Newsom’s last budget as governor would give schools and community colleges an unexpected $22 billion
Students wait outside a classroom at Valencia High School in Santa Clarita.
Credit: Jae C. Hong / AP Photo
Top Takeaways
- Budget proposal includes extending and increasing funding for the 2,500 existing community schools, teacher residencies, and multibillion dollar post-Covid learning recovery funding through 2027-28.
- $40 million is earmarked to continue screening all students in kindergarten, first and second grades to identify students at risk of reading difficulties.
- One-time infusion of $100 million to increase access to college and career pathways for high school students.
Schools and community colleges can expect billions of dollars in new funding, thanks to robust tax receipts tied to wealth from artificial intelligence companies, according to the governor’s 2026-27 state budget.
The state’s public universities would get hundreds of millions in new funding, a helpful infusion as they contend with federal cuts and threats.
The biggest surprise in the state budget, released Friday, is an unanticipated $22 billion in additional funding for TK-12 and community colleges, beyond what was projected in the 2025-26 budget passed by the Legislature in June.
This will raise state funding per student under Proposition 98 to a record $20,427 in 2026-27, according to the budget summary. Prop. 98 requires that about 40% of the general fund be allocated to schools and community colleges.
Budget summaries
You can find the full budget by areas here.
Prop. 98 also protects schools and community colleges from cuts. The University of California and California State University systems, on the other hand, compete with prisons, health care and environmental protection for their share of the general fund.
Total per-student funding, including federal money, will increase to $27,418, up 61% from $17,014 in 2018-19.
Gov. Gavin Newsom is using his final state budget as governor for a trio of education policy goals: paring back past debt, fulfilling guaranteed increases for ongoing expenses and committing money for landmark programs to ensure they continue after he leaves office in November.
Toward that end, Newsom is proposing significant money to extend and increase the 2,500 existing community schools, teacher residencies and multibillion dollar post-Covid learning recovery funding through 2027-28.
The tension in the coming months will be finding agreement with legislators who will want to strike a different balance.
Newsom’s budget summary indicates that a lot could change between now and the May revision, when an additional five months of revenue receipts and forecasts will likely provide a clearer picture of what to expect between now and the end of the next budget in June 2027.
“AI has been a driver of what we’ve seen in our revenues, and we know from the history of the markets, there may be a downturn, but it’s impossible to predict when that will actually happen, so we just need to prepare and be ready for that,” said Department of Finance Director Joe Stephenshaw during a press conference on Friday.
The proposed budget does not set aside money to cover potentially massive federal cuts to health, nutrition and child care. Backfilling additional cuts amid a growing state budget deficit will require additional revenue or serious cutbacks in other places.
The surplus $21.7 billion for schools and community colleges, from revised revenue receipts over the current and past two years, will be carved up several ways. Some of the money will refill an empty education-specific rainy day fund to $4.1 billion, and much of it will go to one-time spending for programs, including sustaining community schools, repaying money owed to schools and community colleges, called deferrals, and a new block grant that gives districts wide latitude in spending.
About $2 billion from a 2.4% cost-of-living adjustment, or COLA, for the Local Control Funding Formula will be a point of contention. The California School Boards Association has made a COLA-plus increase its primary aim for 2026-27, since districts’ expenses will far exceed the minimum COLA that is based on a national formula for costs of goods and services. Many districts face rising health insurance costs for employees, demands for higher pay and reduced funding due to declining enrollments.
More controversial will be the $5.6 billion Newsom proposes to withhold from the revised 2025-26 Prop. 98 funding guarantee. Arguing that the amount is legally binding, districts will want to apply it to raise base funding immediately and not retroactively at some future date.
Kevin Gordon, president of the consulting firm Capitol Advisors Group, is sympathetic with the districts. “It’s a borrowing scheme from schools to balance other parts of the general fund. It’s money districts need now,” he said.
The Department of Finance’s position is that the governor needs that cushion in case the state’s volatile, stock-market-dependent revenues fall in the coming months.
Screenings for reading difficulties
The governor’s proposal includes $40 million to continue screening all students in kindergarten, first and second grades to determine if they are at risk of reading difficulties, such as dyslexia. The screenings began this school year.
Newsom will also propose changes to “clarify the appropriate administration of the screeners to ensure the consistency and quality of results.” The proposed language is not yet available.
Current law allows school districts to screen children at any time of the school year. Researchers at the UC San Francisco Dyslexia Center recommend that to get the most accurate results, students in kindergarten should not be screened until they have had at least six to eight weeks of instruction, and that first and second graders should not be screened until at least four to six weeks into the school year.
