, particularly within the Medi-Cal program, have strained the budget. To address these challenges, Newsom proposes measures such as freezing new enrollments for undocumented adults in Medi-Cal starting in 2026 and introducing a $100 monthly premium for existing undocumented enrollees beginning in 2027, aiming to save the state $5.4 billion over the next few years.
Given this year’s budget shortfall—and projections that next year’s deficit could be two to three times larger—we expect the Administration will seek concessions from state employees and initiate new rounds of bargaining.
Despite the fiscal constraints, the revised budget maintains investments in several areas. It continues to fund universal transitional kindergarten, free school meals for all students, and expanded before- and after-school programs. The budget also allocates resources to expedite critical infrastructure projects, such as the Delta Conveyance Project, to enhance the state’s water management system. Furthermore, it includes provisions to lower prescription drug costs and extends the state’s cap-and-trade program to support climate initiatives, including the high-speed rail project.
Specific to public safety and Bargaining Unit 7, the Governor is attempting to address the challenges posed by the illicit cannabis market. The revised budget includes a proposal to shift the Department of Cannabis Control’s enforcement funding from the Cannabis Control Fund to the Cannabis Tax Fund. This move is designed to sustain existing enforcement activities without imposing significant fee increases on current licensees. Additionally, the budget allocates $7.1 million in 2025-26, $4.9 million in 2026-27, and $6.1 million ongoing from 2027-28 to support additional inspections and departmental activities by adding 27 staff over the next three years. These measures are part of a broader strategy to strengthen the legal cannabis market, reduce financial and administrative barriers, and promote equity within the industry.
