Gov. Gavin Newsom‘s (D-CA) new $300 billion budget agreement aims to square California‘s glaring deficit and revive Newsom’s status as the darling of the Democratic Party. 

Newsom’s latest and final budget as governor comes as his state faces a $45 billion deficit, just two years after the Golden State enjoyed the flush of a $100 billion surplus. 

With Newsom at the helm of the economic woes, Californians’ confidence in their governor, still hailed as one of the country’s top Democratic stars, has waned. A California poll conducted earlier this year found 57% of voters believe the state is on the wrong track. Newsom’s budget marks an attempt to get the state and his political career out of the ditch. 

The governor’s budget agreement cuts $1.1 billion for affordable housing, delays a minimum wage increase for healthcare workers, eliminates $750 million in funding for the prison system, and reduces California’s water storage. Additionally, the agreement calls for suspending tax breaks for businesses earlier than originally planned while allowing Newsom to declare a “budget emergency” to pull $12 billion from the state’s reserves. 

The latest agreement comes as a compromise after the governor’s proposed budget in May drew ire from some California Democrats for reducing social services funding and other Democratic priorities.

The June compromise has drawn some of Newsom’s earlier critics to his side, with some political strategists saying the agreement could boost the governor’s credibility and revive his hopes to stake a presidential run in 2028. Strategists say Newsom could use the deal as a model to tell voters across the country that he holds the political will to hold his own at the negotiating table and broker deals that breed financial responsibility.

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For now, Newsom is grappling with wrestling results from the state’s historic spending increases. From  $201.4 billion in 2018 to $454.7 billion in 2023, California’s spending represents more than a 60% increase during Newsom’s leadership.

Despite the record numbers, economic prospects for the state’s middle class have declined, while California’s homeless population has skyrocketed. While Newsom has led actions to allocate $24 billion to tackle homelessness, half the size of the state’s budget deficit, more than a third of America’s entire homeless population is found in California. Newsom faced heat after a recently released state audit revealed state leaders don’t know where the billions in funds went or if they were effective in addressing the homelessness crisis.