Today, Governor Gavin Newsom released the May Revise summary with an unusual approach of delivering a proposal that includes solutions for two years of budget problems in a single budget. Also unusual for the summary, fewer details than normal are included on the specifics of the budget for K-12 schools.

In his press conference this morning, the Governor emphasized revenue volatility and fluctuations in capital gains as the need to look to the out-years to resolve ongoing deficit issues.  The overall proposal reflects a balanced budget of $288.1 billion.

At May Revision, the budget shortfall is currently $27.6 billion, compared to $37.9 billion in the Governor’s January Budget. While the May Revise acknowledges an additional shortfall of $7 billion, it notes that $17.3 billion of solutions were already addressed in the Early Action Plan passed by the legislature in April (as illustrated in the chart below).

The May Revision maintains the Governor’s Budget withdrawal of approximately $12.2 billion from the Budget Stabilization Act (BSA), as well as $900 million from the Safety Net Reserve. The BSA withdrawals are spread over two fiscal years, utilizing $3.3 billion in the 2024-25 fiscal year and $8.9 billion in the 2025-26 fiscal year.

In addition, the May Revision includes withdrawals from the Public School System Stabilization Account of approximately $8.4 billion to maintain predictable support for local educational agencies and community college districts.  Further details regarding this component are likely forthcoming.

Proposition 98

The summary released today does not include the traditional chart outlining annual Proposition 98 funding levels for the entire three-year budget window.  That will likely be forthcoming from the Department of Finance.

A slide included in the Governor’s presentation displayed per-pupil Proposition 98 funding levels of $17,502 total per pupil spending and $23,940 in all funds per pupil spending at May Revise, compared to $17,653 total per pupil spending and $23,519 all funds per pupil spending, from the Governor’s January Budget.

Statutory Cost-of-Living Adjustment (COLA)

In his press conference today Governor Newsom made reference to a COLA of 1.07 percent, but did not provide details on whether he is proposing to fully fund that COLA or how it would be funded. The Governor did not elaborate on the specifics, however, more details are expected next week.

CASBO supported fully funding the statutory COLA of 0.76 percent in the January Budget proposal for the Local Control Funding Formula (LCFF), and categoricals such as special education and school nutrition.

 

Other K-12 Education Budget Adjustments

To address the projected budget shortfall and multi-year operating deficits, the May Revise proposes one-time and ongoing General Fund solutions to achieve a balanced budget in both the 2024-25 and 2025-26 fiscal years.

This section highlights the Budget’s significant proposed adjustments to various educational programs outside of the LCFF.

 

Learning Aligned Employment Program

  • Reducing $485 million one-time, which reflects the balance of unspent one-time Learning-Aligned Employment Program resources.

Golden State Teacher Grant Program

  • Reducing $60.2 million one-time support for the Golden State Teacher Grant Program. Combined with a technical adjustment, $50 million one-time support for this program would remain.

Middle Class Scholarship Program

  • Reducing $510 million ongoing support for the Middle Class Scholarship program. Combined with a technical adjustment, $100 million ongoing support for this program would remain.

California Preschool, Transitional Kindergarten and Full-Day Kindergarten Facilities Grant Program

  • Reducing a planned 2025-26 investment of $550 million that would have supported the California Preschool, Transitional Kindergarten, and Full-Day Kindergarten Program. Such an investment could be considered for inclusion in education facilities bond proposals being contemplated by the Legislature.

School Facilities Aid Program

  • Eliminating the remaining $375 million one-time in planned support for the School Facilities Aid Program. The Early Action package previously reduced a planned investment of $875 million one‑time General Fund by $500 million one-time General Fund.

Preschool Inclusivity

  • Eliminating the planned General Fund investments of $47.9 million in 2025-26 and $97.9 million ongoing starting in 2026-27 that would have supported California State Preschool Program adjustment factor costs for State Preschool to serve at least 10 percent of students with disabilities by 2026-27. Providers would continue to be required to serve at least 5 percent of students with disabilities.

 

What’s Next

Budget Details: Once released, CASBO will analyze the language in greater detail and release updates via NewsBreak.

Legislative Committee: CASBO’s legislative committee is meeting on Thursday, May 16, 2024, to discuss the May Revision, hear from the Department of Finance and develop CASBO’s response to the May Revision.

Legislative Budget Hearings: The legislature will begin hearings in the budget committees and subcommittees to discuss the May Revision in the coming weeks. The Legislature has until June 15th to pass a balanced State Budget.

Materials

Governor Newsom’s State Budget Presentation

May Revision Fact Sheet

Statement from the Senator Pro Tempore Mike McGuire and Budget Chair Scott Weiner

Statement from the Assembly Speaker Robert Rivas and Budget Chair Jesse Gabriel