SearchOverview
On Wednesday, May 14, 2025, Governor Gavin Newsom released the May Revision, which updates the 2025-2026 State Budget proposal with the latest economic forecasts and tax revenue information.
The Governor began his presentation by highlighting the strength of California’s key economic indicators such as our position as the 4th largest economy in the world, the increase in new business starts, and the strength of our research & development and tourism industries. In addition, he noted that federal government’s policies, such as tariffs, are negatively impacting California’s economy and budget outlook. Specifically, while revenues outperformed January projections by over $7 billion, the budget projects a $16 billion reduction over two years due to federal actions.
The Budget proposal at the May Revision forecasts a balanced Budget of $321.9 billion, down from $322.2 billion in January, which will be sent to the legislature. The general fund for this year is now $226.4 billion, down from $228.2 billion in January. The May Revision proposes $15.7 billion in reserves, down from $16.9 billion in January.
Updated Proposals
Proposition 98 General Fund
At the May Revision, the Proposition 98 Guarantee for 2024-25 and 2025-26 has been adjusted down. The revised Guarantee for TK-14 schools is calculated to be $118.9 billion in 2024-25 and $114.6 billion in 2025-26, down from January projections of $119.2 billion in 2024-25 and $118.9 billion in 2025-26. The 2023-24 Guarantee remains at $98.5 billion.
The May Revision continues to propose to appropriate the 2024-25 Guarantee at $117.6 billion, instead of the currently calculated level ($118.9 billion at May Revision) due to uncertainty of the revenue projections.
The May Revision includes total funding of $137.8 billion ($80.5 billion General Fund and $57.3 billion other funds) for all TK-12 education programs, up from the January budget proposal of $137.1 billion ($83.3 billion General Fund and $53.8 billion other funds). At the May Revision, per pupil funding is $18,839 in Proposition 98 and $24,314 when accounting for all funding sources, compared to $18,918 and $24,764, respectively, in the January budget.
Proposition 98 Rainy Day Fund
The May Revision maintains the mandatory withdrawal from the Public School System Stabilization Account (PSSSA) of the full $8.4 billion in 2023-24, same as the January budget.
The May Revision also proposes to reduce the mandatory deposit in 2024-25 to $540 million, down from $1.2 billion in January. Finally, the 2025-25 change in the Proposition 98 Guarantee eliminates the January proposal for a discretionary deposit of $376 million and at the May Revision, requires a mandatory withdrawal of $540 million. This will result in the exhaustion of the balance of funds in the PSSSA.
Local Control Funding Formula (LCFF)
At the May Revision, the Budget includes a LCFF cost of living adjustment (COLA) of 2.3%, down from 2.43% in January. This COLA and population growth adjustment will provide LEAs with $2.1 billion in discretionary funds, down from $2.5 billion in January
While deferrals of $246.6 million from 2023-24 and 2024-25 will still be fully repaid in the three-year budget window, at the May Revision, the Budget proposes a deferral of $1.8 billion in LCFF funding from June to July of 2026.
Student Support and Professional Development Discretionary Block Grant
At the May Revision, the total proposed Proposition 98 General Fund appropriation for the block grant has been reduced to $1.7 billion from $1.8 billion in January. The proposal largely remains unchanged and will provide LEAs with funds to address rising costs and support statewide priorities such as the English Language Arts/English Language Development (ELA/ELD) Framework, professional development on the Mathematics Framework, and teacher recruitment and retention. In addition, the budget trailer bill language continues to clarify that the use of block grant funds is fully discretionary and not limited to these priorities and are appropriated on an average daily attendance (ADA) basis.
Universal Transitional Kindergarten (TK)
In the 2025-26 school year, the Budget proposes to provide a total of $2.1 billion ongoing Proposition 98 General Fund to support the full implementation of TK and serve all children who turn four years old by September 1st of the school year they enroll, down from $2.4 billion in January. At the May Revision, the Budget also proposes to provide $1.2 billion in ongoing Proposition 98 General Fund to support lowering the student to adult ratio from 12:1 to 10:1 in all TK classrooms, down from $1.5 billion in January due to revised ADA estimates.
