The 2025 legislative year began with deep uncertainty, as wildfires across Los Angeles devastated the region and the California legislature and Governor Newsom respond to volatility from the federal administration. These developments continue to shape the political atmosphere in Sacramento, the state’s budget, and the thousands of bills moving through the process.
Legislative Process
The Legislature is in full swing, as May 2 marked a major legislative deadline for fiscal bills to be heard and passed out of policy committees. Over 2,000 bills introduced this Legislative Session had to move through the policy process in just two months. Non-fiscal bills have until May 16 to pass out of their relevant policy committees and head to the Floor, though the vast majority of legislation is deemed “fiscal”. Fiscal bills which passed through their policy committee face their next hurdle on May 23, when the Appropriations Committees will hold their Suspense File hearings. Bills will either proceed to the Floor, or be held on ‘suspense,’ effectively done for the year. The House of Origin deadline is on June 6, at which time bills that pass will go to the second House to go through the policy and fiscal committee process all over again.
State Budget
On January 10, the 2025-2026 budget was unveiled. This was the beginning of a multi-month process between the Governor and the Legislature to assess and craft the state’s annual budget. Higher than expected revenues initially meant that there was no projected deficit, and in fact, the Governor projected a modest surplus. However, since January, volatility at the federal level impacting the stock market has led to concern about the impact to the overall state budget, which is expected to have a deficit for 2025 and 2026. Additionally, federal proposals to cut healthcare funding, cancel clean energy incentives, and end numerous grants across the scientific and academic communities could erase many billions of dollars of investments in California, posing further budget problems. Additionally, the federal government has still not responded to California’s request of $40 billion in disaster aid for the LA fires, which provides additional uncertainty.
On May 15, the Governor will unveil an updated proposal for the state budget, known as the May Revise. We will continue to monitor the budget to see how any changes impact Proposition 4, or Climate Bond funding, and other expenditures important to AEP. In January, the Governor outlined how he would begin to spend the $10 billion from the Bond towards water, climate, and wildfire resilience. He is also expected to propose an extension to the state’s Cap & Trade program beyond 2030 and a restructuring of how the revenues of those auctions, the Greenhouse Gas Reduction Fund, are to be spent.
Following the May Revise, the Legislature is constitutionally required to pass a budget by June 15. Additional details will come in the form of Budget trailer bills, which can pass until the end of Session on September 12.
Legislature
Below are some of the priority bills AEP is tracking, including where each bill is in the process.