Sacramento Report: What’s at Stake with Federal Spending Cuts

If you’ve followed news reports about federal funding cuts, you’re probably confused. If it’s any consolation, public officials are just as baffled. Lawmakers and administrators are trying to make sense of what’s at stake for California. 

It’s almost certain public healthcare could lose billions of dollars, along with education and highways. But the exact dollar figures are just guesswork. 

“We can’t say with any specificity how much or where that would affect California’s budget,” H.D. Palmer, a spokesperson for the Governor’s Department of Finance told me. 

I contacted San Diego’s state senators and assembly members and most didn’t respond. The ones who did acknowledged they’re in a waiting game. 

San Diego County is also in the dark. “At this time the County is unsure of the scope of impacts to Medi-Cal and other programs and services,” county spokesperson Sarah Sweeney said in an email.  

We do know how much money California has expected from the federal government for programs including schools and healthcare. We know what’s on the chopping block, but not how much will be scrapped. 

Big Cuts to Health and Education 

The cuts driving headlines this week are outlined in the House GOP budget resolution, approved Tuesday. Senate Republicans approved its own budget bill, and the two congressional bodies will have to hash out their differences. The House budget calls for at least $2 trillion in cuts over the next decade, and orders congressional committees to find those savings. Almost half of that – $880 billion – would fall to the House Energy and Commerce Committee, which oversees Medicaid, the healthcare provider for low-income families, children and people with disabilities. The House budget would also slash $330 billion from education and $230 billion from agriculture, which includes food assistance.  

Federal funds make up about a third of California’s total $500 billion budget for this fiscal year, Mary Halterman, an assistant program manager with the state Department of Finance told an Assembly budget subcommittee last week.  

The biggest chunk of federal money goes to Medi-Cal, the state’s version of Medicaid, which provides healthcare to about 15 million people, or more than a third of Californians. Total funding for the program in 2025-26 is $188.1 billion, including $83.6 million in state funding and  the rest covered by federal funding.  

State officials don’t know how much is at risk, Palmer said. But federal cuts to Medi-Cal could force the state to reduce the amount it reimburses medical providers, the number of people eligible for Medi-Cal or the scope of services it covers. Cal Matters’ Ana Ibarra looked at what that could mean for children, seniors and people with disabilities in California. 

The Center for American Progress published a projected breakdown of how much Medi-Cal reductions could cost each congressional district. In San Diego County, it estimates cuts could range from about $1.3 billion for Rep. Mike Levin’s district in North County and Orange County, where 103,393 people are enrolled in Medi-Cal, to more than twice that, or $2.7 billion for Rep. Juan Vargas District in South San Diego, home to 215,770 Medi-Cal recipients. 

Schools K-12, University of California and California State Universities, and the department of transportation, Caltrans, also get billions of dollars in federal funding. That money is up in the air.  

It’s unclear how much California will eventually lose, but the state won’t be able to make up the difference. “We’ve made it clear that we’re not in a position to backfill lost federal funds at this point,” Palmer said.  

What other federal money is at stake? There are also the well-publicized and bewildering cuts by Elon Musk’s DOGE (Department of Government Efficiency,) including contract cancellations and layoffs at federal agencies. News organizations have fact-checked Musk’s claims about DOGE efforts and found that many of the purported savings don’t add up.  

These cuts don’t directly affect California’s budget but have led to termination of about 30,000 federal employees throughout the country and funding loss to agencies ranging from National Parks to Veterans Affairs. Those purges might not last; on Thursday a federal judge in San Francisco found that the mass firings of probationary employees were probably unlawful. 

There’s another category of cuts that’s currently on hold. The federal Office of Management and Budget last month tried to freeze $3 trillion in federal grants, arguing that “the use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve.” A federal judge paused that order a day later, after a group of nonprofits and nearly two dozen state attorneys general sued to block it. 

All of those efforts to slash spending leave state and local governments uncertain about how much federal funding they stand to lose, and how they can adapt to steep cuts. 

“It absolutely is a situation that is very much in flux, not only from the standpoint of the Trump administration to freeze federal funds, but also in terms of what Congress may or may not do regarding their budget resolution,” Palmer said. 

Clearing Homeless Encampments 

The state and cities should work together to clear homeless encampments near highways, state Sen. Catherine Blakespear prosed in a new bill. 

Her bill would require Caltrans to draw up plans to clean up encampments, convene advisory committees and make it easier for the agency to get assistance, Blakespear said in a statement. 

In 2023 the city of San Diego passed an “Unsafe Camping Ordinance,” that bans camping on public property if shelter is available, and outlaws it all the time near schools, transportation hubs, parks and waterways. The ordinance got mixed reviews, with reports that encampments had declined in some areas such as downtown, Balboa Park and around schools, but appeared more numerous around freeways and along the banks of the San Diego River. 

Last year Gov. Gavin Newsom issued an executive order requiring California state agencies to clear camps on state property, and encouraging local governments to do the same on city and county land.  

Blakespear said her recent bill would help speed that along: “SB 569 establishes a state process for local governments and Caltrans to work together to more effectively clear encampments and direct the unsheltered to the shelters and services they need.” 

The Sacramento Report runs every Friday. Do you have tips, ideas or questions? Send them to me at deborah@voiceofsandiego.org.