In Final State of State Speech, Gov. Newsom Says California Offers Model for the Nation

Touting California as a “marvel of invention and reinvention,” Gov. Gavin Newsom used his final State of the State speech on Thursday to deliver a full-throated defense of the state and his tenure in office — arguing that California can offer an affirmative alternative vision for the future.

Newsom mounted a defense of his record on homelessness and climate leadership, while advancing proposals to crack down on corporate homeownership and reform how the state’s education system is governed. He cited a huge growth in revenues — more than $40 billion higher than forecast last year — and touted California’s progressive tax system, which relies far more on top earners than many other states.

Among his specific proposals, Newsom called for new laws to make it harder for private equity firms and other large investors to snap up huge numbers of properties, saying it is driving up housing prices and moving homeownership out of reach. And, he said the state should implement long-talked-about reforms to its education system, moving the Department of Education into the executive branch.

Ahead of an expected run for president in 2028, Newsom continued his sharp criticism of President Donald Trump, calling the federal government “unrecognizable” and corrupt.

“For 175 years, California has been a marvel of invention and reinvention, disaster and recovery, grit and ingenuity. We have found a way to build the future, over and over,” Newsom said in a fiery opening to his speech. “But today, that spirit is being tested. We face an assault on our values unlike anything I have seen in my lifetime.”

Quoting Martin Luther King Jr., Newsom said the greatest tragedy in a moment like this one is the silence of good people — and he argued California is providing “a policy blueprint for others to follow.”

“In California, we are not silent, we are not hunkering down, we are not retreating,” Newsom said. “We are a beacon. This state is providing a different narrative.”

Newsom is fresh off a year of political highs, as he gained national acclaim among Democrats for his political, legal and rhetorical combat with the White House. California has sued the Trump administration over 50 times, and Newsom spearheaded the passage of Proposition 50, a redistricting plan to help elect more Democrats to Congress.

Throughout his tenure, Newsom has portrayed California as a progressive economic engine, despite stubborn challenges of homelessness and affordability. On Thursday, he acknowledged that the state must not only oppose Trump, but also show what it stands for.

“Every year, the declinists, the pundits and critics suffering from California Derangement Syndrome look at this state and try to tear down all our progress,” Newsom said. “But we know the truth. California’s success is not by chance — it’s by design.”

But Republican lawmakers, who spent much of the speech sitting silently, said Newsom is glossing over the hard realities many Californians face.

“The governor gave a very polished speech today, full of half-truths, and ultimately really lacking results, which is what California is asking for,” said Republican Sen. Suzette Valladares, who represents parts of Los Angeles and San Bernardino counties. “Right now, costs are up, we have the highest gas prices in the nation, housing is out of reach, families are struggling, and that is a real state of the state in California.”

The governor’s speech in the state Assembly chambers marked a return to tradition. His last State of the State in the Capitol was in early 2020. Since then, Newsom has taken the address on the road — including at Dodger Stadium in 2021 and in a series of statewide speeches in 2023 — or delivered it virtually.

Newsom’s speech will be followed on Friday by the release of his state budget proposal. The Legislative Analyst’s Office pegs the state budget shortfall at $17.7 billion — despite tax revenue that continues to exceed expectations, driven by a soaring stock market.

But rising state costs for healthcare and retirement benefits, combined with federal cuts to Medi-Cal and other state programs, continue to weigh down the state’s finances.

Progressives have rallied behind a proposal to tax Californians with assets valued at over $1 billion — a “wealth tax” that could appear on the ballot this November. Newsom has made clear he opposes the tax.

In Thursday’s speech, the governor claimed significant progress on homelessness, an issue that has plagued California leaders for years and which he centered more aggressively than many of his predecessors. He touted new data showing a 9 percent decrease in unsheltered homelessness and put pressure squarely on local officials.

“No more excuses — it’s time to bring people off the streets, out of encampments into housing, into treatment,” he said, citing the 2024 passage of Proposition 1, a $6.4 billion bond measure for housing, mental health and substance abuse treatment — as well as the creation of new mental health courts. “Counties need to do their jobs.”

The corporate housing proposal echoed a similar call by Trump this week and aims to prevent spikes in rent prices and ease competition for home purchases. A bill to ban large firms from buying and renting out additional properties in California stalled in the state Senate last year.

But it may have an easier path this year: Newsom’s assertion that private equity firms in Manhattan should not be some of California’s biggest landlords garnered rare applause from GOP lawmakers in the chamber, and support from progressive lawmakers who are frustrated over the governor’s opposition to the billionaire tax.

Assemblymember Alex Lee, a progressive Democrat from San Jose, wrote last year’s unsuccessful bill. Lee said he looks forward to working with the governor on the proposal.

“I’m very excited to hear that the governor wants to take on institutional buyers buying up whole neighborhoods full of houses,” Lee said after the speech. “It’s a real affordability crisis for people who want to buy a home and get the California dream.”

Newsom spent a portion of the speech also touting policies he said are lowering costs for Californians — including tax credits for low-income families, families with young kids and foster youth. He cited laws he’s signed to increase paid sick and family leave in the state — and said last year’s extension of the state’s cap-and-trade climate program will result in significant rebates on energy bills.

The governor also laid out plans to revamp the governance of California schools, which traditionally command the largest share of state spending.

Newsom proposed shifting more authority to the executive branch by moving the Department of Education, tasked with overseeing education law, underneath the State Board of Education, a policy-making body appointed by the governor.

That would strip power over the department from the state superintendent of public instruction, who is directly elected by California voters. The current superintendent, Democrat Tony Thurmond, is running to succeed Newsom as governor next year, and said later that he has not seen details of the proposal but is skeptical.

“I do think it would weaken the state superintendent position, but here’s the real thing. I don’t see what it would do to benefit students in California,” he said. “People have said that there’s fragmentation in the system, and if that is true, I don’t know how this lessens the fragmentation.”

Newsom, who has overseen the creation of a new school grade, transitional kindergarten, over the past five years, also said this year’s budget will fund universal after-school care at elementary schools statewide. If implemented by the Legislature, that proposal would save many parents thousands of dollars in childcare costs each year.

But some of the biggest applause came when Newsom spoke about the state’s progressive tax system, contrasting the state’s high minimum wage and its tax rates for middle- and low-income earners, with what people make and pay in Republican-led states.

“It comes down to a simple question: Who do you stand for? The rich and the powerful, the most well-connected?” Newsom asked. “Or the bus driver, the janitor, the special education teacher, working overtime to support their families? Who do you stand for?”

The line prompted Democratic members to stand and cheer.