Legislative leaders and the governor reached agreement on a 2024-25 budget package on June 22, which they describe as supporting fiscal stability while preserving key programs. The $297.9 billion deal includes $211.4 billion in General Fund expenditures and a Prop. 98 minimum guarantee of $115.3 billion for 2024-25.  It incorporates a multi-year approach that Gov. Newsom proposed in his May Revise, with a balanced budget projected for both 2024-25 and 2025-26. The deal largely protects education funding, with a fully funded statutory COLA (1.07%) for TK-12 and community colleges, as well as increased base funding for the University of California.  The controversial Proposition 98 funding maneuver that was initially proposed by Gov. Newsom is not included in the enacted budget; instead, the agreement will result in higher funding levels in the short- and long-term.

Faced with a deficit of $46.8 billion, the budget agreement relies on many tools including deferrals and delays, fund shifts, spending of reserves, some new revenues, and funding cuts. Roughly half of the state’s rainy day funds will be used, leaving about $13 billion in the fund after the 2025-26 year. The budget package includes agreement to allow the state to save more during periods where there is an anticipated surplus.  The Prop. 98 reserves are used to cover expenditures from 2023-24, and the Prop. 98 guarantee for that year is suspended. Though a maintenance factor is established, the practical operational impact of the suspension is not expected to be disruptive to schools and community colleges.

New revenues come from a suspension of a tax deduction for businesses with CA income over $1 million (NOL, net operating loss, deduction) and limits on a business tax credit to $5 million for the next three years.  There is also an increase to the MCO Tax (Managed Care Organization tax) that supports Medi-Cal.

The budget bill package includes 19 bills and trailer bills. Of particular interest for CFT are the 2024 Budget bill (AB 107), Budget Bill Jr. for 2024 and 2023 (SB 108 and 109), Education trailer bill (SB 153), Suspension of Prop. 98 (SB 154), Higher education trailer bill (SB 155), and the Early Childhood education trailer bill (SB 163).  Some additional clean-up actions are anticipated in August.

Download and read the full document here Final State Budget 2024-25

FOR ADDITIONAL INFORMATION, CONTACT:

Aimee Shreck Research Director ashreck@cft.org 
Tiffany Mok Legislative Advocate tmok@cft.org   
Telephone (916) 446-2788