California lawmakers and the governor are working on opening up the books on last year’s budget to make some tweaks that could soften the impact of what's expected to be a significant shortfall later this year. The state's legislative analyst, Gabe Petek, told lawmakers Thursday his office projects the shortfall will be $73 billion, while Newsom's Department of Finance said it's $38 billion. Thursday's action involved healthcare. The Assembly Budget Committee held the first public hearing on increasing the managed care organization tax, also known as the MCO tax, which helps cover costs for the state's healthcare coverage also known as Medi-Cal. Newsom’s administration noted this is not a typical tax, but mainly a way to draw down more Medicaid funds from the federal government. | MORE | California governor wants reserves and cuts to fix state deficit, mostly sparing schoolsLawmakers said it could help California net an extra $1.5 billion. “We can continue to keep the word on increasing our provider rates we voted on, and also prevent us from having to go into our healthcare space and cutting some programs and other services for our patients," said Assemblymember Akilah Weber, D-San Diego. Some Republicans have been critical of the budget that earmarks $4 billion to expand the state’s health insurance to undocumented immigrants. Officials today said the money as a result of the MCO tax increase would not fund that program because the increase would provide federal dollars. The extra money does give the state more wiggle room to use its general fund money on that expansion. "So we're going to be spending $4 Billion that we don't have to cover this new expansion is what it sounds like," said Assemblyman Bill Essayli, R-Riverside. | PREVIOUS COVERAGE | California expands Medi-Cal benefits to all undocumented immigrantsThis proposal still has a few hurdles to move through. It’s likely the legislature will pass this before they leave Sacramento for spring break. Because this involves federal dollars, the federal government has the final say in this. Newsom’s administration is confident that approval will come. "We've had assurances from the federal government that they will move in a timely manner on this," said H.D. Palmer, who noted the proposal needs to pass California's legislature by April 1 for the federal government to move. This is one of about $8 billion worth of early budget action the governor and state lawmakers are negotiating. Newsom’s administration and lawmakers have said there is more to come but could not provide specifics as of Thursday.