California at Risk: Proposed Federal Funding Cuts Jeopardize Key Services

Federal funds have long supported vital public services in California — from health care and food assistance to child care and higher education. These services are now in jeopardy due to threatened federal budget cuts and policy rollbacks, putting the health and well-being of millions of Californians at risk.

President Trump and congressional Republicans are seeking deep cuts to federal funding to help offset the cost of tax cuts for the wealthy and corporations. The Trump administration has already tried to cut spending through its unconstitutional funding freeze, which faces legal challenges. Additional spending cuts are being planned in the Republican-controlled Congress for adoption as soon as this spring.

As highlighted in the table below, federal funding reductions could target a broad range of public services and systems, with substantial human and financial impacts at the state and local levels. The funding cuts under consideration would:

• Destabilize California’s state budget. Federal funds make up over one-third of the state budget — totaling $170 billion under current state estimates. Most of these federal dollars support Medi-Cal (California’s Medicaid program), which provides health coverage to more than 14 million Californians. Republican proposals to slash support for Medicaid could reduce annual federal funding for California by $10-$20 billion or more. Cuts of this magnitude would create a massive budget hole that would force state leaders to make painful spending cuts — cuts that would jeopardize Californians’ access to health care through Medi-Cal as well as threaten other state services and systems.
• Devastate vital services that help vulnerable Californians make ends meet. In addition to the Medicaid program, federal policymakers could target SNAP food assistance (CalFresh in California), cash assistance for older adults and people with disabilities (SSI), housing supports, child care, and other safety net programs that together support millions of Californians. This includes immigrant communities, Californians with disabilities, low-income families with young children, older adults living on fixed incomes, and many more.
• Undermine K-12 schools and higher education. Public education could face cuts to federal grant programs and/or a shift of federal funds to private schools. The Trump administration has already announced billions of dollars in cuts to research institutions across the country, and higher education “remains particularly vulnerable to the consequences” of the federal funding freeze.
• Erode critical funding for California’s local jurisdictions. Counties, cities, and special districts rely on federal funding to support the services that they deliver to their residents. Counties, for example, operate health and safety net programs on behalf of the state, with federal funding making up a large share of the funds that counties receive for this purpose. County officials are particularly concerned about Trump’s unconstitutional funding freeze, which they have called “an evolving situation with potentially significant impacts to funding that counties utilize to serve communities.”

One thing is clear: These Republican-proposed cuts would harm millions of Californians, all to bankroll tax cuts for corporations and the wealthy, who are already thriving.

Erik Saucedo contributed to this publication.

Federal dollars support a wide array of public services and systems that touch the lives of all Californians — from health care and food assistance to child care and public schools. Under the Trump administration and a Republican-controlled Congress, many of these services are expected to face significant reductions — in large part to pay for tax cuts for corporations and the wealthy. Federal funding cuts would devastate vital services that help the most vulnerable Californians, including immigrant communities, Californians with disabilities, low-income families with young children, older adults living on fixed incomes, and many more.

How Federal Funds Support California’s State Budget and Programs

A significant share of federal funding for California flows through the state budget. The governor’s proposed state budget for 2025-26 includes more than $170 billion in federal funds. This is over one-third (34.6%) of the total state budget.

Almost 4 in 5 federal dollars that are projected to flow through California’s state budget in 2025-26 — $134.9 billion — support vital health and human services (HHS) for millions of Californians, including children, seniors, and families with low incomes.

• The largest share of federal funding for HHS programs — $112.1 billion — is budgeted through the Department of Health Care Services for Medi-Cal (California’s Medicaid program). Medi-Cal provides health care services to more than 14 million Californians with low incomes, including children, older adults, and people with disabilities. More than half of Californians enrolled in Medi-Cal are Latinx.
• The second-largest share of federal funding for HHS programs — $11.7  billion — goes to the Department of Social Services. These funds support child welfare services, foster care, the CalWORKs program, and other critical services that assist low-income and vulnerable Californians.

The remaining federal funds that are projected to flow through the state budget in 2025-26 — $35.6 billion — support a broad range of public services and systems. This includes:

• $8.6 billion for labor and workforce development programs, primarily for unemployment insurance benefits for jobless Californians;
• $7.9 billion for K-12 education;
• $7.3 billion for higher education (the California Community Colleges, the California State University, and the University of California);
• $6.7 billion for transportation, primarily to improve state and local transportation infrastructure; and
• $5.1 billion for additional public services and systems, including environmental protection, the state court system, and state corrections.

Potential Federal Cuts Threaten California: Health Care, Safety Net, Education At Risk

The outcome of the November 2024 national election portends major cuts to federal funding for key public services, including Medicaid (Medi-Cal in California). Such cuts would have devastating consequences for Californians. Federal funding for Medi-Cal alone comprises nearly two-thirds (65.7%) of all federal funds that flow through California’s state budget. State leaders should do all they can to prevent or mitigate the impact of harmful federal policy changes on the state budget and California’s diverse communities.

The potential challenges to California are enormous. For example, Republicans are considering multiple options for cutting Medicaid, including radically restructuring the program’s current financing system. Many of the proposed changes would shift significant costs to states. In California, this cost-shift could exceed $10 billion per year, depending on the mix of Medicaid reductions that federal policymakers ultimately decide to adopt.

In order to replace lost federal dollars and protect the Medi-Cal program, state leaders would likely need to raise new state revenue — such as by eliminating tax breaks for the wealthy and profitable corporations.

However, fully closing the Medi-Cal budget hole with state funds would be challenging, particularly if federal cuts approach or exceed $10 billion per year. State leaders could be forced to consider reductions to Medi-Cal eligibility, services, or provider rates as well as cuts to other services funded through the state budget. Cuts to Medi-Cal would jeopardize health care access for the one-third of Californians who rely on this critical program.

In addition, federal policymakers have suggested cuts to K-12 education, key safety net programs like CalFresh, and other critical services — while simultaneously trying to extend and expand tax cuts that disproportionately benefit corporations and the wealthy.

The resulting ebb in federal funding would trickle down to the state level and cause harm across the country. This would leave California leaders with difficult decisions about how to fill — as much as possible — the resulting funding gaps in order to prevent the erosion of public services and systems that promote economic security and opportunity for millions of Californians.