Assemblymember Jose A. Alvarez, chair of the California State Assembly Subcommittee on Education Finance, opened the Feb. 18 hearing by flagging uncertainty in the governors budget and asking higher-education leaders how the state can protect access and affordability amid projected deficits.

"The governor's budget is balanced, but it is unclear what we will see in the May revise," Alvarez said, noting both the Department of Finance and the Legislative Analysts Office had identified multibillion-dollar shortfalls in the out years.

Department of Finance and Legislative Analysts Office officials walked the subcommittee through the administrations proposals and the fiscal tradeoffs. Gabriela (Gabby) Chavez of the Department of Finance told members, "Both the UC and the CSU should continue planning for a 7.85% reduction in ongoing general fund support." The LAO described the proposed reductions to the systems as roughly an "about 8%" cut and flagged deferred compact payments that push some funding to the 2027-28 fiscal year.

The Department of Finance presented specific figures attached to the multiyear compact: it identified a deferred compact payment for the University of California of about $240.8 million and a deferred compact payment for the California State University of about $252.3 million, and told the committee that the statewide control section would require planning for large reductions in ongoing support. The LAO, using its own analysis, said the governor's plan moves into 2025-26 with a $300 million reduction proposed for CSU and a $272 million reduction proposed for UC, and that the budget includes deferrals that could be paid later with one-time funds.

Legislative Analyst Jennifer Paciello told the subcommittee that Proposition 98 funding trends make the community college side of higher education a different fiscal story this year. "Nearly all the new higher education spending this year is for the community colleges," she said, adding that many of the administration's one-time proposals for community colleges "lack clear state objectives, key details, [and] realistic timelines."

Justin Hurst of the Department of Finance summarized the governor's community-college investments: a roughly $260 million Proposition 98 allocation for a 2.43% cost-of-living adjustment, $30 million for 0.5% enrollment growth, a $30 million augmentation for the Rising Scholars Network, a $162.5 million investment (including $29 million ongoing) for a common cloud data platform, and a $168 million one-time investment for an enterprise resource planning project. He also described a $100 million Proposition 98 proposal tied to credit-for-prior-learning initiatives.

Leaders of the three public segments told the subcommittee the proposed cuts and deferrals would have tangible effects on students and campus operations. President Michael V. Drake of the University of California recounted the systems recent growth and student-support expansions and urged reconsideration of an "8% cut" and deferred compact payments. "I ask you to reconsider the magnitude and severity of these cuts," Drake said.

Chancellor Mildred Garcia of the California State University told the panel the CSU had already made difficult reductions totaling roughly $460 million to align expenditures with revenues and warned that an additional cut of about $375 million would be "dire": "The proposed cut of approximately 8% or $375,000,000 places this progress in jeopardy," Garcia said, listing program suspensions, eliminated course sections and larger class sizes as likely consequences.

California Community Colleges Chancellor Sonia Christian described heavy recent enrollment growth at the collegesshe said California community colleges now enroll more than 2.1 million students and reported a 9.6% enrollment increase systemwideand urged the Legislature and the administration to fund growth and key student supports. "The current 0.5% growth is woefully inadequate," Christian said, and asked lawmakers to consider increasing that growth factor to better match actual enrollment.

Analysts and system leaders repeatedly flagged the governors plan to defer portions of the multiyear compact rather than provide immediate ongoing funding. The LAO recommended the Legislature reject the proposed deferral arrangement, saying it would commit the state to future obligations without a clear, realistic plan to meet them. Chavez of the Department of Finance said the administration views the compact and the control section as different policies but that the administration expects campuses to honor the compacts commitments in anticipation of future payments.

Committee members pressed officials on reserves, vacancy savings and how campuses could grow enrollment while absorbing cuts. The LAO told members that CSU reported about 34 days of reserves systemwide and UC about six days of uncommitted reserves. System leaders said many campuses are relying on hiring freezes and uncommitted reserves to absorb near-term pressure while cautioning that sustained reductions would reduce services, course offerings and student support.

Public comment emphasized the human consequences of cuts. Students, faculty and union leaders urged full funding for UC and CSU and asked legislators to reject cuts that would result in course reductions, staff layoffs and closures of programs.

The subcommittee did not vote on any budget actions. Members said the hearing was an opening for a full series of hearings this spring; Alvarez and other members asked system leaders and administration staff to return with more detail as the May revise approaches and as the Legislature crafts its budget response.

Ending: The subcommittee will continue hearings on higher education funding and specific campus proposals in the weeks ahead as the Legislature and administration negotiate final 2025-26 budget language.