Gov. Gavin Newsom‘s (D-CA) Department of Finance notified lawmakers on Wednesday that it needs another $3.4 billion to cover the costs associated with the state’s Medicaid program, which includes providing health insurance to illegal immigrants.

The one-page letter, which came after Newsom told lawmakers they underestimated the costs, did not specify why Medi-Cal needs the money.

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The $3.4 billion loan is the maximum the state can borrow and is only expected to last until the end of the month, Department of Finance spokesman H.D. Palmer said. 

The state has been hemorrhaging money, and this latest problem has brought renewed scrutiny on California’s medical coverage for undocumented immigrants.

The state initially earmarked $3 billion per year for the cause, but that estimation fell well below reality. The current budget proposal estimates that it will cost the state $8.4 billion to cover undocumented immigrants in 2024-2025 and $7.4 billion in 2025-2026. 

“This is a disturbing pattern — Newsom creates a budget that’s laughably detached from reality, spends way more than he has, then puts his hand out for more when the bill comes due,” California State Assembly Leader James Gallagher, a Republican, told the Washington Examiner. “It’s how we went from a $100 billion surplus to a massive deficit in barely a year. The cost of these benefits to illegal immigrants is $9.5 billion — that is badly needed money that could go toward helping our citizens.”

California State Assembly Speaker Robert Rivas, a Democrat, admitted the strain on the budget could lead to making some “tough choices” about healthcare for Californians, including capping enrollment and limiting benefits. 

“The greatest threat to healthcare in California is Republicans and their reckless budget cuts to Medicaid,” Rivas said in a statement to the Washington Examiner. “Immigrant workers and families, who pay billions in taxes, deserve access to care, and I am proud to protect California’s progress expanding Medi-Cal. There are tough choices ahead, and Assembly Democrats will closely examine any proposal from the governor. But let’s be clear: We will not roll over and leave our immigrants behind.”

Rivas did not specify whether the immigrants he referred to were undocumented. 

In all, there are nearly 15 million Californians enrolled in Medi-Cal. 

Newsom’s office told the Washington Examiner that the $3.4 billion loan was discussed before and is indicative of growing costs for medical coverage across the board. 

“This isn’t new — as the administration already outlined in the governor’s January budget proposal, additional funding is needed to support Medi-Cal. Rising Medicaid costs are a national challenge, affecting both red and blue states alike,” his office said. “This is not unique to California.”

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In fact, other states experiencing rising Medicaid costs include Pennsylvania, Colorado, and Indiana, which have reported $2.5 billion, $1.2 billion, and a billion dollars in additional costs, respectively. 

Factors contributing to a hike in prices include higher-than-expected enrollment following COVID-19, an aging population that is reliant on Medicaid benefits, and rising healthcare costs in general, including prescription drugs, provider wages, and lengthy and expensive hospital stays.