California newsrooms had expected to receive $30 million from the state as part of a deal brokered last year in which Google and the state would jointly contribute money over five years to support local newsrooms through a News Transformation Fund. The state Department of Finance confirmed Wednesday that California instead will pay out $10 million for the 2025-26 fiscal year.

“The sole reason for the reduction is more limited/fewer resources than projected in the January budget,” Department of Finance spokesperson H.D. Palmer said.

Newsom announced Wednesday that the state is facing an additional $12-billion budget shortfall next year. The revised $321.9-billion plan will also include a reduction in healthcare for low-income undocumented immigrants and a decrease in overtime hours for select government employees.

The deal was born of negotiations that began with a proposed funding bill written by Assemblymember Buffy Wicks (D-Oakland), which is known as the California Journalism Preservation Act. It would have required Google to pay into a fund annually that would have distributed millions to California news outlets based on the number of journalists they employ. The California News Publishers Assn., of which the Los Angeles Times is a member, backed the larger effort.

It was designed to aid newspapers that have seen their finances collapse in recent years, leaving fewer journalists to cover institutions and communities.

The proposal was modeled after a Canadian bill that has Google paying about $74 million per year. Google fought the bill, arguing its passage would force the company to remove California news from its platform, thus restricting access for Californians.

Instead, the state and Google agreed in August to provide nearly $250 million to newsrooms over five years, starting in 2025, with funding slated for two projects.

The second initiative was a $68-million pledge for Google to fund artificial intelligence in the form of a National AI Accelerator. The AI funding element of the deal drew sharp rebukes from Democratic lawmakers and journalists.

California had pledged $30 million in 2025 and $10 million for each of the next four years. Google agreed to an initial payment of $15 million in 2025 and $55 million in total into the journalism fund. Google also agreed to boost its own journalism programs with a separate $50-million grant.

Rebuild Local News President Steven Waldman said the $30-million pledge to support local news was “modest” but a “meaningful first step.”

“Cutting it by two-thirds moves California in the wrong direction at a time when local journalism is collapsing across the state,” Waldman said. “We urge the Legislature to hold an open, transparent hearing to assess the impact of this shortfall and explore ways to ensure funding matches the scale of the crisis.”

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Through a mix of funding from Google, taxpayers and potentially other private sources, the five-year deal would let Google avert a proposed state bill that could force tech companies to pay news organizations when advertising appeared alongside articles on the tech company’s platform.

The announcement was packed with praise for the effort to stabilize the news industry, which has faced layoffs and shuttered newsrooms as readership has shifted online.

“The deal not only provides funding to support hundreds of new journalists but helps rebuild a robust and dynamic California press corps for years to come, reinforcing the vital role of journalism in our democracy,” Gov. Gavin Newsom said in a statement.

The trade group, the California News Publishers Association, called the agreement “a first step toward what we hope will become a comprehensive program to sustain local news in the long term.” The author of the bill, Assemblymember Buffy Wicks, praised it for being a “cross-sector commitment” and called it “just the beginning.”

A union representing journalists, however, denounced the deal as a “shakedown,” and lawmakers who had been working for months on more comprehensive proposals criticized its scope. Also, the president pro tempore of the State Senate, Mike McGuire, questioned legislative support for the state’s share of the deal, which would require approval as part of the annual budget process.

“We have concerns that this proposal lacks sufficient funding for newspapers and local media, and doesn’t fully address the inequities facing the industry,” said Senator McGuire, a Democrat. He added that “the Senate was pursuing a global solution that would hold all of these companies accountable.”

The deal would establish a News Transformation Fund administered by the Graduate School of Journalism at the University of California, Berkeley, to preserve and expand California-based journalism. Twelve percent of the funding for the News Transformation Fund would be reserved for locally focused publications and those aimed at underrepresented groups.

Under the agreement, California taxpayers would provide the new fund $30 million in the program’s first year and $10 million in each of the next four years, to be allocated by the Legislature in budget bills. Google would contribute $15 million to the fund in the first year and at least $10 million in each of the following years, according to a summary provided by Ms. Wicks’s office.

Google would also provide $62.5 million over five years to create a National A.I. Innovation Accelerator, which would provide “organizations across industries and communities” with funding and other support to experiment with artificial intelligence “to assist them in their work,” according to the announcement. And the company would maintain $10 million a year in existing programs it has to support journalism.

For two years, Google had resisted the bill, saying it would create “uncapped financial exposure” and “a level of business uncertainty that no company could accept.”

Kent Walker, chief legal officer for Google’s parent company, Alphabet, called the agreement “a collaborative framework to accelerate A.I. innovation and support local and national businesses and nonprofit organizations.”

The Media Guild of the West, a local of the NewsGuild union, denounced the deal as “vague” and “opaque.”

“Not a single organization representing journalists and news workers agreed to this undemocratic and secretive deal with one of the businesses destroying our industry,” it said.

And Senator Steve Glazer, a Democrat who has sought to give news outlets a tax credit to employ local journalists, paid for with a fee on major tech platforms, said the deal gave Google a bargain; overlooked similar incursions on local news funding by other tech titans, such as Amazon and Meta; and “seriously undercuts our work toward a long-term solution to rescue independent journalism.”

“Despite the good intentions of the parties involved, this proposal does not provide sufficient resources to bring independent news gathering in California out of its death spiral,” he said.

Google has regularly said it is “one of the world’s biggest financial supporters of journalism.” Publishers get traffic from its ubiquitous search engine, it has said, and can monetize their businesses with Google technology that lets them find advertisers.

But the company has usually drawn the line at government regulations that have tried to force it to compensate publishers. Google fought bills in Australia and Canada that would have compelled such payments, arguing that paying for clicks went against the spirit of the open web. In 2021, the company threatened to leave Australia if it went ahead with its news media bargaining code.

Eventually, the company found a compromise. It rolled out News Showcase in Australia, a program in which it selects publishers to team up with and pay on its own terms. Google said it now had more than 180 publications on board in the country.

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