On May 14, Gov. Gavin Newsom released his proposed May Revise to the 2025–26 State Budget. Despite higher than estimated state revenues over the past several months, the May Revise offered a somber view of the state budget in light of significant developments at the federal level.
In response to the Governor’s May Revise, CSBA President Dr. Bettye Lusk issued the following statement:
“While the Governor’s May Revise Budget attempts to preserve funding for TK-14 schools, one major provision raises our concern: a proposal to allow the state to arbitrarily withhold $1.3 billion from the Proposition 98 school funding guarantee. This is the second consecutive year the budget has contained some form of unconstitutional Prop 98 manipulation,” Lusk said. “Last year’s maneuver is the subject of ongoing CSBA litigation and if this provision is not removed, we may be forced to take similar legal action this year. It’s also disheartening to see anticipated funding for the Local Control Funding Formula (LCFF) fall by $400 million, or roughly $72 per student based on average daily attendance (ADA).
“The proper way to respond to our current budget situation is to uphold Prop 98’s constitutional requirements for schools, avoid unfunded mandates, give local educational agencies the flexibility to meet local needs instead of dictating one-size-fits-all programs from Sacramento, and allow schools the time and resources needed to effectively implement ongoing programs before requiring new initiatives,” Lusk continued. “Even in lean times, investing in public schools is California’s best economic strategy, so we cannot sidestep constitutional protections for public education nor underfund Prop 98 to offset shortfalls in other sections of the budget.”
In advance of the May Revise announcement, the Governor’s office released a memo on May 13 stating that the impact of President Donald Trump’s tariffs and the economic uncertainty that has ensued has resulted in a $16 billion drop in state revenues, leading to an estimated $12 billion deficit in the coming 2025–26 fiscal year. The on-again, off-again tariffs have resulted in wild swings in the stock market. Because state revenues are heavily influenced by personal income taxes, including capital gains, fluctuations in the stock market can have a disproportionate influence on California’s General Fund. Adding to the state’s fiscal pressures are recent expansions of Medi-Cal eligibility, which is quickly increasing cost pressures on the non-Proposition 98 side of the budget.
To bridge the $12 billion gap, the Governor is proposing to use a combined state General Fund Reserve withdrawal and programmatic savings through reductions in expenditures and other cost savings. In total, the overall budget proposes $321.9 billion in state spending, but forecasts a year-over-year operational deficit of $14 billion in 2026–27, $19 billion in 2027–28 and $13 billion in 2028–29.
Overall, as in past years, public education funding under Proposition 98 is largely being preserved but comes with a caveat — a troubling withholding of $1.3 billion in public education funding. Most cuts and cost-savings proposals are to programs on the non-Proposition 98 side of the budget.
Below is a summary of Proposition 98 and public education funding and program proposals included in the May Revise.
Proposition 98
Overall funding for Proposition 98 is revised to be $98.5 billion in the prior 2023–24 fiscal year, $118.9 billion for the current 2024–25 fiscal year (a decrease of $300 million) and $114.6 billion for the 2025–26 budget year (a decrease of $4.3 billion). Over this three-year period, Prop 98 is now projected to increase by only $2.9 billion over the level assumed when the previous budget was passed in June 2024, as opposed to the $7.5 billion announced as a part of the January Budget Proposal.
In a win for CSBA advocacy, the May Revise maintains the state’s commitment to allocating additional ongoing funding to Prop 98, known as rebenching, to reflect the full implementation of universal transitional kindergarten (UTK). Additionally, the May Revise proposes a change to how funding generated by this rebench is distributed, such that TK-12 education receives the full amount of the funding generated by the rebench, rather than a portion (approximately 11 percent) going to community colleges. Specifically, over the past four years of UTK expansion, the state has allocated the additional funding generated by the UTK rebench using the typical split in Prop 98 funding between the TK-12 and community college systems. The May Revise proposal would instead exempt UTK-generated funding from the split calculation, directing all UTK-derived funding to the TK-12 public education segment going forward.
Whereas the operative test for Prop 98 was Test 2 in 2023–24 (although ultimately suspended), both 2024–25 and 2025–26 are Test 1. Generally considered to be an approximately 40 percent share of the state’s General Fund, with the UTK rebenching, Test 1 will increase from 39.2 percent to 39.6 percent of the General Fund.
Critically, the Governor continues to propose a maneuver to withhold $1.3 billion in Prop 98 funding from the 2024–25 fiscal year and only allocate that funding to schools. This represents the second effort in as many years to manipulate how the Prop 98 funding guarantee is calculated. CSBA is strongly opposed to this and is currently in litigation with the state challenging the inclusion of the first Prop 98 maneuver included in the 2023–24 budget.
Prop 98 reserve
In January, the Governor indicated that statute required two deposits in the Public School System Stabilization Account, also known as the Prop 98 Rainy Day Fund. Instead, there will be a single required deposit of $540 million in 2024–25. However, the formula requires a mandatory withdrawal in 2025–26 of the full amount. These funds will primarily support the LCFF, but will leave the Rainy Day Fund empty unless future deposits are made.
