Let’s Talk… 2025 Governor’s May Budget Revision
Examining the May Revise outcome and how it impacts NextGen’s policy priorities
May 22, 2025
When he served as President of the United States, former General Dwight Eisenhower cited a military saying that “plans are worthless, but planning is everything.” This mindset acknowledges the importance of carefully thinking through how to address future needs and challenges without becoming overly attached to any particular set of responses in the face of constantly changing information and circumstances.
The California state budget process often illustrates the wisdom of Eisenhower’s advice. In just the roughly five months since the Governor’s January 2025 budget proposal was drafted:
- The Los Angeles region has experienced a massive wildfire disaster,
- Growing international conflicts over tariff policies have generated substantial new uncertainty about long-term economic trends, and
- Proposals to eliminate or significantly alter federal programs (including funding for healthcare, renewable energy, and disaster relief) threaten to shift new costs and program responsibilities onto state and local governments.
The so-called “May Revise” budget proposal that the Governor submitted last week makes numerous changes to the initial proposal the Governor announced in January, reflecting the rapidly evolving environment in which the state must adopt its budget plan for the upcoming fiscal year.
This edition of NextGen’s Let’s Talk blog dives into some specifics of what the Governor recently proposed in his revised budget proposal. As described in a previous Let’s Talk blog post, the annual May Revision plays an important role in developing and setting the stage for the negotiations on California’s adopted final state budget. So, what’s important to know about this year’s May Revise proposal?
State Budget Outlook is Worse Than Projected in January
The Governor’s January budget proposal reflected projections that the state’s revenues and spending would be roughly in balance during the 2025-26 fiscal year. However, the May Revise reflects lower than expected revenue projections and higher expenditures, particularly in health care.
As a result, the revised proposal includes roughly $12 billion in adjustments to bring the proposed budget into balance and maintain around $4.5 billion in the state’s general budget reserve. These adjustments consist primarily of $5 billion in proposed spending reductions, including a Medi-Cal enrollment freeze for some undocumented adults and other reductions to Medi-Cal and In-Home Supportive Services (IHSS) costs. An additional $5.3 billion in adjustments is achieved through proposed shifts of spending from the General Fund to special funds and from borrowing internally from funds that hold cash for state programs.
Impacts on NextGen’s Work
Some of the revisions included in the Governor’s recent proposal directly relate to NextGen’s top priority policy areas.
Climate – May Revise proposals relating to climate policy include a proposed reauthorization of the state’s current Cap and Trade program. The reauthorized program, which would be rebranded as the “Cap and Invest” program, would be extended through 2045, and aim to align program targets with the state’s carbon neutrality goals. The proposed reauthorization would designate $1 billion in annual program revenue for the state’s high-speed rail project. This reauthorization proposal also shifts $1.54 billion in annual expenditures for CalFire operations from the General Fund to the Cap and Invest program’s Greenhouse Gas Reduction Fund.
Higher Education Affordability – The May Revise includes one-time General Fund increases in the current year funding for Cal Grant and the Middle Class Scholarship to account for unexpected increased participation in the state’s financial aid programs and therefore ensure no student sees a reduction in their current year grant awards. Additionally, the May Revise proposes 3% cuts to state funding for the UC and CSU systems. These cuts, while substantial, are still lower than the nearly 8% cut proposed in the Governor’s January budget.
Proposed changes to the formula for allocating Prop 98 funding – the portion of the state budget dedicated to funding education – to transitional kindergarten (TK) expansion will increase the amount of funding available for TK expansion in future years, while resulting in a corresponding decrease of funding available to community colleges.
Workforce Development – The May Revise increases funding for the Workforce Innovation and Opportunity Act (WIOA) program, which supports workforce development activities, including education, training, and job placement services. The proposal would increase funding levels by $20.4 million in the current year and $119.6 million in 2025-26 to align with anticipated federal WIOA funding.
The May Revise would also increase one-time funding for the Department of Industrial Relations’s apprenticeship training grant program for construction and related trades. Additionally, the proposal reduces some resources available for implementation of the Master Plan for Career Education, including eliminating a proposed $5 million ongoing investment in a California Education Interagency Council and reductions to proposed funding for the Career Passport and Credit for Prior Learning programs.
Food Insecurity – May Revise proposals relating to fighting food insecurity include an additional $90.7 million of ongoing Prop 98 funding for our School Meals for All program, which provides two free meals to all California students, regardless of income. The Governor also proposes a $150 million one-time increase in funding for the Kitchen Infrastructure program, which provides eligible school districts with state funds to purchase food preparation equipment, upgrade their kitchen infrastructure, and offer staff training. The May Revise also includes $21.9 million in additional ongoing Prop 98 funding for the SUN Bucks Program, which provides nutrition funding to eligible families during the summer months when students do not have access to school meals.
They’re in the Homestretch
The release of the May Revise typically marks the beginning of the end of the state’s annual budget process. Within a week or two after the May Revise comes out, the LAO typically publishes reports summarizing and providing commentary on the substance of the various May Revise proposals. During that same timeframe, the Budget Committees in both houses of the State Legislature will hold hearings on the various elements of the May Revise and then ultimately on their version of the budget for the coming year. In early June, legislative leadership and the Governor’s administration typically engage in negotiations over the final structure of the budget bill. The Constitution requires the Legislature to pass a balanced budget by June 15th and send it to the Governor. To meet the requirement that bills be in print for 72 hours before a floor vote, the final budget bill will typically be released on or before June 12. The Governor generally reviews and acts on a budget bill before the new fiscal year begins on July 1st.
Sources for Additional Information
If you want even more detailed information about the California State Budget process as well as the May Revision, here are some important sources for you to check out before a new budget is (likely) passed by the June 15th deadline and signed into law by July 1st:
Department of Finance (DOF)
- A summary and full details of the revised budget can be accessed through the Department of Finance’s budget website.
- Finance letters contain the details of each of the administration’s proposed amendments to revise the Governor’s proposed January budget, as reflected in the budget bill.
- Budget change proposals (BCPs) are documents submitted by state agencies and departments that propose changes to the level of service or funding source for a currently authorized program or propose a new program. A full list of this year’s BCPs that identifies which BCPs are related to the May Revise can be found here.
Legislature
- The budget bills for this year are AB 227 and SB 65.
- The Assembly Budget Committee’s website contains information about the full committee and subcommittee hearings on the state budget as well as documents and reports relating to the current and past-year budgets, including a summary of this year’s May Revise proposal.
- Similarly, the Senate Budget and Fiscal Review Committee’s website contains information relating to the committee’s budget hearings as well as information about current and historic budgets, including a summary of this year’s May Revise proposal.
Legislative Analyst’s Office (LAO)
- Dozens of LAO reports analyzing various aspects of this year’s state budget, including a response to the May Revise proposal, can be found on the LAO’s 2025-26 Budget page.
Thanks for reading,
Brian Weinberger
