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A controversial $125 million deal California struck with Google last year to prop up the state’s struggling journalism industry is already on track to shrink — before any of the money has been delivered to news outlets.

The deal, announced last August, committed California and Google to each put tens of millions of dollars into a fund to be distributed to local news outlets over five years. In exchange, lawmakers scrapped two ambitious proposals that sought to force the search engine behemoth and its tech counterparts to pay outlets for using their published content.

But Gov. Gavin Newsom on Wednesday proposed to slash the state’s initial commitment to the journalism fund by two-thirds.

Department of Finance spokesperson H.D. Palmer wrote in an email that the administration is seeking to reduce the state’s first-year payment of $30 million to $10 million solely because of “fewer resources than projected in the January budget.” The cut is part of Newsom’s May budget proposal, in which he’s seeking to close an estimated $12 billion shortfall for the 2025-2026 fiscal year that begins in July.

The proposal to reduce the state’s share of the funding outraged local news advocates and proponents of requiring tech platforms to pay journalism outlets for their content — who already called last year’s deal insufficient. It raises questions about Google’s commitment to paying its share of the matching funds, and the overall status of the agreement which was announced in August but appears to have made little progress toward becoming reality.

There were no signed term sheets in Google’s handshake deal with the state and with lawmakers last year — only public promises.

“It’s extremely disappointing,” said Steven Waldman, president of the journalism advocacy group Rebuild Local News. “It was already too small and they’ve walked in the wrong direction from it at a time when the collapse of community news in California continues … Pink slime and rumor and misinformation is flooding into the vacuum so time is of the essence to try to turn this around. Instead, the effort is shrinking.”

A draft of the deal released last year suggested UC Berkeley would administer the funding program; the university has since declined to do so and the state has not announced a new administrator. As a result, Google also does not appear to have made its first-year payment of $15 million toward the fund, said Steven Waldman, president of the journalism advocacy group Rebuild Local News.

The deal did not include strict timelines, but proponents said they aimed to “front-load” much of the money in the first year, which they believed could garner more private contributions along the way.

Deal struck after billions in lobbying from Google

Neither Newsom’s office nor Google responded to inquiries. The Computer and Communications Industry Association, a lobbying group that last year was largely bankrolled by Google to oppose the news bills, declined to comment. Google’s payments to influence state lawmakers surged to almost $11 million from July through September last year when the bills were under consideration – 90 times more than it has ever spent on lobbying in California over the same period of time.

A spokesperson for Assemblymember Buffy Wicks, who negotiated the deal last year in exchange for abandoning her bill that would have required platforms such as Google and Meta to either pay a fee or negotiate with news outlets for using their news content, said there would be “more information to share on this in the coming days.”

Wicks, in a statement, did not address the proposal to cut state funding. Instead the Oakland Democrat thanked Newsom for “for making an essential public investment that strengthens journalism” and described the funding as a “down payment, combined with those of private and philanthropic partners.”

After the first-year payments, Google and the state both were to put $10 million a year into the fund for four more years.

The company also agreed to continue paying $10 million a year in existing grants to newsrooms — money it had threatened to withhold if the legislation passed. And it planned to put $17.5 million into an unspecified artificial intelligence program that had given some journalists and their union representatives anxiety over job losses.

Now, Waldman is worried the state’s reduction in funding could prompt the company to do the same. As part of the deal, Google specified it would only pay into the journalism fund as a match to state dollars, said former Sen. Steve Glazer, the author of the other bill that was scrapped.

“They did not want a precedent to be set in California that could be easily replicated in other states, so they insisted upon a state match,” he said. “The fact that the governor is proposing to renege on (part of the deal) is a cherry on top for Google and it allows them to reduce their contribution if they desire.”

Glazer’s bill would have imposed a fee on major tech platforms to provide news outlets a tax credit to employ local journalists. The measure, legislative staff estimated, would have raised $500 million a year. Wick’s bill requiring the platforms to negotiate payments to news outlets was modeled on similar programs in Canada and Australia, but the political headwinds were tough in the tech companies’ home state.

Lawmakers pursued both proposals to try to stem the decline of the news industry in California.

Following a nationwide trend, media companies have hemorrhaged jobs over the past two decades as advertisers fled print media for the internet and technological advancements reshaped how readers consume news. The state has lost one-third of its newspapers since 2005 in a trend experts say worsens civic engagement, polarization and misinformation.

To try to keep their readers, publications increasingly rely on social media and online search. Google controls the lion’s share of search in a way the U.S. Justice Department and one federal judge have said violates antitrust law.