ARTICLE
By Kristen Brown, Chamber Executive Director Governor Newsom released the May Revision of the proposed 2025/2026 state budget last week, reflecting a more cautious outlook in light of economic uncertainty. The revised plan responds to a projected deficit and outlines steps to stabilize the state’s finances while maintaining core investments. The revised budget highlights a shift from earlier expectations of modest growth. Slowing job creation, rising inflation, and policy shifts at the federal level, particularly around tariffs and immigration, are creating new headwinds for California’s economy. While the state remains a global economic powerhouse, the outlook for the next few years points to slower growth, less hiring, and tighter household budgets. For Santa Cruz County’s employers, this translates into a more challenging operating environment. Workforce and consumer pressures are growing, especially in high-wage sectors like tech, manufacturing, and professional services. Housing development is also likely to slow, further straining affordability and talent retention. The May Revision avoids broad tax increases and instead relies on borrowing, fund shifts, and reserve withdrawals to balance the budget. At the same time, it includes cuts to Medi-Cal that would impact access to care for low-income residents, including older adults and people with disabilities. There are also key workforce-related updates that matter locally. The state continues to support job training and apprenticeship programs, with additional funding for construction trades, public works systems, and federal workforce partnerships. However, not all programs are protected - career education coordination efforts saw reduced funding. Despite fiscal constraints, the state is pursuing changes to how it manages its rainy-day fund, seeking voter approval to raise caps and build more savings in the future. These structural reforms could help provide greater long-term stability. As lawmakers negotiate the final budget, the Chamber will continue to track developments that affect local employers, workforce pipelines, and essential services. Business leaders should stay engaged. Policy decisions made in the next few weeks will shape the conditions we operate in for years to come. If you’d like to learn more, you can dig into the Governors May Revise, here.
By Kristen Brown, Chamber Executive Director
Governor Newsom released the May Revision of the proposed 2025/2026 state budget last week, reflecting a more cautious outlook in light of economic uncertainty. The revised plan responds to a projected deficit and outlines steps to stabilize the state’s finances while maintaining core investments.
The revised budget highlights a shift from earlier expectations of modest growth. Slowing job creation, rising inflation, and policy shifts at the federal level, particularly around tariffs and immigration, are creating new headwinds for California’s economy. While the state remains a global economic powerhouse, the outlook for the next few years points to slower growth, less hiring, and tighter household budgets.
For Santa Cruz County’s employers, this translates into a more challenging operating environment. Workforce and consumer pressures are growing, especially in high-wage sectors like tech, manufacturing, and professional services. Housing development is also likely to slow, further straining affordability and talent retention.
The May Revision avoids broad tax increases and instead relies on borrowing, fund shifts, and reserve withdrawals to balance the budget. At the same time, it includes cuts to Medi-Cal that would impact access to care for low-income residents, including older adults and people with disabilities.
There are also key workforce-related updates that matter locally. The state continues to support job training and apprenticeship programs, with additional funding for construction trades, public works systems, and federal workforce partnerships. However, not all programs are protected - career education coordination efforts saw reduced funding.
Despite fiscal constraints, the state is pursuing changes to how it manages its rainy-day fund, seeking voter approval to raise caps and build more savings in the future. These structural reforms could help provide greater long-term stability.
As lawmakers negotiate the final budget, the Chamber will continue to track developments that affect local employers, workforce pipelines, and essential services. Business leaders should stay engaged. Policy decisions made in the next few weeks will shape the conditions we operate in for years to come.
If you’d like to learn more, you can dig into the Governors May Revise, here.