SAN FRANCISCO — With California facing deep budget uncertainty and widening economic divides, Gov. Gavin Newsom on Friday vowed to protect residents on both ends of the income spectrum — from wealthy business leaders he fears could leave the state to unhoused Californians relying on state-funded services.
That balancing act was on display as Newsom sharpened his criticism of a proposed ballot measure to tax billionaires, a measure opponents say may push tech companies and other businesses out of the state and wound California’s economy.
“It’s already had an outsized impact on the state,” said Newsom, speaking to reporters in San Francisco’s Mission District.
Newsom is trying to head off a union’s plan for a November ballot measure that would put a one-time tax on billionaires. If approved by voters, it would raise $100 billion by imposing a one-time wealth tax of 5% on fortunes.
Service Employees International Union-United Healthcare Workers West, the union behind the proposal, wants to raise money to help millions of Californians affected by widespread healthcare cuts by the Trump administration.
California political leaders, facing a tough budget year, warn that the state does not have the financial capacity to backfill those cuts.
Newsom, who is working behind the scenes with SEIU-UHW in an effort to stop the ballot measure, on Friday appeared doubtful that a deal could be struck with proponents of the measure.
“I don’t know what there is to compromise,” said Newsom, calling the measure “badly drafted” and arguing the money raised wouldn’t be spread among other groups.
“It does not support our public educators. Does not support our teachers and counselors, our librarians. It doesn’t support our first responders and firefighters. Doesn’t support the general fund and parks.”
Two top Newsom advisors, Dan Newman and Brian Brokaw, are raising money and have formed a committee to oppose the measure.
The billionaire tax measure is dividing political leaders in California and the rest of the country, with both Rep. Ro Khanna (D-Fremont) and Sen. Bernie Sanders (I-Vermont) supporting the tax.
“It’s a matter of values,” Khanna said on X. “We believe billionaires can pay a modest wealth tax so working-class Californians have the Medicaid.”
Already, some prominent business leaders are taking steps that appear to be part of a strategy to avoid a potential levy.
On Dec. 31, PayPal co-founder Peter Thiel announced that his firm had opened a new office in Miami, the same day venture capitalist David Sacks said he was opening an office in Austin.
Suzanne Jimenez, chief of staff for SEIU-United Healthcare Workers West, called it a myth that billionaires are leaving the state and criticized Newsom.
“Right now, his priority seems to be protecting roughly 200 ultra-wealthy individuals,” she saiad. “Healthcare workers are focused on protecting emergency room access and lifesaving care for all 39 million Californians.”
The proposed tax has reverberated throughout the Silicon Valley and Bay Area, home to some of the world’s most lucrative tech companies and financially successful venture capitalists.
Newsom was in San Francisco on Friday, where he served two terms as mayor, to address a separate, more pressing concern for Californians on the opposite end of the economic spectrum — those living in poverty and on the city streets.
Newsom, who is weighing a 2028 presidential run, spoke at Friendship House, a substance-use treatment provider, where the governor said California is turning around the state’s homelessness crisis.
He pointed to a recent 9% statewide drop in unsheltered homelessness as evidence that years of state investment and policy changes are beginning to show results.
That was the first such drop in more than 15 years on an issue that is a political vulnerability for the two-term governor. California still accounts for roughly a quarter of the nation’s homeless population, according to the Public Policy Institute of California.
Newsom said Friday that the decline reflects years of expanded state investment in shelter, housing and behavioral healthcare, combined with stricter expectations for local governments receiving state funds. He said the state’s efforts contrast with what is happening elsewhere, pointing to homelessness continuing to rise nationally.
The governor’s budget proposal, which was released Jan. 9, includes $500 million for California’s Homeless Housing, Assistance and Prevention program, which provides grants to cities, counties and local continuums of care to prevent and reduce homelessness.
That money is paired with investments from Proposition 1, a 2024 ballot measure backed by Newsom and approved by voters. The measure authorized billions in state bonds to expand mental health treatment capacity and housing for people with serious behavioral health needs.
Following Newsom’s budget proposal, legislators, housing advocates and local officials said the funding falls short of the scale of the problem.
That concern is unfolding against a constrained budget backdrop, with the governor’s finance director warning that even as AI-related tax revenues climb, rising costs and federal cuts are expected to leave the state with a projected $3 billion deficit next year.
The nonpartisan Legislative Analyst’s Office said Newsom’s plan leaves California financially exposed, noting that the administration’s higher revenue estimates exclude the risk of a stock market correction that could significantly worsen the state’s budget outlook.
The analyst’s office said those risks are compounded by projected multiyear deficits of $20 billion to $35 billion annually, underscoring what it called a growing structural imbalance.
Newsom on Friday called the LAO’s projections about the budget too pessimistic, but said the office is “absolutely right about structural problems in the state.”
Newsom’s budget does not include significant funding to offset federal cuts to Medicaid and other safety-net programs under President Trump and a Republican-led Congress, reductions that local officials warn could have far-reaching consequences for local governments and low-income residents.
Addressing those broad concerns, the governor defended his budget and suggested the spending plan will change by May, when the state’s financial outlook is more clear.
Times staff writer Seema Mehta and Caroline Petrow-Cohen contributed to this report.
The post In San Francisco, Newsom rails again proposed billionaire tax, vows to protect homeless Californians appeared first on Los Angeles Times.
