The Big Picture

Over the course of the State of the State Address and a briefing from the Department of Finance late last week, the Governor released his final budget. He proposed a $348.9B balanced budget and emphasized continued progress and building long-term fiscal resilience as his guiding principles.

CASBO appreciates Governor Newsom’s continued commitment to public education and his focus on sustaining core education operations. We support the decision to refrain from creating new education programs and instead prioritize stability and sustainability. Local educational agencies are already managing rising costs, enrollment volatility, and complex program requirements, and they need predictable, flexible funding to plan responsibly and direct resources where they are most effective and aligned with local priorities.

While the Governor’s proposal includes important investments, particularly in special education, and provides flexible funding that aligns with the principles of local control, we remain deeply concerned about the proposed $5.6 billion underfunding of Proposition 98 in the 2025-26 year. Proposition 98 funding is constitutionally owed to support today’s students, and deferring these dollars shifts financial risk to local educational agencies that must balance budgets in real time.

Why It Matters

The release of the Governor’s budget begins a roughly 6-month long process to shape the final budget for the 2026-27 fiscal year. Through a series of legislative hearings and engagement with policy makers, CASBO will share member input and priorities to protect Proposition 98, reinforce fiscal sustainability, and ensure state budget decisions respect local control and the operational realities facing school districts and county offices of education.

Join the Conversation

CASBO’s advocacy team will discuss the highlights from the budget in the January Budget Webinar free to members on Friday, January 16th at 12 pm. Register here.

Budget Snapshot

• Total budget: $348.9B
• General Fund: $248.3B
• Reserves: $23B total
  • $4.1B in the Public School Rainy Day Fund

Proposition 98 at a Glance

• Prop 98 funding:
  • 2024-25: $123.8B
  • 2025-26: $121.4B but proposes underfunding the guarantee at $115.9B
  • 2026-27: $125.5B
• Three-year increase: $21.7B in the three years relative to the 2025 Budget Act
• Per-pupil funding at an all-time high:
  • $20,427 (Prop 98)
  • $27,418 (all sources)

Local Control Funding Formula (LCFF)

• COLA: 2.41%
• Discretionary increase: $2B statewide
• Deferrals: $1.9B is fully repaid in 2026-27

Special Education

• COLA: 2.41%
• $509M ongoing Proposition 98 General Fund

Discretionary Block Grant

• $2.8B one-time Proposition 98 General Fund
  • Early indications are that, like last year, the funds will be fully discretionary, allocated on a per-pupil basis, and without additional reporting requirements.
  • Can support the statewide priorities of:
    • Professional Development for:
      • ELA/ELD Framework
      • Math Framework
      • TK instruction
    • Teacher recruitment & retention
    • Dual enrollment and career pathways

Expanded Learning Opportunities Program

• $62.4M ongoing Proposition 98 General Fund
  • Guaranteed per pupil amount of $1,800 for Tier 2 LEAs
  • Will bring total program funding to $4.7B

Learning Recovery Emergency Block Grant

• $757.3M one-time Proposition 98 General Fund
  • Final payment
  • Funds must be used to support learning recovery through 2027-28
  • Subject to a needs assessment and must be incorporated into the LCAP

Educator Workforce

• $250M one-time Proposition 98 General Fund 
  • Teacher and Counselor Residency Program

Community Schools

• $1B Proposition 98 General Fund
  • Supports the expansion of the community school model to additional schools serving large high needs populations

School Facilities

• $1.5B in Proposition 2 bond funds

System of Support

• $13.3B ongoing Proposition 98 General Fund 
  • For County Offices of Education to provide universal and targeted support for LEAs, including those identified for Differentiated Assistance
• Updated eligibility criteria for Differentiated Assistance

Charter School Accountability

• Proposes new requirements for charter schools to address fraud, improve accountability, and ensure public funds are properly used
• Proposes use of verified data until June 30, 2028

Education Governance

• Proposes to implement recommendations from the 2002 Master Plan for Education to improve state governance of TK-12 Education
  • Moves the California Department of Education under the State Board of Education
  • Provides additional authority to the Superintendent of Public Instruction to strengthen coordination and alignment between the education segments
• See CASBO’s statement in support of this proposal here

What’s Next

• Learn more: CASBO January Budget Webinar January 16 at 12:00 PM
  • Free for members (registration required)
• Additional details via Budget Trailer bill expected early February

Materials

Governor’s Budget Summary

TK-12 Education Summary

Education Budget Agency Report

TK-14 Facts and Figures