In summary
Newsom touted a 9% reduction in unsheltered homelessness, but lawmakers were restrained in their responses to him claiming success on the issue.
Gov. Gavin Newsom promoted California as an antidote to the Trump agenda on Thursday, telling lawmakers during a wide-ranging State of the State address that California still leads in a host of critical areas such as manufacturing, technology, education and agriculture.
“Every year, the declinists, the pundits and critics suffering from California derangement syndrome look at this state and try to tear down our progress,” he said, instead pointing to technological advancements and engineering talent as a metric of his administration’s success.
“California’s success is not by chance — it’s by design. We’ve created the conditions where dreamers and doers and misfits and marvelers with grit and ingenuity get to build and do the impossible.”
He touted a 9% reduction in unsheltered homelessness, cheaper insulin and increased clean energy use in California as among his accomplishments, in a speech delivered with an eye toward higher office.
The address, his first State of the State to lawmakers in the Assembly chambers since 2020, was light on policy details. He mentioned only a few specific goals such as renewing a business tax credit and cracking down on large-scale investors buying up houses — a day after Trump also announced a similar effort.
Instead, he used it mostly as an opportunity to highlight progress on some of his most ambitious promises on housing affordability, expanded health care coverage, universal pre-kindergarten and going fossil fuel-free. Some of those haven’t yet been met, like his promise to build 3.5 million new housing units or creating a universal public health care system. But he pointed to accomplishments such as the state’s production of $11 insulin.
He targeted the Trump administration on a range of issues, including excessive policing and immigration raids, saying the state “faces an assault on our values unlike anything I have seen in my lifetime.” And in a common talking point for Newsom recently, he indirectly criticized the president for deprioritizing clean energy as China dominates electric vehicle production, and pointed to his own visits to international climate conferences.
“In California, we are not silent. We are not hunkering down. We are not retreating. We are a beacon. This state is providing a different narrative,” he said.
In a closing segment that roused the most support from lawmakers, he renewed his call for Trump to back a requested $34 billion aid package for Los Angeles to recover from last January’s wildfires.
California’s relationship with the president has steadily deteriorated in the past year, between the state’s frequent lawsuits, Trump’s deployment of immigration agents and the National Guard to Los Angeles, federal funding fights and Proposition 50, Newsom’s successful redistricting measure to help Democrats gain five new seats in Congress this year. But Newsom attempted a nod toward unity on the issue of fire aid, pointing to the recently deceased Republican Rep. Doug LaMalfa’s support for it.
“It’s time for the president of the United States to act like a president for all of the United States,” he said, later adding, “we’re home to more Americans than any other state.”
Newsom casts homelessness as a win
On homelessness, the reduction in the number of Californians sleeping on the street, in vehicles and in other places not meant for habitation is an important figure for the governor as he seeks to show improvement on one of California’s most stubborn challenges in his final year in office.
A humanitarian and public health crisis and the most visible consequence of California’s housing shortage, Newsom is sure to face national criticism on homelessness should he make an expected presidential run in 2028.
Lawmakers were restrained in their responses to Newsom claiming success over the reduction. It comes after years of increases in homelessness despite Newsom’s campaign promises to tackle it and pouring over $24 billion to it during his two terms. In 2024, the year before the announced reduction, homelessness in California hit a record high: 123,974 were unsheltered while 63,110 were sheltered. That year, homelessness also spiked nationally.
Newsom did not announce the number who were homeless overall in 2025. The federal government in the coming weeks is expected to release the results of the 2025 homeless census for each state, including California. In the meantime, many California counties have already released their individual results. Several, including Contra Costa, San Diego and Los Angeles, indeed are showing progress.
“I think the question always comes back to us, is it enough?” said Senate President Pro Tem Monique Limón, a Santa Barbara Democrat, to reporters after the speech.
Newsom touted his administration’s focus on sweeping street encampments and building new mental health facilities paid for with Prop. 1, a $6.3 billion bond he promoted and which voters approved in 2024.
He also spoke about making the state more affordable, an issue over which Democrats and Republicans nationally are jockeying for credit after the 2024 presidential election showed voters were heavily motivated by the high cost of living.
The issue is another weakness for Newsom on the national stage. Republicans criticizing him after the speech mostly accused him of not doing enough to lower costs.
“The results don’t match the rhetoric,” said Sen. Rosilicie Ochoa Bogh, a Yucaipa Republican, in a statement. “While speeches sound optimistic, budgets at the kitchen table don’t add up.”
Sen. Tony Strickland, a Huntington Beach Republican, called the address “more of a campaign speech than it was a State of the State address. He added that he was “shocked” that Newsom talked about the state’s over-budget and delayed high speed rail project, calling it “an example of why we have a budget deficit.”
Projecting a rosier budget outlook
The address was also a preview of Newsom’s last budget proposal, to be released Friday.
The state faces an estimated $18 billion deficit and remains threatened by federal cuts. Newsom now says revenues came in higher than expected last year, in a “windfall” officials mostly attribute to stock market gains and the artificial intelligence boom.
But he did not reveal where that leaves the deficit this year, saying only that the state received $42 billion more in revenue than officials predicted. Finance department spokesperson H.D. Palmer later clarified that the higher figure covers a three-year period.
“I didn’t hear anything about the budget deficit, I didn’t hear anything about what we’re going to do to grow our economy,” said Assemblymember Jasmeet Bains, a moderate Democrat from Bakersfield who is also running for Congress in a district with many residents who could lose health coverage under Trump’s tax and spending bill. “What about the health care disparities? … There’s a lot of questions that need to be answered.”
A rosier-than-expected financial picture could allow Newsom to avoid difficult fights with Democratic lawmakers over major cuts to programs, while maintaining funding for banner Newsom administration priorities like expanding public school to include all four-year-olds and providing more funding for community colleges.
Democrats will be sure to jockey for additional funding for their favored programs or to reverse scheduled cuts to Medi-Cal coverage for low-income undocumented immigrant adults they made last year. But Newsom will propose instead to put $7 billion into reserves and $11 billion toward pension obligations.
Democratic lawmakers mostly said they were cautiously optimistic about Newsom’s budget preview, though progressives said they’ll continue to push for new taxes to backfill expected federal health care cuts, such as a proposal to tax the wealthiest Californians to generate more revenue, which Newsom vocally opposes. The governor instead will propose to renew a business development tax credit that has been often used by the technology and manufacturing sectors.
CalMatters’ Marisa Kendall, Maya Miller and Yue Stella Yu contributed to this report.
