State Budget Update

Read CPEHN’s analysis of the 2024-2025 State Budget. From January to July, the Governor, Legislature, advocates, and community partners debated how California’s historic surplus should be used.

CPEHN Commends Governor Newsom for Upholding Vital Health Care Safety Net Amid Budget Challenges, Urges Addressing Wealth Disparity for State’s Vulnerable Residents 

Sacramento, CA – CPEHN commends Governor Newsom for preserving California’s health care safety net in the face of a multi-billion-dollar budget deficit. Critical programs that support California’s most vulnerable residents should never be on the table for budget cuts. These programs provide children, families, and workers with basic health, financial, and food support.  California made history on January 1st when we became the first state in the county to remove the unjust exclusion of undocumented immigrants from our Medi-Cal program. The budget maintains this commitment, as well as other key Medi-Cal improvements made in recent years.   

At the same time, we must do better. The wealthiest Californian’s continue to benefit richly while those who keep the state running struggle to make ends meet. The Governor and Legislature must consider strategies to raise and stabilize revenues while closing California’s extreme and unacceptable racial wealth gap. We cannot expect to achieve health or racial equity while we allow a tiny number of wealthy people and corporations to maintain their status at the expense of the 5 million California children, families, and workers living in poverty. 

Additional Comments:  

CPEHN commends the Governor for preserving the Medi-Cal expansion for income-eligible undocumented adults, the removal of the Medi-Cal asset test, and other key Medi-Cal program improvements.   

We support the Department of Health Care Services in seeking an amendment from the federal government to the Managed Care Organization tax in order to raise more revenue. However, we are disappointed that the Governor continues to exclude community health workers from the provider rate increases supported by the MCO tax. As it stands, community health workers would not receive a rate increase even when they provide the same service as another provider receiving a rate increase. The current rate for community health workers is too low to ensure a living wage, and severely threatens the success of this Medi-Cal benefit.   

Finally, we believe that the underlying budget problem is economic inequality and California’s dramatic and unacceptable racial wealth gap. As such, the only true budget solution is to reform our tax system so that those with extreme wealth, which has been amassed as a result of historical and present-day systemic racism and racialized poverty, pay their fair share.   


As California faces a significant budget deficit, the longevity of investments to support community-based and community-informed solutions to achieve health equity are imperative to preserve. The Governor’s proposed January Budget estimates  a $37.9 budget deficit, but continues to demonstrate a commitment to programs such as Medi-Cal, behavioral health, and oral health. However, it fails to increase rates for community health workers, promotoras, and representatives (CHW/P/Rs) and we urge the legislature to take action to increase wages for this important workforce. State leaders must do more to address budget shortfalls to ensure California can meet the needs for all state residents to thrive. We must turn to revenue solutions that allow our state to establish the necessary programs and services for all communities to thrive. CPEHN looks forward to working with the Legislature and the Newsom administration to ensure we can continue strong investments towards health equity.  

For a full analysis of the issues CPEHN is tracking in the budget (click here)  


Despite a projected budget deficit, the Governor’s budget preserves critical Medi-Cal coverage expansions and program improvements, including the continued expansion of full-scope Medi-Cal for all Californians regardless of immigration status and the elimination of the assets test for older adults and seniors with disabilities. The Medi-Cal budget includes $157.5 billion ($37.3 billion General Fund) in 2023-24 and $156.6 billion ($35.9 billion General Fund) in 2024-25, a projected decrease of $1.4 billion General Fund compared to the revised 2023-24 expenditures. The proposed budget pays for critical safety-net programs through a combination of programmatic delays of behavioral health initiatives and a proposed $1.5 billion increase to the MCO Tax, subject to legislative approval.  

Medi-Cal: Caseload projections: According to the Administration’s figures, Medi-Cal is projected to cover approximately 14.8 million Californians, an increase of 583,000 individuals over 2023 Budget Act estimates, resulting in increased costs of $2.3 billion ($499 million General Fund) in 2023-24. The budget projects a decrease to 13.8 million in 2024-25 likely as a result of the resumption of annual renewals after a three-year hiatus. Since redeterminations began, over 1.1 million individuals have been disenrolled, with communities of color disproportionately impacted. The majority of disenrollments (90%) were due to procedural reasons, rather than eligibility determinations.  

