On Jan. 6, Gov. Gavin Newsom provided a topline preview of his proposed 2025–26 budget. Highlighting the main themes of the budget, he deferred much of the detail typically included in the January Budget Proposal announcement to Friday, Jan. 10, when the state’s Director of the Department of Finance will present the Governor’s proposed budget in much greater detail. The unusual release is due to the Governor’s attendance at former President Jimmy Carter’s funeral later this week.
State General Fund
The Governor shared that the overall state budget is $322.2 billion, which includes all federal, state and special funding. The General Fund share of the budget is estimated at $228.9 billion with an available reserve amount of $16.9 billion, which includes $1.5 billion for the Proposition 98 Rainy Day Reserve. Gov. Newsom also shared that state revenues are up by $16.5 billion; however, he advised caution since this increase is reflective of the state’s revenue volatility. This volatility is a product of California’s progressive tax system, whereby the state relies disproportionately on the top 1 percent of income earners and capital gains revenues.
Reflecting on this significant increase in revenues, the Governor shared his desire to pursue reforms to the state’s reserve funds requirements. In order to capture increased revenues and better plan for a rainy day, the Governor expressed his desire to increase the cap on the amount of funding the state can transfer into the state’s General Fund reserve as well as exempting such revenues from being considered a state expense. This does raise the question as to whether the Governor would also like to increase the cap on the Prop 98 Reserve and how that could affect future Prop 98 calculations.
Proposition 98
Regarding public education funding, the Governor did not provide much detail, but did share two overall estimates. First, Proposition 98 is estimated to be $118.9 billion for TK-14 public education. Second, the statutorily required cost-of-living adjustment (COLA) is estimated to be 2.43 percent.
“We’re pleased to see the Governor announce he intends to keep education funding whole and meet his statutory obligation to fully fund Proposition 98 and the COLA,” said CSBA President Dr. Bettye Lusk. “We’re also encouraged that the Governor pledged to allocate more resources toward the full rollout of universal transitional kindergarten, but whether that includes necessary funding for the new grade, lower student-teacher ratios and increased facilities needs remains to be seen.”
What’s next?
As the saying goes, “the devil is in the details.” The full 2025–26 January Budget Proposal release will happen Jan. 10. CSBA will provide a summary of the Governor’s January Budget Proposal after its full release.
Join CSBA’s Governmental Relations team for its annual January Budget Webinar on Monday, Jan.13, at 2 p.m. Staff will provide a breakdown of the proposed budget and what it will mean for local educational agencies.
Register for the webinar here.
