Governor Gavin Newsom just handed California lawmakers and voters a $351.7 billion spending plan—the largest in the state’s history—and he’s already using it as ammunition in a fight he’s been losing on the campaign trail. The budget, finalized Friday with Democratic legislative leaders, includes a record-breaking $251 billion general fund, and Newsom isn’t shy about what that means for his opposition to the proposed billionaire tax heading to November’s ballot.
Here’s the tension: California’s wealthiest residents bankroll the state. The top 0.1% of earners accounted for 20.52% of personal income taxes in 2024, according to the California Franchise Tax Board. So when capital gains surge, the state’s coffers overflow. Newsom sees that overflow and essentially says,“Look, we don’t need a billionaire tax—we’re already flush.”The SEIU-UHW, which got the 5% asset tax measure on the ballot to fund healthcare programs, would argue that’s exactly backward: today’s abundance shouldn’t obscure tomorrow’s structural problems.
The budget does include some teeth. Tax increases on health plans, a new digital software-as-a-service tax, and restrictions on unlimited corporate tax credits all represent revenue-raising moves. But notably absent is any payment toward California’s roughly $22 billion unemployment insurance debt owed to the federal government—a bill that will hit every business in the state through higher payroll taxes until it’s settled. Newsom said he’s been pushing lawmakers to chip away at the principal, and they’ve compromised by including the debt in a November ballot measure asking voters to boost the rainy-day fund. If approved, those reserves could eventually help pay it down.
On the policy front, the agreement reshapes education oversight by moving the California Department of Education under the governor’s authority instead of the independently elected Superintendent of Public Instruction, Tony Thurmond. It also secures $900 million in homelessness grants for major cities and counties, avoids closing Riverside State Prison—which lawmakers had proposed—and leaves California with $28.8 billion in reserves heading into the new fiscal year.
Lawmakers are set to debate and vote on the deal Monday, with Newsom expected to sign shortly after. The budget takes effect July 1. The real test, though, comes in November. Newsom’s argument that current revenues prove the billionaire tax unnecessary will collide with advocates’argument that protecting the state’s future means diversifying its revenue sources beyond the volatile whims of the capital gains market. One thing’s certain: Newsom just gave both sides plenty of numbers to argue over.
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Andrew Johnson
Andrew Johnson is a contributor to LocalBeat, covering local news and community stories.
