California May Revision predicts $4.6B reduction in Proposition 98 funding for schools

The California Assembly Budget Subcommittee No. 3 on Education Finance convened on May 20, 2025, to discuss significant revisions to the Proposition 98 funding guarantee for education. The May revision forecasts a Proposition 98 guarantee of $114.6 billion for the 2025-26 fiscal year, which is a decrease of $4.3 billion from earlier projections in the governor's budget. This reduction reflects lower general fund revenue estimates and adjustments related to average daily attendance (ADA) and property tax revenues.

Key discussions included the implications of these funding changes on K-12 schools and community colleges. The committee noted that the projected maintenance factor obligation has slightly increased to approximately $8 billion, while the maintenance factor payment for the 2024-25 fiscal year has decreased to about $4.9 billion. The ongoing budgetary actions aim to provide flexibility amid revenue uncertainties while addressing the needs of educational institutions.

The meeting highlighted the re-benching of funding to accommodate the expansion of universal transitional kindergarten (TK), which has shifted costs from community colleges to K-12 schools. This adjustment aims to align funding with actual costs incurred by schools. Additionally, the revision includes a one-time allocation of $9.7 million to support property tax backfills for basic aid school districts affected by recent fires in Los Angeles County.

The Legislative Analyst's Office (LAO) expressed concerns regarding the sustainability of the proposed budget, particularly the reliance on one-time funds to support ongoing programs, which could lead to future budget shortfalls. The LAO recommended a more cautious approach, emphasizing the need to preserve existing programs rather than expanding them in a volatile fiscal environment.

In conclusion, the subcommittee's discussions underscored the challenges of balancing educational funding amid fluctuating revenues and the importance of strategic planning to ensure the stability of California's education system in the coming years. The next steps will involve further deliberations on the proposed budget adjustments and their long-term implications for schools and community colleges.