On May 14, Gov. Gavin Newsom presented the May revision to his January Budget Proposal, announcing a balanced budget for the next two fiscal years. Notably, revenues — largely driven by higher-than-expected increases in personal income and capital gains — are $16.5 billion more than projected in January.

The May Revise contains welcome provisions that will benefit public schools, including a 4.31 percent cost-of-living adjustment (COLA) for the Local Control Funding Formula (LCFF) and a $2.4 billion ongoing increase for special education. Unfortunately, the Governor’s proposal maintains a withholding of the Proposition 98 school funding guarantee and relies on the prolific use of one-time money to inflate funding levels in the short term without providing the stability and predictability schools need to plan effectively for student support.

“The Governor’s proposal to withhold $3.9 billion in Proposition 98 funding from school districts and county offices of education is unacceptable and we will continue to oppose this decision,” said CSBA CEO & Executive Director Vernon M. Billy. “Local educational agencies are already managing rising operational costs, staffing shortages, declining enrollment, expanding state requirements and growing student needs. Withholding voter-approved, constitutionally guaranteed education funding shifts financial risk from the state to local governance teams and threatens the stability schools need to serve students effectively. If California expects LEAs to accelerate student achievement and close persistent achievement gaps, at a bare minimum, the state must provide the necessary resources to do that work.”

The overall state budget is $349.9 billion including federal funding and special funds. The state’s General Fund is $246.6 billion.

Although the May Revise proposes a balanced state budget, it does not address ongoing operational budget deficits that remain. The Legislative Analyst’s Office has said that, beginning in 2027–28, structural deficits are estimated “to grow to about $35 billion annually due to spending growth continuing to outstrip revenue growth.”

Due to the increase in revenues, the May Revise increases Prop 98 funding. Over the current three-year budget period, Prop 98 is estimated at $124.9 billion for 2024–25, $125.1 billion for 2025–26 and $127.1 billion for 2026–27.

Most troubling, and counter to the collective advocacy of CSBA and others, the Governor is keeping his proposal to hold back Prop 98 funding; albeit by $3.9 billion — estimated at $640 per student — as opposed to the original $5.6 billion proposed in the January Budget.

The Prop 98 reserve is proposed to finish the 2026–27 fiscal year with a balance of $10.3 billion. Of that amount, $1.6 billion is proposed as a discretionary deposit, hitting the 3 percent Prop 98 reserve threshold that will trigger local 10 percent reserve caps under Prop 2. Small school districts and community-funded districts are exempt from the cap.

As set by statute, the LCFF COLA for the 2026–27 fiscal year is estimated to be 2.87 percent. However, the Governor is proposing a “super COLA” of 4.31 percent for a total of $2.2 billion in additional LCFF funding.

The super COLA is also intended to cover a new proposal to require LEAs and community colleges to provide employees with 14 weeks of paid pregnancy disability leave — inserting a state mandate into the COLA — another unprecedented approach to the state budget.

Categorical programs statutorily required to receive the COLA will receive the base 2.87 percent COLA, excluding preschool, which will receive a modified COLA of 2.01 percent.

In addition to the proposed increase of $13.3 million for a total of $131.9 million to enable county offices of education (COEs) to provide universal and targeted academic assistance services, the May Revise includes $48.3 million to help cover changes in average daily attendance (ADA). This includes the proposed super COLA of 4.31 percent.

Retained in the budget is the proposal from January to provide $30.7 million to increase Necessary Small School funding rates by 20 percent. It reflects a continued effort by CSBA and others to push for increased funding for small school districts, which is especially necessary due to the impact of increasing costs and economies of scale on these districts.

In surprise news, the May Revise includes an additional $1.9 billion in base special education funding, bringing the total to $2.4 billion — a 43 percent increase. Included are proposals for a one-time $25 million increase for Inclusive College Technical Assistance Centers, $16.2 million ongoing increase in federal special education funds to support the Golden State Teacher Grant Program (GSTGP) with awards for prospective special education teachers of up to $20,000, and $1.6 million one-time federal Title II funds to continue the GSTGP and grant awards of $10,000 per prospective teacher.

Also seeing an increase in funding is the Student Support and Professional Development Block Grant — a fully discretionary block grant to help LEAs address growing operational costs. Proposed at $2.8 billion in January, it has been increased by $2.2 billion to $5 billion and will go out on an ADA basis.

The proposed restoration of $757.3 million in prior cuts to the Learning Recovery Emergency Block Grant remains, though this grant is not fully discretionary and receipt of funds will continue in its requirements.

Furthering state efforts to address student literacy, the May Revise proposes a one-time increase of $428.8 million to extend the existing literacy instruction and support through June 30, 2031, for all Literacy Coaches and Reading Specialists Grant Program grantees, $11.2 million to support the literacy coaches through the Literacy Coaches and Reading Specialists Educator Training Competitive Grant, and $5 million in ongoing Prop 98 dollars to Sacramento COE and the Dyslexia Center at the University of California, San Francisco to provide the Multitudes screening tool statewide at no cost to LEAs.

One-time support in the amount of $60 million in General Funds is proposed to extend the work of the Mathematics Professional Learning Partnership to support educator training and coaching in math to more LEAs beyond its current expiration date of June 30, 2029.

In addition to the proposed $1 billion in ongoing Prop 98 funds, the Governor is adding $485 million through the redirection of funding from the existing California Community Schools Partnership Program. The vast majority of this funding ($401 million) would be used to establish new planning and implementation grants.

Using $60 million in one-time Prop 98 General Funds to help “accelerate the state’s progress in addressing teacher shortages,” the May Revise proposes $30 million for the Statewide Teacher Residency Technical Assistance Center, extending through 2034, and $15 million to expand and enhance offerings through the 21st Century California School Leadership Academy program.

The state is proposing $316 million in Proposition 1 funding to improve behavioral health services across the state including $174.8 million to the California Department of Public Health to support prevention and early-intervention mental health programs, $131.1 million to the Department of Health Care Access and Information to help train and expand the behavioral health workforce, and $10 million to the Commission for Behavioral Health for oversight, planning and implementation work.

The Legislature will conduct budget deliberations through hearings and has until June 15 to pass a balanced budget. The Governor has until June 30 to sign the budget act into law.