— Zaidee Stavely
COLA increases for child care
The governor is not proposing to increase the number of low-income children receiving subsidized child care, despite having promised in 2021 to add 200,000 more slots by 2026, compared to 2020-21. So far, only 146,000 new subsidies have been added.
However, his proposal includes an increase of $89.1 million for a cost-of-living adjustment for the subsidies child care providers receive for caring for low-income children, and $157.9 million for one-time “stabilization payments” for subsidized child care and preschool providers. Child care providers have long advocated for increases.
Several advocates said Newsom should do more to backfill the cuts made by the federal government.
Mary Ignatius, executive director of Parent Voices California, which represents low-income parents whose children qualify for subsidized child care, said additional funding is needed, especially given President Donald Trump’s proposed cuts and a reduction in state cannabis tax revenue, a portion of which goes toward subsidized child care.
“While Trump is proposing to decimate our early education system, California has the opportunity to show the nation how we should treat our children, families and early educators by investing robustly in their success,” Ignatius said.
— Zaidee Stavely
More funds for teacher training
Residencies for teachers and counselors remain a priority in the new budget, with the state allocating an additional $250 million to the program.
Residents work alongside an experienced teacher-mentor for a year of clinical training while completing required coursework in a university preparation program.
The state invested $620 million into educator residencies over the last five years to address persistent educator shortages and improve instructional quality. Research shows that residents complete teacher preparation at higher rates and remain in the job longer.
The funds, which can be used through 2029-30, will be awarded by the end of this school year.
EdVoice CEO Marshall Tuck said that the investment in teacher residency programs is a positive step toward solving the teacher shortage, but expressed disappointment that the budget did not include new funding for the Golden State Teacher Grant Program. The grant program offers college tuition for those who agree to teach in hard-to-staff subjects or underserved cities.
“California cannot solve its student achievement challenges without sustained investments in recruiting and retaining excellent teachers in schools that need them most,” Tuck said in a statement. “As budget negotiations begin, we hope the governor and the Legislature will make strengthening our teacher workforce a bigger priority. Our students and teachers need our support.”
— Diana Lambert
Special education gets a boost
The number of students with disabilities in California is rising, while overall enrollment is decreasing. The governor’s budget proposes investing an additional $509 million in Prop. 98 funds. The rate increase will “now allow for full equalization of rates across the state,” said Joe Stephenshaw, director of the state Department of Finance. That means all districts would receive the same per-pupil rate in special education funding.
Rates have varied considerably across Special Education Local Plan Areas (SELPAs), regional agencies that provide funding and oversight for students with disabilities. In 2019-20, the Plumas Unified School District SELPA received $493 for average daily attendance, while Modoc County SELPA received almost double at $942.
The additional funding is important because roughly 60% of special education expenditures come from the general fund, and there are growing needs for students with disabilities, according to Veronica Coates, chair of the SELPA Administrators of California.
“These investments are particularly meaningful in fiscally tight times, and we recognize the effort to sustain support for students with disabilities while balancing broader statewide priorities,” said Coates in a statement to EdSource. “Funding equalization is an important step toward greater equity for students across California.”
— Emma Gallegos
Master Plan for Career Education gets one-time funding
In recent years, the state has been developing a Master Plan for Career Education to ensure students are prepared for fulfilling careers from an early age through high school, college and beyond.
The budget proposes using $100 million in one-time funding to increase access to college and career pathways for high school students, including expanding access to dual enrollment. It separately recommends that districts prioritize these programs using the $2.8 billion discretionary block grant.
“Dual enrollment is one of the most powerful equity levers we have,” said Christopher Nellum, executive director of EdTrust-West, a nonprofit focused on educational equity. “This is a victory for the students most marginalized by our education systems, one we are proud to have championed.”
— Emma Gallegos
the STATE BUDGET PROCESS
Governor’s initial budget proposal:
- Must be released by Jan. 10.
- Assumes an estimate of revenues the state will collect over the next 18 months (by June 30, 2026). Actual revenues often differ significantly due to economic conditions, federal policy, and unforeseen events, such as the destructive fires in Los Angeles.
May revision:
In mid-May, Newsom will submit a revised budget with an updated revenue forecast.
Legislature’s response:
The Assembly and Senate have until June 15 to hold hearings and respond with their own version.
Negotiation:
Behind closed doors, legislative leaders and the governor settle differences. Lawmakers sign off, and the governor signs the final version.
Governors have increasingly used the budget to rewrite statutes outside the legislative process. That’s why it’s important to read the fine print in massive “budget trailer bills” written after the budget is passed.
About 40% of the state’s general fund will go to schools and community colleges. The bulk goes to keeping schools running, but in some years, new money is spent on new programs, such as transitional kindergarten and community schools.