Medi-Cal Highlights: 

  • Maintains Expansion of Full-Scope Medi-Cal for All Californians ($1.4 billion in FY 2023-24, $3.4 billion in 24-25 and approximately $3.7 billion ongoing). The proposed budget moves forward with the expansion of Medi-Cal to over 700,000 income-eligible adults ages 26 to 49 regardless of immigration status, inclusive of In-Home Supportive Services (IHSS), effective January 1, 2024. 
  • Maintains Asset Limit Elimination ($101.1 million total funds ($50.5 million General Fund) in 2023-24 and $195.4 million total funds ($97.7 million General Fund) in 2024-25). The proposed budget moves forward with elimination of the Medi-Cal asset test for older adults and seniors with disabilities. Complete elimination will reduce barriers for older adults and seniors with disabilities to accessing the Medi-Cal program, by only considering a person’s income for financial eligibility.  
  • Fails to increase Medi-Cal Community Health Workers, Promotoras, Representatives Rates to at least 87.5% of the Medicare rate: The current Medi-Cal CHW/P/R payment rates starting at $26.66 for a 30-minute of direct contact (face-to-face, telephone, or video call) are deemed insufficient and contribute to the persistence of poverty cycles.  Although the state is pursuing an additional $1.5B dollars from the MCO tax, we are deeply disappointed to see the proposal fail to include CHW/P/Rs provider rate increases to at least 87.5% of the comparable Medicare rate at $53.35 for a 30-minute interaction. A mere 10% of CHW/P/R Coalition members felt their current salary covers their basic expenses. The majority of the CHW/P/R workforce in California are women, Latino/x/e and represent other culturally diverse populations underrepresented in the state’s health workforce. Excluding this diverse demographic from the Administration’s proposal may deepen poverty cycles for these workers, exacerbating existing socioeconomic disparities within the communities served by California’s Medi-Cal program. 
  • Continues Investments in Cal-AIM ($2.4 billion ($811.1 million General Fund) in 2024-25 as well as $24.7 million ($8.6 million General Fund) in 2025-26 increasing to $197.9 million ($69.3 million General Fund) for CalAIM initiatives including full implementation of the housing community supports program, which will allow up to six months of rent or temporary housing to eligible individuals experiencing homelessness or at risk of homelessness transitioning out of institutional care, a correctional facility, the child welfare system, or other transitional housing settings. 
  • Share of Cost Reform and Continuous Eligibility Still Subject to Contingencies: California’s 2022 Budget Act updated Medi-Cal Share of Cost so seniors and people with disabilities can afford to access needed Medi-Cal services. Additionally, the state adopted a permanent policy of multi-year continuous coverage for children from birth to age five, which will allow children enrolled in Medi-Cal to remain enrolled without having to face administrative hurdles. These changes must be implemented immediately. 
  • Maintains one-time spending for the California Reproductive Health Access Demonstration Waiver ($200 million ($100 million General Fund): The California Reproductive Health Access Demonstration (CalRHAD), currently pending CMS approval, is set to begin no sooner than July 1, 2024, and will support access to family planning services for Medi-Cal members and support the sustainability of California’s reproductive health provider safety net. By 2026-2027, $85 million of General Fund costs will be offset by federal funding. 

MCO Tax & Other Budget Measure to Close Shortfalls: 

