Undocumented immigrants in California will bear the brunt of reductions in health care and nutrition programs under Gov. Gavin Newsom’s initial proposal for a 2026-27 state budget unveiled earlier this month.
Joe Stephenshaw, director of the California Department of Finance, said in a Jan. 9 press conference that the state’s Health and Human Services Agency is bracing for about $1.1 billion in impacts on Medi-Cal, the state’s version of the federal Medicaid insurance program for low-income individuals and households.
Another $300 million hit will be felt by CalFresh, California’s incarnation of the federal Supplemental Nutrition Assistance Program (SNAP) formerly known as food stamps.
The Newsom administration is attributing the reductions to House Resolution 1, the One Big Beautiful Bill Act backed by President Trump and signed into law in July 2025, and other federal actions.
But health and policy advocates responded that Newsom’s proposal doesn’t do enough to generate more tax revenue to maintain the levels of benefits to those who will be affected.
Newsom, in his final year as governor, decried the Trump administration’s actions – and what it could mean to residents of the nation’s most populous state – in his annual State of the State address on Jan. 8.
“That Big Beautiful Bill is putting 1.8 million Californians at risk of losing their health insurance (and) 2 million facing premium increases,” he said in his speech to state Senate and Assembly members. “Cuts in food aid (are) poised to impact some 375,000 Californians. And for what? … All to benefit the top 10% of this country, people who already own two-thirds of the household wealth.”
Among the federal law’s provisions are requiring states to impose work or service requirements of at least 80 hours per month for most people ages 19 to 64 to be eligible for Medicaid; and to recertify the eligibility of beneficiaries every six months.
Stephenshaw said the law also is reducing what the federal government contributes to provide “limited scope” emergency services under Medi-Cal, and increasing how much California must pay to administer SNAP or CalFresh.
“There will be, over time, impacts to [Medi-Cal and CalFresh] due to the federal actions and the loss of federal funds and the pullback of federal support,” Stephenshaw said. “The costs that are reflected in the budget, particularly $1.4 billion, are mainly changes that were made that shift costs to the state.”
“In Medi-Cal, the big one, it was that (the federal government) is no longer providing the 90% match for limited-scope care, so that’s a cost the state has no choice but to pick up.”
About 2.1 million residents across the San Joaquin Valley, from San Joaquin County in the north to Kern County in the south, are covered by Medi-Cal, the state Department of Health Care Services reported in September. That includes about 156,000 people ages 19 and older who have been eligible for Medi-Cal benefits under California’s expansion of benefits to undocumented residents.
The Department of Finance has estimated that as many as 500,000 fewer people would be enrolled in Medi-Cal as a result of the federal actions as well as measures that California is taking to deal with its own budget concerns.
The current state budget adopted in June 2025 included a range of actions that are being carried over in the new budget proposal aimed at limiting or eliminating some health services for residents with “unsatisfactory immigration status” – bureaucratic jargon for undocumented immigrants who are not eligible for federal Medicaid coverage.
California is one of only seven states in the U.S., plus the District of Columbia, that offers public health coverage to some or all low-income adults regardless of immigration status, and one of 14 states plus D.C. that provide medical coverage for children regardless of their immigration status, according to KFF, an independent health policy and information organization.
CalMatters, a nonprofit, nonpartisan news organization, reported last year that about 1.6 million undocumented immigrants in California are enrolled in Med-Cal.
California’s steps to reduce the cost burden
The measures in the state’s 2025-26 budget to contain the cost of caring for undocumented immigrants include:
- Freezing new enrollments for full-scope Medi-Cal coverage for undocumented immigrants ages 19 and older, starting no earlier than January 2026. This measure is projected to create almost $78 million in general fund savings to the state in 2025-26 and up to $3.3 billion by 2028-29.
- Eliminating full-scope dental benefits for undocumented enrollees ages 19 to 54 starting in July 2026. Emergency and restricted-scope dental coverage would still be available to such patients. This change is estimated to save the state’s general fund $308 million in 2026-27 and $336 million annually in following years.
- Eliminating a “prospective payment system” covering care funded only by the state to undocumented immigrants starting in July 2026, instead shifting to a system in which care providers are reimbursed on a fee-for-service basis. The shift is projected to save the state $1 billion in 2026-27 in general fund spending, and $1.1 billion each year in subsequent years.
