State Leaders Can Avoid Harmful Cuts: Here’s How

Governor Newsom’s 2025-26 revised budget proposes significant, harmful cuts on California’s immigrant and low-income communities to address the budget shortfall, but it doesn’t have to be that way.

Policymakers can raise revenues to avoid harming vulnerable Californians, who are also the target of federal leaders. They can, and should:

Draw more from reserves. Reserves exist for times like this. While state leaders already plan to draw down some reserves funding, the state can afford to further draw from California’s $15.7 billion in reserves to prevent cuts in the coming fiscal year to services that support basic needs.
Scale back questionable spending by reducing the bloated state prison budget even further and rejecting the governor’s proposed expansion of the already costly film tax credit, which just furthers a race to the bottom for the film industry.
Scrutinize the costly ‘shadow budget’ of tax breaks, close tax loopholes, and make corporations pay their fair share. Many tax breaks cost the state billions of dollars per year and largely benefit the wealthy and profitable corporations, with little to no scrutiny. For example, some state tax breaks allow many corporations to avoid paying a fair share of taxes by stashing their profits in offshore tax havens or wiping out their tax bill using stockpiles of tax credits. Since big corporations and wealthy people are poised to gain the most from proposed federal tax cuts — which will come at the expense of the majority of Californians and their loved ones — scaling back state tax breaks for these interests would be a no-brainer for legislative leaders looking to stave off the most harmful cuts.

Californians expect and deserve a bold response from California’s leaders amid unprecedented federal threats, rising costs, and economic uncertainty. These meaningful solutions can help close the budget shortfall, protect Californians’ health and well-being, and show the country that state leaders are still committed to a California for all.

Corporate profits have skyrocketed in recent years, but have failed to “trickle down” to the workers who help make those profits possible.
The most profitable corporations saw their profits soar in recent years.
Profitable corporations have saved billions in federal taxes since the 2017 tax cuts.
The average income of the richest 0.1% of Californians is 250 times that of middle-income Californians — $12.9 million vs $51,300 in 2022 — and the federal tax and budget cut proposals will make inequality even worse.
Commentary: Other states are showing California how to protect its budget without cutting needed services

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