  • Managed Care Tax Changes and Adjustments: The proposed budget includes several changes and adjustments to the Administration’s 2023 MCO Tax Proposal including: 
    • Seeks Managed Care Organization (MCO) Tax Increase ($1.5 billion): The Governor’s proposed budget requests the Legislature take immediate action to seek an amendment from the federal government to increase the tax to achieve $20.9 billion in total funding to the state, an increase of $1.5 billion compared to the 2023 version of the tax in order to support critical safety-net expansions and enhancements.  
    • Shifts a portion of MCO Tax revenue proposed for future Medi-Cal provider rate increases to Backfill Medi-Cal Eligibility Expansions and Programs ($3.1 billion): The proposal modifies the MCO Tax revenue spending plan for future targeted Medi-Cal provider rate increases from $11.1 billion (2023 plan) to $8 billion, a decrease of $3.1 billion, to be used instead to support Medi-Cal’s General Fund spending for critical safety-net programs.  
    • Maintains Medi-Cal provider rate increases agreed upon in 2023 Budget Act ($727 million ($291 million MCO Tax) annually): These include targeted provider rate increases for primary care, obstetric, and non-specialty mental health services to bring rates to at least 87.5% of the Medicare rate, effective January 1, 2024.  
  • Reduces Proposition 56 funding for physician services supplemental payments ($193.4 million ($77.1 million Proposition 56)): Due to declining Proposition 56 revenue and budgetary challenges with backfilling reduction with General Fund, 2024-2025 supplemental payments to Medi-Cal providers are reduced by $193.4 million.  All other Proposition 56 supplemental payments remain fully funded. The Budget includes $907.4 million ($192.6 million General Fund) for all Proposition 56 supplemental payments, inclusive of $465.2 million for physician services. Certain providers currently receiving Proposition 56 supplemental payments, including physician services, will receive MCO Tax rate increases. 
  • Adds Trigger Language to Health Care Worker Minimum Wage Increases: The 2023 Budget Act (SB 525 – Durazo) increases the minimum wage incrementally to $25 an hour for nearly 500,000 specified health care workers, effective June 1, 2024. The proposed budget seeks early action in January by the Legislature to add an annual “trigger” to make the minimum wage increases subject to General Fund revenue availability, clarify the exemption for state facilities, and make other implementation clarifications. 
  • Seeks to borrow from the Hospital Building Fund to the General Fund ($50 million): Budgetary loan to the General Fund from the Hospital Building Fund of $50 million that is not currently projected to be used for operational or programmatic purposes. 
  • Utilizes Safety-Net Reserve ($900 million): The proposal withdraws $900 million from the Safety Net Reserve to maintain existing program benefits and services for the Medi-Cal and CalWORKS programs. 
  • Increases Waiver Slots for Assisted Living Waiver (ALW) and Home-and Community-Based Services: The proposed budget increases the number of slots for the Assisted Living Waiver and Home-and Community Based Services Waivers, resulting in $10.8 million in General Fund savings in 2024-25. 

Medi-Cal Mental Health 

  • Continued implementation of the behavioral health crisis care continuum ($8 billion total funds): The administration will continue implementation of previous investments across various Health and Human Services departments to expand the continuum of behavioral health treatment and infrastructure capacity, including providing behavioral health services to children and youth. We support the continued implementation, but continue to have concerns about specific components of the crisis care continuum such as law enforcement involvement in the Medi-Cal mobile crisis benefit and the implementation of the CARE Act, which will create a pathway for government officials to place people under state control through involuntary, court-ordered treatment. This will further endanger a person’s autonomy and liberties by criminalizing and institutionalizing people who are unhoused, and will have a disproportionate impact on Black and Brown Californians. 
  • Expands the Use of Institutions for Mental Disease as part of the BH-Connect Demonstration ($40.6 million total funds ($762,000 General Fund)) set to begin on January 1, 2025: On October 20, 2023, DHCS submitted its application for a Medicaid Section 1115 Demonstration with the intent to improve access and quality of mental health services for Medi-Cal members living with serious mental illness or serious emotional disturbance. If approved by the federal government, the use of Institutions for Mental Diseases (IMDs), inpatient psychiatric and residential treatment facilities with more than 16 beds would expand using Medicaid dollars. This would disproportionately harm the Black, Indigenous, People of Color (BIPOC), and Lesbian, Gay, Bisexual, Transgender, and Queer Plus (LGBTQ+) people of California. This also diverts investment in community-based mental health services and programs, at a time when funds for prevention and early intervention programs are being threatened.  
  • Children and Youth Behavioral Health Initiative Wellness Coaches ($9.5 million total funds): The state is introducing a new certification program for Wellness Coaches, aimed at helping children and youth through the age of 25. Wellness Coaches will be a benefit in Medi-Cal starting next year, and will be used to alleviate the workload of school psychologists, counselors, and staff providing clinical services at community-based organizations so those providers can focus on youth who may have more complex need. Wellness Coaches will support youth through non-clinical services, including wellness promotion and education, screening, care coordination, individual and group support, and crisis referral. We appreciate the expansion of more community providers in Medi-Cal’s behavioral health program. 