- Charging a $30-per-month premium for Medi-Cal coverage for undocumented enrollees ages 19 to 54, starting in July 2027. The estimated general fund savings are $695.7 million in 2027-28 and $675 million annually in subsequent years.
- Putting in place a program to seek pharmacy drug rebates for the state for undocumented immigrants, resulting in general fund savings of about $370 million in 2025-26 and $600 million in 2026-27 and beyond. Additional savings from minimum rebates for HIV/AIDS and cancer drugs are estimated at $75 million in 2025-26 and $150 million in following years.
But the state is also dealing with cost pressures beyond services for the undocumented population.
“We’re seeing in some of our programs, particularly in the Health and Human Services area, that costs over time have been increasing” faster than the revenue needed to pay for them, Stephenshaw said. “We took a number of steps last year, in particular related to Medi-Cal, where the solutions we adopted as part of the 2025 budget were projected to result in approximately $12 billion in reduced costs over time. And so we’ve taken action to really address the structural shortfalls that we do see.”
U.S. law already bars states from using federal money to provide services to undocumented immigrants; that’s why California has in recent years used only state funds to provide Medi-Cal coverage to people regardless of their immigration status. But, Stephenshaw said, maintaining full-scope Medi-Cal benefits to those residents would put an additional $1.1 billion strain on the state’s general fund, the pot of money from which most of California’s day-to-day bills are paid.
“So again, it goes to the impact of change from the federal government that the state can’t afford to backfill,” he said. “However, it’s still part of the broader discussion on the overall Medi-Cal program, and we know we’re going to have that discussion with the Legislature.”
The January budget proposal is likely to undergo significant review by both Newsom’s office and state legislators before a revised proposal arrives in May as the state assesses updated figures for revenue from various taxes and investments. The state is constitutionally required to adopt a balanced budget in June for the 2026-27 fiscal year that begins July 1.
Advocates: Newsom’s not doing enough
The budget proposal has come under fire from a number of advocates who say the state has an obligation to maintain benefits as best as it can.
Chris Hoene, executive director of the California Budget & Policy Center, said in a prepared statement that “unfortunately, the governor’s 2026-27 spending plan balances the budget by dodging the harsh realities of the Republican megabill, H.R. 1, and maintains state cuts to vital public supports, like Medi-Cal, enacted as part of the current-year budget.”
“The governor’s proposal once again avoids scrutinizing the billions of dollars the state spends each year on tax breaks that disproportionately benefit large, profitable corporations and the wealthiest Californians,” Hoene said, “and fails to consider meaningful tax solutions, like a progressive corporate tax, to address federal cuts and their impact on Californians.”
Hoene encouraged legislators to consider the budget proposal with an eye toward leveling the playing field in terms of income inequality. Senate and Assembly members, he said, “must ask why the state is not working to help backfill federal programs that vulnerable Californians rely on, while some of the world’s most profitable corporations – including, for example, Alphabet, Nvidia and Apple – continue to benefit from billions of dollars in state subsidies.”
The California Pan-Ethnic Health Network also suggested that Newsom is using the federal legislation as cover for reducing state Medi-Cal benefits for some immigrant categories.
“Despite being couched as a response to federal policy under H.R. 1, this proposal would reverse a decades-long state commitment enshrined in state law to care for refugees, asylees, domestic violence survivors, and holders of visas for crime victims,” said Kiran Savage-Sanwan, the organization’s executive director. “Without access to these benefits, refugees who often need ongoing health care for injuries, nutritional deficiencies, [post-traumatic stress disorder], exposure to infectious diseases will be torn away from their doctors, therapists, medications.”
“We call on legislators to reject these additional, racist cuts to Medi-Cal for immigrant populations,” she added, “and seek new revenues to protect care for the millions of Californians who are losing coverage and critical access to dental services as well as those still at risk as federal cuts loom.”
Tim Sheehan is the Health Care Reporting Fellow at the nonprofit Central Valley Journalism Collaborative. The fellowship is supported by a grant from the Fresno State Institute for Media and Public Trust. Contact Sheehan at tim@cvlocaljournalism.org.