Newsom tightens policy on immigrant benefits, homelessness amid budget strain

Newsom tightens policy on immigrant benefits, homelessness amid budget strain

California governor shifts tone as budget shortfall and political pressures mount

LOS ANGELES — California Gov. Gavin Newsom is adopting a more restrictive approach to immigration and homelessness policy, freezing key expansions to undocumented immigrant healthcare and urging cities to adopt stricter rules against homeless encampments. The shift comes as the state confronts a projected $12 billion deficit and as Newsom, widely viewed as a likely 2028 Democratic presidential contender, faces growing scrutiny from both the left and right.

In a revised $322 billion spending plan unveiled Wednesday, Newsom proposed freezing enrollment for full-scope Medi-Cal coverage for undocumented adults beginning in 2025. The move would halt the final phase of a years-long plan to offer California’s low-income insurance program to all adults, regardless of immigration status.

Budget realities collide with universal healthcare ambition

“This is not an ideological retreat,” Newsom said. “It’s a fiscal reality.”

The governor cited multiple contributing factors to the budget crunch — including what he dubbed the “Trump slump.” He blamed former President Donald Trump’s tariffs, economic instability, and declining international tourism for an estimated $16 billion revenue loss over this fiscal year and next.

Still, Newsom acknowledged the deeper structural budget challenges not entirely tied to federal policies. Medi-Cal’s financial shortfall — projected at over $6 billion — has been driven by unexpectedly high enrollment, soaring pharmacy costs, and increased managed-care expenses.

Under the proposed freeze, undocumented adults currently enrolled in Medi-Cal will retain their benefits, and services for children remain unaffected. However, beginning in 2027, undocumented enrollees and others with "unsatisfactory immigration status" would be required to pay $100 per month for their coverage, generating an estimated $2.1 billion in savings by 2029.

GOP attacks, Democratic unease

Republican leaders seized on the proposal as evidence of political repositioning.

“Finally adopting our call to freeze free health care for illegal immigrants — but it’s too little too late,” said California Senate Minority Leader Brian W. Jones (R), who added that Newsom “owns” the deficit due to “reckless giveaways.”

Newsom denied any ideological shift, describing himself as an “open-minded pragmatist” reacting to evolving data. Yet, his recalibrated stance on a signature progressive issue reflects growing political complexity as he navigates national aspirations.

Homelessness crackdown: “Not funding failure anymore”

Earlier this week, Newsom also urged local leaders to adopt a sweeping model ordinance to curb homeless encampments, part of what he called a more “aggressive” strategy. The proposed rules would bar encampments near sensitive locations such as schools, restrict camping in one place for more than three nights, and prohibit the construction of semipermanent shelters like hand-built sheds.

“Look at these encampments. They are a disgrace,” Newsom said. “People are dying. Kids are being born. Overdoses. We’ve got to be more aggressive.”

Despite the state’s record-high spending on homelessness — tens of billions of dollars in recent years — the problem persists visibly in urban centers. Newsom argued that state efforts have removed over 16,000 encampments from state property but insisted that local governments must do more to clean up city streets.

Strained alliances within the Democratic Party

While Newsom’s comments and policy shifts may appeal to moderate voters and fiscal conservatives, they have generated friction with progressive allies. His March remarks on transgender athletes — calling it “deeply unfair” for transgender girls to compete in women’s sports — triggered backlash from LGBTQ+ advocacy groups and some Democratic lawmakers.

The cumulative effect is a noticeable pivot toward the political center — a trend often seen among governors with national ambitions facing tough fiscal choices and a polarized electorate.

A legacy of ambitious, costly reform

California has led the nation in providing healthcare access to undocumented immigrants. A 2015 law signed by then-Gov. Jerry Brown made undocumented children eligible for Medi-Cal. Newsom expanded the program in stages to include undocumented young adults (2020), older adults (2022), and, starting in 2024, all remaining undocumented adults.

He has framed the expansion as both morally necessary and fiscally prudent — arguing that access to preventive care reduces costly emergency visits. However, the real-world expenses have outpaced projections.

State officials now estimate that pausing enrollment and introducing cost-sharing measures will save a combined $5.4 billion by the 2028-2029 budget cycle.

Political balancing act

“We’ve provided more support than any state in American history, and we’ll continue to do so,” Newsom emphasized. Still, he added, “As a taxpayer, not just governor, I’m not interested in funding failure anymore.”

Newsom’s pragmatic recalibration — cutting costs while defending his reform legacy — comes as Republican contenders intensify attacks on progressive immigration and homelessness policies nationwide. Democratic strategists are watching closely to see whether Newsom’s new approach positions him as a viable national candidate or risks alienating the Democratic base.

Stay tuned to The Horizons Times for continuing coverage of California’s policy shifts and their national implications.