CA's $322B Budget Proposal: Reviving Hollywood Jobs, Free Preschool

CALIFORNIA — Gov. Gavin Newsom proposed a $322 billion budget with no major shortfall on Monday, which represents a major turnaround for the state following two years of deficit.

Newsom hasn't unveiled the full scope of what spending will look like, but he assured that the new proposal will allow the state to fully implement the nation's first universal kindergarten program, which will essentially make preschool free for hundreds of thousands in the state.

The new budget proposal also includes doubling California's film and TV tax credit to $750 million annually to revive the embattled Hollywood job market.

The Democratic governor will share more details of the proposal alongside the Department of Finance on Friday, which is the deadline to present the plan to lawmakers.

And while the 2025-2026 budget proposal looks to be more stable than the last two years, lawmakers are bracing to see if President Donald Trump will make good on threats to revoke billions in federal dollars. About a third of California’s budget relies on funding from the federal government, including tens of billions to provide health care services.

Trump takes office on Jan. 20, but Newsom won't have to sign the final budget until the end of June.

Newsom acknowledged the financial unknowns associated with Trump's administration, noting that Trump and Musk's plan to cut $2 trillion in government spending comes with a "level of uncertainty," The Hill reported.

“Our D.O.G.E. is spelled O.D.I.,” he said at the Monday press conference in reference to the Office of Data and Innovation, meant to streamline government back in 2019.

In early December, lawmakers already discussed arming Attorney General Rob Bonta's office with $25 million to "Trump-proof" the state by fighting or defending against legal challenges brought on by the new administration. More funds, proposed by state senators, could go to city attorneys, county councils and community legal aid organizations to provide free legal services to immigrant communities. Legal battles will likely take place over climate policy as well as LGBTQ+ and immigrant rights.

Newsom touted his budget proposal as "balanced" on Monday, but it remains to be seen whether a response to the incoming administration will tip the scales.

“Last year, we endeavored to make this year’s budget a nonevent,” Newsom said.

Newsom's office also said tax revenues are $16.5 billion above projections, "thanks to a stronger economy, stock market, and cash receipts." The proposal also includes $228.9 billion in general fund spending.

These revenues have helped the Golden State recover from hampered consumer spending and job growth.

The elimination of 6,500 government positions, also saved $1.2 billion over two years, Newsom's office said. Government offices also reduced travel budgets, printing costs, and IT modernizations which further reduced costs by $3.5 billion.

California remains the fifth-largest economy in the world, according to Newsom's office.

Last year the state faced an estimated $46.8 billion budget deficit and in the year before, a $32 billion budget shortfall. The state also saved $1.2 billion over two years by eliminating roughly 6,500 vacant positions in state departments and another $3.5 billion from cutting travel budgets and modernizing IT systems, Newsom said.

The Associated Press contributed to this report.