California Gov Gavin Newsom proposes state dip into Rainy Day Fund to close nearly $38B deficit

The governor said the budget deficit is approximately $30 billion less than previously anticipated

California Gov. Newsom on Wednesday proposed the state dip into its Rainy Day Fund to close an anticipated $37.9 billion deficit

Newsom stopped short of calling California's budget deficit a "crisis," but the Democratic governor’s proposal to pull more than $13 billion from the state’s reserves would require him to declare a "fiscal emergency." 

The proposal, outlined during a Wednesday press conference, aims to protect investments in education and public safety, as well as addressing the homelessness and mental health care crisis and tackling climate action. 

California Gov. Gavin Newsom

California Gov. Gavin Newsom. (Justin Sullivan/Getty Images/File / Getty Images)

The governor touted that the nearly $38 billion deficit is significantly less than the $68 billion predicted last month by the Legislative Analyst's Office.

"We are just a little less pessimistic than they are about the next year," Newsom said about the differing numbers.

Still, the budget is enough to potentially delay a minimum wage increase for more than 400,000 health care workers and force spending cuts across various housing and climate programs.


Newsom vowed not to roll back his previous major spending commitments, including free kindergarten for all 4-year-olds and free health insurance for all low-income adults — even illegal immigrants. 

The latter, announced last by the governor, aims to provide health insurance for approximately 700,000 illegal immigrant residents aged 26-49. The state has been providing free health insurance to illegal immigrants who are under 26 years old since 2019. 

Gov. Gavin Newsom signs legislation

California Gov. Gavin Newsom signs legislation raising California fast food workers' minimum wage to $20 an hour in September. (Sarah Reingewirtz/MediaNews Group/Los Angeles Daily News via Getty Images/File / Getty Images)

The Newsom administration has argued that providing such health care to illegal immigrants lowers the likelihood of emergency room visits and expensive treatments for diseases that will pose a higher burden on California taxpayers down the road. 

The government’s budget proposal for 2024-25 also includes $8.5 billion in spending cuts, with about half of those cuts spread across various housing and climate programs. The rest of the deficit comes from a combination of delays, deferrals, borrowing and shifting expenses to other funds.

Newsom also wants to spend $126.8 billion on public schools — about $2.4 billion less than last year. Newsom is using money from a special savings account for public schools that voters approved in 2014 to make up the difference.


Republican Assemblyman James Gallagher called the governor’s budget proposal "pure fantasyland."

"The governor doesn’t want to recognize the fiscal disaster he has put the state in," Gallagher told Fox News Digital. "He still hasn’t come to a reckoning with his overspending. And his proposal is to empty out the savings account and nothing to really fundamentally fix our spending problem." 

The Associated Press contributed to this report.