Gov. Newsom’s May Budget Revise Leaves Small Businesses Waiting on Investments

“It’s disappointing that the governor’s May Revise fails to mention small businesses even once. While the California Constitution requires that the state's projected revenues meet or exceed its projected expenditures, the budget cycle comes at a moment when California’s smallest business owners cannot safely rely on the continuation of federal programs and resources to help them start, grow and invest in their business. Some in Congress are pushing to slash Medicaid and social safety net programs to extend tax cuts for the wealthy, and we’ve seen proposals that would result in diminished funding for the U.S. Small Business Administration and the Consumer Financial Protection Bureau. 

The stability of California’s low- and middle-income working families is under threat. Federal funding makes up just over one-third of California’s budget, and a significant portion of county budgets. The largest portion of federal money is appropriated to Medi-Cal, which provides healthcare for more than 14 million Californians – many of whom are small business owners and their employees. California has an opportunity to be a beacon of light for diverse small business owners and the workers they hire. Unfortunately, the governor’s budget proposal does the opposite.

Penalizing Small Businesses to Save Money is the Wrong Approach:

The reality is that the budget necessitates targeted spending reductions, but not on the backs of our state’s smallest and most diverse business owners. We must pursue meaningful revenue solutions to help close the shortfall, like examining existing tax breaks for the wealthy and large corporations, the same that stand to gain the most from another round of federal tax cuts:

• The governor’s May Revise proposes to freeze enrollment for undocumented adults, many who own or work for small businesses, enrolled in Medi-Cal starting in January 2026, and to add a $100/month premium for existing undocumented Medi-Cal enrollees ages 19 and up starting January 2027.  Additionally, the budget proposes to cut in-home supportive services, long-term care and full-scope dental benefits from undocumented Medi-Cal enrollees starting in January 2026. 

• The Revise loans $400 million from the Labor and Workforce Development Fund (LWDF), which is used to fund outreach efforts in immigrant communities and increase capacity for community-based organizations who support small business owners to address the general fund budget shortfall. 

• The Revise increases by $8.5 million the amount to pay down the Unemployed Insurance Trust Fund loan interest, on top of $650 million proposed in January. These payments tend to benefit larger businesses more than small ones, as the program has not been reformed since the 1980s. Reforms must balance the need for a solvent UI system with the capacities of small business owners.

No Budget Love for Small Business Ecosystems:

• The Revise makes no additional investments in the Technical Assistance Program, the Women’s Business Center (WBC) Enhancement Program, or the Capital Infusion Program under the California Office of the Small Business Advocate (CalOSBA).  

• The Small Business Recovery Loan fund, a critical component to prevent small business displacement in the wake of wildfires, was also not included –  initiatives that help small businesses access funding and grow sustainably. 

• For immigrant entrepreneurs, there are no new investments in Social Entrepreneurs for Economic Development (SEED 3.0), a grant program that supports economic mobility through training, technical assistance, and up to $5,000-$10,000 microgrants.

Healthy Employees, Healthy Bottom Lines: 

• California must spend the full amount of California’s Health Care Affordability Reserve Fund (HCARF) to restore California’s premium assistance program through Covered California, and partially backfill Federal premium subsidies at risk under the Trump Administration.

• The Revise ignores that 85% of small business owners support aligning the definition of “family” under Paid Family Leave to include extended and chosen family. It makes no mention of a one-time budget ask of $2 million to improve the program for those living apart from immediate family. 

Now is not the time for California to retreat from supporting small businesses. After all, many small businesses are still recovering from wildfires and some will soon be impacted by federal funding cuts. Therefore, we urge Gov. Newsom to reconsider his proposals to walk back critical investments for small business programs designed to support California’s most prolific job creators.”