ADVOCATING FOR THE INDUSTRY


Because of continued uncertainty surrounding federal policy changes, it is quite possible that the Governor and Legislature will have to reopen the enacted 2025-26 state budget to make further adjustments.


Changes to California’s Budget and Legislative Landscape


BY MELANIE PERRON C


alifornia’s budget and legis- lative landscape are under- going significant shifts in 2025,


shaped by economic pressures, federal policy changes, and evolving state priorities. The Governor’s initial proposed budget in January had a modest sur- plus, but within a few short months, the state budget outlook was at a $12 billion deficit largely due to proposed tariff impacts and increased costs to the state’s Medi-Cal program. As part of the budget, hard deci-


sions were made predominantly in health and human services as those programs are funded through the state’s General Fund. Transportation and infrastructure funds were largely left intact due partly to constitutional provisions protecting gas tax dollars to be used for transportation purposes. Because of continued uncertainty


surrounding federal policy changes, it is quite possible that the Governor and Legislature will have to reopen the enacted 2025-26 state budget to make further adjustments.


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CALIFORNIA CONSTRUCTOR JULY/AUGUST 2025


Affordability Is a Big Issue A significant theme for this legislative session is affordability. Legislators and the Governor continue to highlight issues surrounding affordability for Californians, including housing, insurance, energy costs, and climate policy impacts. Tis is layered with the recent budgetary decisions that had to be made, further impacting service delivery to the state’s residents. To that end, Assembly Speaker Robert


Rivas created four select committees to examine childcare costs, CalFresh en- rollment and nutrition, housing finance and affordability, and transportation costs and impact of the Low Carbon Fuel Standard. Other legislators are pushing bills to further ease requirements around housing production by pushing Califor- nia Environmental Quality Act (CEQA) exemptions and permit streamlining mea- sures that are receiving mixed reviews. However, despite the considerable discussion surrounding affordability and the state’s budget condition, many bills are still pending that would add more costs to working families. It remains to be seen if the Legislature and Governor will


take meaningful actions to help reduce the financial and regulatory burdens on businesses and individuals alike.


Extending and Rebranding Cap-and- Trade Te Governor and legislative leadership have committed to extending California’s cap-and-trade program that is set to expire in 2030. Te current sunset date is already creating market compaction concerns, as industries are less inclined to continue investing without certainty about the program’s continuation. To that end, the Governor is also considering renaming the program to Cap-and-Invest. While the Governor is seeking a clean


extension, legislators are showing in- creased interest in changing the expen- diture plan to recast how funds are being spent on key California priorities. Under the current program, California’s high- speed rail program has received billions, and transit and other key transportation and infrastructure programs have had their funding shifted to this program to help with recent constraints on the state’s budget.


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