Governor Gavin Newsom released the May Budget Revision on May 14 proposing a $322 billion spending plan for 2025-2026 as the state faces a $12 billion 2025-2026 budget deficit. He cited lower capital gains, weaker corporate taxable profits, lower wages and personal income tax withholding, as well as decreased personal income tax items as the primary reasons for the deficit.
Governor Newsom also pointed to what he is calling a “Trump Slump” as driving the deficit, including tariffs, market volatility, and a decrease in international tourism.
Food and Agriculture Impacts
In a pivot away from Governor Newsom’s January budget, the May Budget Revision does not propose any funding for agricultural-related programs, such as Healthy Soils, the State Water Efficiency and Enhancement Program (SWEEP) and Urban Greening, even though those programs have funding available through the Prop 4 climate bond and are not part of the state General Fund.
Greenhouse Gas Reduction Fund (GGRF) Programs
Further, the governor’s proposal does not contain any Greenhouse Gas Reduction Fund (GGRF) allocations for programs that significantly reduce greenhouse gas emissions in the food and agriculture sector, such as the Food Production Investment Program. the FARMER program and livestock methane emission reduction programs, which are supported by Ag Council and its members. GGRF dollars are separate from the General Fund, and conversations with legislators and the governor’s office regarding GGRF allocations are connected to reauthorization of the Cap-and-Trade program given that the program is the funding source for GGRF.
Though this is disappointing news at this time, Ag Council is actively meeting with members of the Assembly and Senate, as well as the governor’s staff, to advocate for these critical programs. A great deal of work is underway in the legislative process, and it is important to keep in mind
Water
The governor’s budget proposes a streamlining of administrative processes for the Delta Conveyance Project. The budget plan explains that this effort would lower costs, avoid delays and reduce timelines while protecting the environment and accelerating this surface water supply project. As an example, the language released by the governor’s administration in a budget trailer bill would limit litigation challenges against the Delta Conveyance Project by placing parameters and timelines around court filings. As background, a trailer bill implements policies and statutory changes that are detailed in the state budget.
The Delta Conveyance Project is a water infrastructure modernization project to capture and move excess water while maintaining fish and water quality protections. The Department of Water Resources states that if the project was operational between October 2024 and May 2025, California could have moved 952,000 acre-feet of water, enough to supply water for almost 10 million people for one year.
To continue reading about the budget, including details about how the governor proposes to address the deficit and what’s next, click here. Details about the effort to reauthorize Cap-and-Trade are also provided.