California Democrats aren’t ruling out new taxes on state residents to pay for health care for illegal immigrants despite the program’s costs growing from $9.5 billion this year to $12.1 billion in California Gov. Gavin Newsom’s latest budget proposal, or just a little more than the state’s $11.9 billion budget shortfall.
Should new federal penalties pass, the program could cost the state an additional $4.4 billion in lost federal funding each year, increasing the relative cost of the program to $16.5 billion. An analysis from The Center Square has found the three main House GOP proposals for Medicaid would cost California nearly $40 billion per year.
At a “Save Medi-Cal” press conference speaking out against the governor’s proposal to pause new illegal immigrant enrollment in Medi-Cal as a cost-savings measure while increasing the budget for illegal immigrant care 27%, state Sen. Caroline Menjivar attacked the governor’s budget for not creating any new revenue, or what government officials call the taxes and fees levied on some residents.
“Even the [state-funded Legislative Analyst’s Office] mentioned there is no creation of revenues in these solutions,” said the Democratic senator, who represents Burbank and the San Fernando Valley. “We’re going to be in a situation next year and the year after that if we don’t do creation of revenues as well.”
When asked if this means a tax increase to pay for illegal immigrant health care, state Sen. Lena Gonzalez, chairwoman of the California Latino Legislative Caucus, said all options are on the table.
“We’re looking at a variety of different things,” said Gonzalez, D-Long Beach. “We’re looking at all — across the picture — everything related to our budget.”
Because the federal government does not provide Medicaid reimbursements for non-emergency illegal immigrant healthc are, the cost of such care falls entirely on state taxpayers. According to Assemblyman Carl Demaio, R-San Diego, one in four general fund Medi-Cal dollars is going to illegal immigrant health care, rising to one in three next year based on the governor’s latest May budget proposal.
In late 2024, the LAO already anticipated budget deficits in the coming years rising to $30 billion per year.
The LAO said the state has “no capacity” for new spending, suggesting the state has little leeway to cover major cost increases without substantial cuts to some services, higher taxes or both if the House GOP Medicaid proposals pass in the general budget bill.
Because the federal government does not provide Medicaid reimbursements for non-emergency illegal immigrant healthcare, the cost of such care falls entirely on state taxpayers.
In addition to the proposed $4.4 billion annual cut to California’s Medicaid reimbursements for its enrollment of illegal immigrants, House Republicans proposed requiring Medicaid recipients to work, volunteer, or be in school at least 80 hours a month, which Newsom says could cost the state $22.3 billion in federal funding and potentially kick three million California residents off Medicaid.
With 40% of the state population, or 15 million California residents enrolled in Medi-Cal, this data suggests one in five Medi-Cal users is able-bodied and working-age, but not otherwise engaged in qualifying part-time work, volunteering or education.
A third proposal would, mirroring a proposed federal regulatory change, require that taxes on health care providers be uniform. California and other states engineer higher federal Medicaid funding through provider taxes that are much higher for Medicaid providers, and they pay back providers once higher federal funding is secured by the costs and payments from the tax. This change could invalidate California’s Proposition 35, which is set to bring in $7 billion to $8 billion per year starting in 2027.
