On June 24, the Legislature announced it had reached an agreement with Gov. Gavin Newsom on the 2025–26 State Budget. With less than a week before the Governor is required to sign a balanced budget, the agreement will be reflected in a follow-up budget bill, referred to as “budget bill junior,” and approximately 20 budget trailer bills.
Most troubling and a continuing sign that Proposition 98 is under threat is the inclusion of a higher Prop 98 withholding amount than was proposed in the May Revise, from $1.3 billion to $1.9 billion. This is due to growth in the Prop 98 Guarantee. Additionally, both the Newsom Administration and the Legislature are referring to this amount not as a “withholding,” but as “settle-up.” The distinction is important as settle-up is a term used to describe how the state finalizes the Prop 98 amount when it closes out the prior year; whereas withholding is a manipulation of the Prop 98 Guarantee. Most concerning is that these manipulations of Prop 98 could be used by future legislatures or governors to withhold even greater amounts of Prop 98 funds in future budgets.
CSBA continues to advocate against any manipulation of the Prop 98 formula and is calling on all school district and county board members to send an email to their legislators and the Governor calling on them to reject the withholding.
Additional details on the budget agreement
Proposition 98
- In addition to increasing the amount of the withholding, the budget agreement funds Prop 98 at $114.6 billion for the coming 2025–26 budget year and calculates the minimum guarantee at $120 billion in the current 2024–25 fiscal year, which reflects an increase of $1.1 billion from the estimated $118.9 billion in the May Revise. However, the agreement funds Prop 98 at $118 billion and because the guarantee grew in the current year, the withholding amount also grew by $600 million to $1.9 billion.
- The agreement also includes a withdrawal of $405.3 million from the Prop 98 Reserve Fund to help cover Local Control Funding Formula (LCFF) costs, which would exhaust the entirety of the reserve. There is also a proposed June to July deferral from 2025–26 to 2026–27 of $1.9 billion, which would be scheduled to be paid off in 2026–27.
- Beginning in the 2025–26 school year, it funds the costs of universal transitional kindergarten (UTK) enrollment outside of the of the amount of Prop 98 funding that is split between TK-12 education and the California Community Colleges. This is a win for CSBA advocacy, as the association and its members supported the appropriate and full allocation of Prop 98 funding generated by the growth in UTK enrollment.
Local Control Funding Formula
- In another win for CSBA advocacy, the LCFF cost-of-living adjustment (COLA) will be fully funded at a rate of 2.3 percent for all programs that receive a statutory COLA. However, it is unclear at this time whether the agreement includes the Governor’s May Revise proposal to exempt the California State Preschool Program.
Block grants
- CSBA advocacy also helped in the budget agreement’s restoration of the proposed $1.2 billion cut to the Student Support and Professional Development (SSPD) Block Grant, setting the amount at $1.7 billion. CSBA opposed the cut and advocated for its restoration. The SSPD Block Grant will go out on a per-pupil basis, which CSBA also advocated for.
- Maintains the one-time appropriation of $378 million for the Learning Recovery Emergency Block Grant.
Expanded Learning Opportunities Program (ELO-P)
- Maintains the Governor’s May Revise proposal to expand ELO-P eligibility for students, lowering the unduplicated pupil percentage rate from 75 percent to 55 percent, thus increasing the population of students who must be offered access to ELO-P. It also includes a proposal to increase the minimum ELO-P grant amount from $50,000 to $100,000, signaling yet another win for the state’s small and rural school districts.
Teacher recruitment and retention
- Lowers the Legislature’s proposal to increase the Student Teacher Stipend program by $300 million, from $600 million to $300 million. This is a $200 million increase above the $100 million amount the Governor proposed in the May Revise.
- Appropriates $70 million in one-time Prop 98 general fund for the Teacher Residency Grant Program.
Universal school meals
- Maintains the proposal to allocate $160 million in one-time Prop 98 general fund for the Universal School Meals Implementation Support Grant. The grant provides funding for a variety of purposes to help improve the production and delivery of nutritious school meals.
Literacy and instruction
- Continues the proposed $200 million for literacy instruction, professional development and support efforts. Ostensibly, this is to help fund the implementation of Assembly Bill 1454 (Rivas/Muratsuchi/B. Rubio) to advance evidence-based literacy instruction and professional development programs.
Assembly Bill 218 impact
- The agreement does not include the policy changes CSBA is advocating for to stem the financial impacts associated with the renewal of the statute of limitations for child sexual assault claims. It does include new LEA financial reporting requirements to provide the state a clearer picture of the settlement and judgment amounts.
What’s next?
It is anticipated that the Legislature will take up the budget bill junior and the bulk of the budget trailer bills on June 30, and that the Governor will sign the budget bill junior before July 1.
Although the agreement continues to include the proposed withholding of Prop 98 funds, CSBA staff and members will continue advocacy efforts to oppose the manipulation. This will be to ensure that the Governor and Legislature are made aware that this action undermines the integrity of Prop 98 and the state’s minimum funding guarantee for public education. Please stay tuned for further information from CSBA about the budget and advocacy opportunities.
