Gov. Gavin Newsom released his 2025-2026 budget proposal today. Joe Stephenshaw, the California director of finance, held a media briefing to discuss the budget while Newsom deals with the Los Angeles county fires.
Stephenshaw announced that the $322 billion budget is roughly balanced, with a projected $363 million surplus. The surplus is the result of budget austerity over the past two years, with approximately $16.9 billion still in reserve.
The budget is projected to be the second biggest in state history.
Funding for education is a large part of the budget, with about $137 billion going toward schooling for grades K-12. That includes an increase of $1.8 billion to pay for universal transitional kindergarten for all four year olds, universal free meals for students and more money for teacher recruitment.
Prop. 4, the climate bond that passed in November, allocates $10 billion toward environmental and climate projects. Wildfire prevention programs account for $1.5 billion of that amount. Those funds will go toward prescribed burns and forest health, enhancing air strike capabilities and expanding firefighting capacity. In addition, the state has hired or is in the process of hiring 2,400 new firefighters.
The state is also implementing a program to provide free diapers to every baby born in California for three months, with an approximate price tag of $7-12 million.
Stephenshaw said that the budget includes updated government efficiency figures. In the past year, 6,500 vacant positions were eliminated, saving $1.2 billion over the next two years. Operational efficiency has also been increased, projected to save about $3.5 billion.
Economic uncertainty could impact the state’s expected revenue, Stephenshaw said. The threat of tariffs and potential changes to immigration policy pose specific risks to the state’s economic outlook.
The ongoing fires in Southern California could affect the budget as well. While the federal government will compensate the state for wildfire clean up in counties that have been declared a disaster, the state will be accountable for at least part of the costs. Damages have been estimated to be around $135 billion.
The final budget is due in June.
