On May 14, Governor Newsom released the details of his revised budget proposal for the fiscal year starting in July 2025 and ending in June 2026 (FY 25-26). The proposal maintains the Proposition 4 funding plan put forward in the Governor’s January Budget for agricultural climate solutions. In his May Revise, the Governor committed to working with the legislature to reauthorize the state’s Cap-and-Trade Program through 2045. Cap-and-Trade generates an average of $4.2 billion per year for the state’s Greenhouse Gas Reduction Fund (GGRF) but is currently set to expire in 2030. 

Under the current Cap-and-Trade authorization, five programs (including High Speed Rail) are guaranteed a specific percentage of GGRF revenues annually, totalling 65% of total GGRF revenue each year (see Figure 1 in this report). In addition to committing to reauthorization, the Governor outlined his top two investment priorities for the GGRF: $1.5 billion annually for CalFire for wildfire suppression and $1 billion annually for High Speed Rail. The Governor’s proposal is silent on how the remainder of GGRF revenue should be allocated. Agricultural climate programs have historically received approximately 5% of GGRF investments, though with significant variability from year to year. 

CalCAN and a coalition of 22 food and farming organizations are continuing to advocate for a dedicated set-aside of GGRF funding to support a suite of proven agricultural climate solutions and programs that increase resilience and ensure food affordability. 

CalCAN is also part of a broader coalition of over 40 organizations advocating for eliminating free allowances to the oil and gas industry in the Cap-and-Trade Program. In 2024 alone, those free allowances were estimated to be valued at over $890 million. Rather than subsidizing the fossil fuel industry, our coalition asks lawmakers to redirect those funds to protect communities from climate impacts and lower costs for California households.

Budget Outlook: $12 Billion Projected Budget Deficit Due to Tariffs and Medi-Cal Costs

The budget outlook has deteriorated considerably since January, when the state was projecting a balanced budget. The state is now projecting a $12 billion budget deficit, equivalent to 6% of the state’s overall budget, largely due to tariffs’ impacts on the economy and increases in Medi-Cal costs. Given this budget context, budget proposals and legislation relying on new general fund expenditures face a difficult prospect.

Revised Budget Proposal Maintains Proposition 4 Food and Farm Investments in FY 25-26

Thankfully, the revised budget proposal maintains the same proposed funding levels for Proposition 4 investments for a number of programs CalCAN has advocated for, including the Healthy Soils Program (HSP), the State Water Efficiency and Enhancement Program (SWEEP), and a new regional equipment-sharing program. More specifically, the budget proposal still allocates the following funds in FY 25-26:

• $38 million for the State Water Efficiency and Enhancement Program (SWEEP)
• $36 million for the Healthy Soils Program (HSP); an additional $26 million will be allocated in FY 26-27
• $200,000 to develop a new Regional Farm Equipment-Sharing Program; an additional $14 million will be allocated in FY 26-27 to implement the program
• $2 million for the California Farmland Conservancy Program (CFCP); an additional $9 million will be allocated in FY 26-27
• $12 million for the Multibenefit Land Repurposing Program (MLRP); an additional $51 million will be allocated in FY 26-27
• $19 million for Urban Agriculture Projects
• $10 million for the Certified Mobile Farmers’ Market Grant Program; an additional $10 million will be allocated in FY 26-27
• $10 million for Year-Round Certified Farmers’ Markets Infrastructure and Facilities; an additional $10 million will be allocated in FY 26-27
• $200,000 to develop a new Tribal Food Sovereignty Program; an additional $14 from Prop 4 will be allocated in FY 26-27 to implement the program
• $38 million for Fairground Resilience Centers

Cap-and-Trade Reauthorization: An Opportunity for Increasing and Sustaining Investments in Climate Solutions that Improve Resilience and Affordability

The Governor and leaders in both chambers of the legislature have committed to reauthorizing the state’s Cap-and-Trade Program, which requires the state’s largest greenhouse gas emitting companies to purchase permits to emit greenhouse gas emissions (called “allowances”). The revenue from the program has generated an average of $4.2 billion per year in funding for the state’s Greenhouse Gas Reduction Fund (GGRF). 

Historically, the legislature and the Governor have allocated approximately two-thirds of GGRF on a continuous basis to a handful of programs. The Sustainable Agricultural Lands Program (SALC), which funds permanent easements on farmland to limit urban sprawl, is the only agriculture program that has received a continuous appropriation as part of the umbrella Affordable Housing and Sustainable Communities (AHSC) Program. CalCAN and American Farmland Trust recently organized a letter among California-based land trusts calling on the legislature to protect SALC’s 2% continuous appropriation

Legislators and the Governor have historically made discretionary annual decisions about how to allocate the remainder of GGRF. The Alternative Manure Management Program (AMMP), Healthy Soils Program (HSP), and State Water Efficiency and Enhancement Program (SWEEP) have historically received funding from the discretionary portion of GGRF, but not reliably and not nearly enough to meet farmer demand.

The Governor’s revised budget proposal, if adopted by the legislature, would allocate over half of GGRF to CalFire and High Speed Rail, but remains silent on other continuous appropriations. Instead, the administration says they will work with the legislature on a detailed GGRF expenditure plan in the coming weeks and months.

As noted above, this year CalCAN has been advocating to protect the continuous appropriation for SALC and to secure a continuous set-aside of funding for a portfolio of other agricultural climate solutions and programs. CalCAN has also been advocating for reforms to the Cap-and-Trade Program that could increase overall GGRF revenue by approximately $1 billion per year in order to invest in solutions that more directly protect communities and lower costs for California households.

---

How You Can Support

To be successful in these efforts, we will need a strong show of support from our network. If you’re interested in learning more about how you can support our efforts, please email our partner engagement manager, CC Ciraolo at CC[at]calclimateag.org.

What’s Next in the Budget Process

The legislature and the Governor will negotiate the final budget for FY 25-26 between now and mid-June. Cap-and-Trade reauthorization and associated GGRF investments could be negotiated as part of that overall budget deal, or they could extend into August and September.  Either way, we will keep you informed about this process in our blog and monthly newsletter.