Governor’s May Revise doubles down on troubling Prop 98 maneuver

Gov. Gavin Newsom released his May Budget Revision May 10, but deferred releasing greater details until May 14. Providing a macro-level overview of the state budget, the Governor estimates the state budget deficit grew by $7 billion from a projected estimate of $37.9 billion in January to $44.9 billion today. However, when taking into account the “early action” the Legislature adopted in early April, the budget deficit now sits at $27.6 billion. Early budget actions made by the Legislature and Governor resulted in a reduction of the current year deficit by approximately $17.3 billion.

As presented by the Governor, his Administration is proposing solutions to address both the 2024–25 and 2025–26 budget years. To bridge the $27.6 billion gap, the state is proposing a number of actions, including increasing reliance on the state’s reserve, increased efficiencies and additional budget reductions, along with pausing some funding allocations and increasing funding shifts. Although greater detail will be provided Tuesday, May 14, the Governor stated that funding reductions would impact 260 different programs across all state agencies and departments, including a reduction of $550 million to the California Preschool, Transitional, Kindergarten and Full-Day Kindergarten Facilities Grant program.

Read CSBA President Albert Gonzalez’s May Revise statement.

Governor remains committed to troubling Proposition 98 funding maneuver

Regarding public education funding, minimal detail was provided regarding the scope and scale of changes to the Governor’s January Budget education proposals. Per-pupil funding in the May Revise is down $151 when compared to the January proposal, from $17,653 to $17,502 per pupil. However, when all funds are taken into account, including grant funds and funding not available to all local educational agencies (LEAs), per-pupil funding is up from a proposed $23,519 in the January Budget to $23,940 in the May Revise. A difference of $421 per pupil. The annual cost-of-living adjustment is also proposed to increase from 0.76 percent to 1.07 percent.

Most notably, and problematically, when asked by a reporter about the Prop 98 funding maneuver, the Governor doubled down on his commitment to the proposal and noted that its impact would increase to the tune of $800 million from $8 billion to $8.8 billion. Committing to the approach, he stated that he wanted to maintain public education funding and avert more layoffs, but did not provide more information beyond that.

The funding maneuver would fund a now estimated $8.8 billion gap in Prop 98 funding in the prior 2022–23 fiscal year by borrowing against future-year state revenues. Essentially, if adopted, the state would fund paying a prior-year debt using future state revenues. CSBA is urging the Legislature to reject the maneuver on the grounds that it would undermine the spirit of Prop 98, as well as its statutory and constitutional requirements. The concern is that the proposal would set a worrisome precedent, which if adopted, could be used by future governors and Legislatures to avoid complying with the Prop 98 funding guarantee.

What’s next?

The Legislature will begin budget hearings over the coming weeks to review the Governor’s May Revise. The Legislature has until June 15 to adopt a budget bill. The Governor will then have until June 30 to sign it. CSBA will continue to monitor the implications of the May Revision and will host a series of events to help breakdown what’s included, how it impacts public education and opportunities for advocacy.

Upcoming budget events

Please join CSBA staff and guest experts on Wednesday, May 15, at 3:30 p.m. for the webinar, “May Revise: Prop 98 under siege,” which aims to make sense of one of the most unpredictable budgets in recent years. Panelists will break down Gov. Gavin Newsom’s May Revise and its implications for public schools with special attention to Proposition 98, which is under threat from proposed maneuvers that could reduce school funding for the foreseeable future. Register for CSBA’s May Revise webinar.

CSBA is also co-sponsoring a series of in-person Budget Perspectives Workshops in partnership with Capitol Advisors that will focus on a detailed breakdown of the May Revise. Workshops will be held at county offices of education across the state from May 22 – June 5. Register here.