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Assembly subcommittee warns deep federal cuts would hit Medi‑Cal, schools, universities and counties
Summary
A California Assembly budget subcommittee heard testimony that proposed federal spending reductions and executive actions could force the state and local governments to absorb billions in costs, imperil Medi‑Cal coverage, university research and local services. The Department of Finance was asked to produce an assessment by April 1, 2025.
Chair Hart convened the California State Assembly Budget Subcommittee on Accountability and Oversight for a hearing focused on how proposed federal spending cuts and executive actions could affect state and local budgets and core services.
The Legislative Analyst’s Office, the Department of Finance, county and university officials and nonprofit budget analysts told the panel that the state stands to lose or see disrupted tens of billions of federal dollars that underpin health care, education, disaster response and research. "We are subsidizing the rest of the country right now," said Gabriel, emphasizing the risk if Washington reduces transfers to states.
The hearing featured an overview from Anne Hollingshead of the Legislative Analyst’s Office, who summarized federal funding flows and the scale of money tied to the state budget. Hollingshead said Department of Finance figures show roughly $171 billion in federal funds interact with the state budget in 2025–26, with about $134 billion of that for health and human services. The LAO estimated roughly $453 billion in federal flows to California in 2023 when direct payments to individuals, businesses and nonstate public entities are included.
Mary Halterman, assistant program budget manager in the Department of Finance, told the committee the state budget currently assumes a large share of federal support and warned that reductions would be difficult to backfill. "Federal fund drawdowns for Medi‑Cal average between $6 billion and $9 billion monthly," Halterman said, noting Medi‑Cal federal funding is budgeted at about $107.5 billion and covers up to 15 million Californians.
County leaders and university officials described concrete local and institutional impacts. Cyvette Johnson, chief executive officer for Ventura County, said her county has more than $280 million in active federal awards and about $153 million unencumbered; she identified roughly $150 million in human‑services funding that could be at risk and described paused EV charging grants of about $12 million. "Tapping into the county general funds is not an option to backfill health and human services," Johnson said.
Katherine Newman, president of the University of California, said the UC system received about $17.3 billion in federal support across patient care, research and student financial aid last year. "Federal research activity totaled $4.2 billion" for UC and NIH funding alone topped $2.6 billion, Newman said, warning cuts to research and federal aid could force program reductions and jeopardize students and clinical care.
Scott Graves of the California Budget and Policy Center underscored the scale of the possible shifts in cost and options for the Legislature. He said federal proposals under consideration in Congress could mean $1.5 trillion in cuts nationwide over 10 years, concentrated heavily in Medicaid and SNAP, and that state leaders would face "difficult choices" including whether to raise state revenue or trim programs.
Members pressed witnesses about concrete exposure in districts and sectors. Lawmakers noted potential effects on K–12 and higher education funding, local public health and disaster reimbursement (FEMA obligations), veterans services and food assistance programs, and stressed the potential for cuts to amplify inequality and disrupt emergency services. Committee members described the human effects they expect if programs are reduced — including increased hunger, loss of health coverage and harms to medical and educational infrastructures.
Action and follow up: Chair Hart asked the Department of Finance to deliver an assessment report by April 1, 2025, on how federal actions could affect the state budget and said the subcommittee will hold a follow‑up hearing in April and a meeting on March 11, 2025, on homelessness funding and accountability. Committee members and witnesses urged coordinated outreach to California's congressional delegation and engagement with stakeholders, including labor and business, to press for continued federal funding.
The hearing produced no formal votes; members used the session to gather data and authorize the requested analysis from the Department of Finance that will inform the May revision and future budget negotiations.
Ending: The subcommittee adjourned after members and witnesses emphasized the need for additional hearings and public information so legislators and the public can weigh the tradeoffs if federal support is cut.