Oral Health

  • Maintains adult dental benefits in Medi-Cal Dental: Despite a projected budget deficit for 2024-2025, the proposed budget maintains adult dental benefits in Medi-Cal Dental. One of the most significant barriers to accessing oral health care for low-income communities of color is the lack of stable preventive and restorative dental coverage for adults. We commend the Governor for preserving these benefits to ensure communities can continue to access crucial dental services. 

Preserves Key Affordability Provisions in Covered California

The proposal maintains key affordability measures approved as part of 2023 Budget Act, including $82.5M for affordability subsidies in Covered CA available starting 2024 and up to $165M annually, starting in FY 2024-25 for additional subsidy assistance for each coverage year of the program after coverage year 2024. As a result of this assistance, 600,000 Californians will benefit from the elimination of deductibles and a reduction in copayments and other cost-sharing for health care services through Covered California. 

Public Health & Prevention 

  • The proposed budget protects investments in local public health funding including $200 million in ongoing funding for local public health infrastructure and $76.5 million in Public Hero as a workforce investment to train the next generation of public health professionals.   

Other Workforce Adjustments

  • Maintains $57.5 M in FY 24-25 and 25-26 respectively for Community Health Workers/Promotoras/Representatives Initiative Grants: Despite a projected budget deficit for 2024-2025, the proposed budget maintains funds to recruit, train and certify CHW/P/Rs with specialized training to work with populations such as justice involved, unhoused, older adults, or people with disabilities.  
  • Delays $140.1 million GF to 2025-26 for the HCAI Nursing and Social Work Initiatives: Given lower-than-projected Mental Health Services Act revenue, the Budget also delays $189.4 million Mental Health Services Fund to 2025-26 for the social work initiative, addiction psychiatry fellowships, university and college grants for behavioral health professionals, expanding Master of Social Work slots, and the local psychiatry behavioral health program. Despite the delays, the Budget maintains $974.4 million (General Fund and Mental Health Services Fund) for these initiatives; however, the funds will go out later than originally planned. 

Human Services

Projected CalWORKs Grant Increase —The budget includes an approximate 0.8-percent increase to CalWORKs Maximum Aid Payment levels, with an estimated cost of $26.7 million, is projected to begin October 1, 2024. A determination and update of the projected grant increase will be made at the May Revision. These projected increased costs would be funded entirely by the Child Poverty and Family Supplemental Support Subaccount of the 1991 Local Revenue Fund and would be in addition to the 3.6-percent statutory increase in 2023-24. However, we are disappointed in cuts and elimination of services aimed at supporting CalWORKs recipients secure employment.  

Supplemental Security Income/State Supplementary Payment (SSI/SSP) – The Budget includes a $3.7 billion General Fund in 2024-25 for the SSI/SSP program, including the state-only Cash Assistance Program for Immigrants (CAPI).  These adjustments raise the maximum SSI/SSP grant levels to $1,183 per month for individuals and $2,023 per month for couples. The 2023-24 budget included $146 million General Fund for the SSI/SSP program. 

Safety Net Reserve Withdrawal—The governor and his administration are proposing to use $900 million in Safety Net Reserve to maintain existing program benefits and services for the Medi-Cal and CalWORKs programs. 

Specific Immigrant Programs

In-Home Supportive System (IHHS) – The governor maintains investments in provider wage increases, a permanent provider back-up system, and the full-scope Medi-Cal expansion to IHSS undocumented recipients of all ages including the recent expansion for ages 26 to 49, as of January 1, 2024. 

Migration, Border Communities, and Wraparound Services: Like last year’s budget proposal the administration will continue to work with the federal government to identify resources and assess state needs to expand humanitarian efforts to those seeking refuge and asylum in California. In the coming months, the administration will continue to assess operational needs in these humanitarian efforts for possible consideration in the May Revision. With no new investments for border communities or legal services, the Governor’s Budget misses a critical opportunity to support refugees and asylum seekers. 

Temporary Protected Status Services—The Budget reverts the $10 million General Fund in 2023-24 and makes a reduction of $10 million General Fund in 2024-25 and ongoing. The Budget maintains existing levels of ongoing funding for Immigration Services Funding and Unaccompanied Undocumented Minors Legal Services.