California Gov. Gavin Newsom released his revised state budget proposal for FY 2025–2026 on Wednesday. After having a roughly balanced budget in January, the state must now "close an estimated $12 billion shortfall to balance the budget" because of President Donald Trump's tariffs, which have "driven a downgrade in both the economic and revenue forecasts" and increased spending for the state's Medicaid program.
Despite this shortfall, Newsom's budget calls for maintaining or extending expensive government programs, including the state's cap-and-trade program, which was set to expire in 2030.
Launched in 2013 to reduce greenhouse gas emissions (GHG) in the state, the program sets a GHG emissions cap for "covered entities," which includes electricity generators, oil refineries, and manufacturing facilities. Entities must comply with this annual cap either by voluntarily reducing their GHG emissions or by purchasing allowances (essentially permits to emit 1 ton of carbon dioxide equivalent) at quarterly auctions.