Cost-of-living adjustment
Compared to the cost-of-living adjustment (COLA) in the proposed January Budget, the estimated COLA is lowered from 2.43 percent to 2.3 percent. The revised COLA will apply to the following programs:
- Special Education
- Child Nutrition
- Youth in Foster Care
- Mandates Block Grant
- Adults in Correctional Facilities Program
- Charter School Facility Grant Program
- American Indian Education Centers
- American Indian Early Childhood Education Program
It should be noted that the May Revise also proposes suspending the COLA for the State Preschool Program. This would result in a $19.3 million reduction in Prop 98 funding and $10.2 million in ongoing general funds.
Local Control Funding Formula
The LCFF will receive the 2.3 percent COLA, which, when combined with changes in attendance, will result in an increase of approximately $2.1 billion in funding. The Governor continues to propose the elimination of the 2023–24 and 2024–25 deferrals, but now proposes deferring $1.8 billion in LCFF funding from June 2026 to July 2026.
County offices of education
County offices of education (COEs) will also receive a 2.3 percent COLA, adjusted for ADA changes, that will increase ongoing Prop 98 funding by $700,000 for a total of $12.9 million.
Other significant proposals
Student Support and Professional Development Discretionary (SSPDD) Block Grant
- Lowers the proposed SSPDD Block Grant from $1.8 billion to $1.7 billion but maintains the intent that it may be used to address rising costs, as well as the following priorities:
- Professional development for teachers with the English Language Arts/English Language Development (ELA/ELD) Framework and the Literacy Roadmap
- Professional development for teachers on the Mathematics Framework
- Teacher recruitment and retention strategies
- Career pathways and dual enrollment expansion efforts consistent with the Master Plan for Career Education
Special education
- As a categorical program that receives the statutory COLA, special education funding will receive the 2.3 percent COLA.
Universal transitional kindergarten
- Includes additional funding to rebench Prop 98 for the fourth and final time to reflect the full implementation of UTK. Total amount of the rebenching over the four-year period is estimated to be $2.1 billion in ongoing Prop 98 funding.
- Maintains the proposal to reduce the average teacher-to-student ratio for TK classrooms from 12:1 to 10:1 and reduces by $300 million from $1.5 billion to $1.2 billion additional funding for LEAs to support the hiring of teachers to meet the lower ratio.
Before- and after-school programs
- Maintains the full implementation of the Expanded Learning Opportunities Program (ELO-P) as proposed in the January Budget Proposal. This includes increasing the number of LEAs that must offer ELO-P to all pupils, by expanding the program to LEAs serving grades TK-6 with an unduplicated pupil percentage of 55 percent or more, which would replace the original threshold of 75 percent unduplicated students.
- Increases the proposed funding increase by $80.5 million from $435 million to $515.5 million for over $4.4 billion in ongoing Prop 98 funding.
- The May Revise includes an additional $10 million to increase the minimum LEA grant amount from $50,000 to $100,000.
Literacy instruction
- Provides approximately $745.3 million in one-time Prop 98 funding for the following programs:
- $535.3 million to provide LEAs with instructional materials that reflect current research; to support current and future educators to implement the ELA/ELD Framework, the state’s Literacy Roadmap and the state’s English Learner Roadmap; and to support LEAs to provide evidence-based literacy instruction to diverse learners through early screening of students in K-2 for risk of reading difficulties, including dyslexia, and an expanded Literacy Coaches Program that will include a new opportunity to support mathematics coaches in addition to literacy coaches
- $200 million to support evidence-based professional learning for elementary school educators aligned with the ELA/ELD Framework
- $10 million one-time Prop 98 in General Fund monies for a COE to partner with the University of California, San Francisco, Dyslexia Center to support the Multitudes screener, which is free to California public schools, and expand capacity for educator support for those schools using Multitudes
Teacher preparation and professional development
- Repurposes the $150 million in one-time Prop 98 funding for loan forgiveness for certificated teachers proposed in the January Budget Proposal and instead provides $100 million in one-time Prop 98 funding to fund stipends for student teachers.
- Extends the deadlines by one year for clear credential candidates who received a waiver during the COVID-19 pandemic to complete an induction program or two years of service or to pass the Reading Instruction Competence Assessment (RICA).
- Allows teaching candidates who have completed RICA preparation programs to take that assessment on or before Oct. 31, 2025; and the Commission on Teacher Credentialing to adopt and administer an off-the-shelf assessment that meets the requirements outlined in statute for candidates who have yet to pass a reading assessment and cannot take the state’s new Literacy Performance Assessment.
School nutrition
- Provides an additional $490.7 million in ongoing Prop 98 funding to further meet and provide for the state’s universal school meals program.
Fire-related property tax backfill
- Provides $1.2 million in 2024–25 and $8.5 million in 2025–26 in one-time fire-related property tax backfill for impacted basic aid school districts.
What’s next?
CSBA will host a webinar providing a deeper dive into the May Revise on Monday, May 19, at 11 a.m.
Join CSBA staff for this breakdown of the May Revise with special attention paid to the local governance implications and how the Governor’s proposal addresses key CSBA budget priorities, including protecting Proposition 98, investing in the LCFF, staff recruitment and retention, implementation of transitional kindergarten.
Register for CSBA’s May Revise webinar »
All eyes will now turn to the Legislature, where they will accelerate budget deliberations through budget hearings. The Legislature has until June 15 to pass a balanced budget, and the Governor has until June 30 to sign the budget act into law.
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 COEs across the state from May 27 to June 9. Register to attend a local workshop here.
