February 12, 2025

Governor Newsom released his initial budget proposal for the upcoming fiscal year just as the historic wildfires exploded across Los Angeles and before the presidential inauguration took place.  The 2025-26 proposal showed California revenues were about $16.5 billion higher than anticipated and included a small surplus of $363 million. Newsom’s plan largely follows the framework for this year that was imagined in last summer’s budget that was intended as part one of a two-year balanced budget deal.

The $322 billion budget proposal is about 8% above the 2024-25 enacted budget. It relies on some withdrawals from the state rainy day funds and also calls for reform that would enable California to save even more during economic upswings.

For public education, from EC/TK through higher education, the governor’s proposals continue the programs and priorities adopted in the past few years. Proposition 98 estimates are higher than they were in June 2024, as a result of the higher than expected revenues. However, Gov. Newsom included a controversial proposal to under-appropriate by $1.6 billion the Prop. 98 guarantee for the 2024-25 year – proposing $117.6 billion in Prop. 98 expenditures rather than the $119.2 billion, which is the amount that the formula estimates for the minimum guarantee for that year.  Observers and advocates quickly questioned the legality of the proposal, so there will certainly be more discussions on this proposal.

In light of the urgency around the wildfires and other actions coming from the federal government, a special session was convened in January.  On Jan. 23, Gov. Newsom signed a $2.5 billion relief package for Los Angeles for the ongoing wildfire response efforts. This includes $1 million dedicated for rebuilding fire-damaged school facilities.  Another special session package includes $50 million to protect California from threats coming from the Trump administration. The funding package (signed on Feb. 7) includes $25 million for state agencies and the Dept. of Justice and $25 million for frontline legal and community organizations that work to protect the civil rights of vulnerable groups. 

The uncertainty for the state’s budget related to the LA wildfires is significant. There will be a delay in tax receipts, with the tax filing deadline extended to October 15 for all affected. Property tax relief for affected homeowners will also affect the state’s revenues. In addition, there is unpredictability about the federal government’s contributions, including through FEMA.

Meanwhile, the ongoing turmoil affecting all federal agencies, programs, and initiatives has direct implications for Californians and for the California state budget. Against this backdrop, the legislative budget committees are convened and will continue to deliberate over the budget for 2025-26.

The statutory COLA is estimated at 2.43% and would be applied to the core funding formulas for the TK-12 and community colleges, along with most categorical programs. A funding deferral and a 7.95% cut in state funding was proposed for the University of California last spring and it is included in the January budget proposal.

Over the coming months, CFT will continue to closely monitor the fiscal outlook and to advocate for a budget that prioritizes public education. Despite the uncertainties, CFT will not look away from the critical issues facing our schools, and will continue to push for bold actions to address ongoing staffing shortages and ensure students get the services and support they deserve. The legislative budget committees will meet and deliberate this spring, and Gov. Newsom will release additional details about his proposals for the 2025-26 budget. The next full budget proposal will be released in May as the May Revision.

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