Expanded Learning Opportunities Program
The May Revision continues the support of the final fiscal implementation year for the Expanded Learning Opportunities Program, moving to universal access for LEAs with 55% or more unduplicated pupils. At the May Revision, the Budget proposes $515.5 million in ongoing Proposition 98 General Fund, an increase from the $435 million in January. In addition, the May Revision proposes $10 million to increase the minimum LEA grant from $50,000 to $100,000.
Literacy Instruction
The May Revision builds upon the $545.3 million of proposed investments made in the January Literacy Instruction package by including all the following:
- $200 million one-time Proposition 98 General Fund for the implementation of AB 1454 (Rivas) which would require evidenced-based professional learning for elementary school educators aligned with the ELA/ELD Framework.
- $10 million one-time Proposition 98 General Fund for the implementation of the free Multitudes reading difficulty screener. Multitudes is one of four screeners approved by the Reading Difficulties Risk Screener Selection Panel in December 2024 to assess students in grades K-2 for reading difficulties, including dyslexia, beginning in the 2025-26 school year.
- The authority to use funding from the federal Comprehensive Literacy State Development grant to leverage and expand existing statewide infrastructure, resources, and expertise to support the states literacy efforts.
Teacher Preparation and Professional Development
In addition to continuing the $100 million one-time Proposition 98 General Fund for the National Board Program extension, the May Revision repurposes the January proposal for $150 million one-time Proposition 98 General Fund for the Teacher Recruitment Incentive Grant Program to instead provide $100 million one-time Proposition 98 General Fund to fund stipends for prospective educators. This would result in $10,000 stipends for credential candidates completing five hundred or more hours of student teaching.
The May Revision proposes to extend the deadlines by one year, for clear credential candidates who received a waiver during the COVID-19 Pandemic to complete an induction program or two years of service, and for teacher candidates who received a waiver during the COVID-19 Pandemic to pass the Reading Instruction Competence Assessment. In addition, the May Revision proposes changes related to reading instruction competency assessments for credential candidates.
School Facility Program
The May Revision continues to propose the sale of $1.5 billion Proposition 2 bonds. Proposition 2 authorized a total of $8.5 billion in state General Obligation bonds for K‑12 schools to be allocated through the School Facility Program.
New at the May Revision, there is a proposed $177.5 million reduction in unused funds from 2023 Budget Act for the Office of Public School Construction. These funds were provided to support fire impacted schools through August of 2025. These schools are unable to use the funds ahead of that deadline and Proposition 2 funds will be available for this purpose moving forward.
New Proposals
Proposition 98 Funding Split
At the May Revision, the Budget proposes a change to how Proposition 98 funding is divided between TK-12 and Community Colleges to reflect the intent of “rebenching” related to the expansion of TK. Specifically, it proposes decoupling the TK “rebench” from the Proposition 98 split, which would result in an additional $419 million for the TK-12 segment.
Secondary School Redesign Pilot Program
The May Revision proposes $15 million one-time Proposition 98 General Fund for a pilot program to redesign middle and high school. The budget trailer bill language specifies that schools participating in this program will be required to develop programs that better serve the needs of all students through:
- personalizing the learning environment;
- integrating experiential education and new uses of technology; and
- supporting deeper learning.
TK Multilingual Learner Supplemental Funding
The May Revision proposes $7.5 million in one-time Proposition 98 General Fund to address reductions in LCFF supplemental/concentration grant funding due to the exemption of TK students from the English Language Proficiency Assessments for California (ELPAC). This funding is available through the 2026-27 school year while a new TK assessment for language proficiency is developed for implementation in the 2027-28 school year.
Unchanged Proposals
Proposition 98 General Fund – Tests and Rebenching
The Proposition 98 Guarantee is in Test 2 for 2023-24, although it is important to note it was suspended at $98.5 billion, and in Test 1 for 2024-25 and 2025-26. The Guarantee is “rebenched” from 39.2% to 39.6% to reflect enrollment increases for implementation of TK.
Master Plan for Career Education: TK-12 Education
The administration has been engaged in cross-agency collaborations to make it easier for Californians to receive college credits in high school and in recognition of their real-world experiences, leading to careers in high-demand fields. This led the release of the Master Plan for Career Education in April.
At the May Revision, dual enrollment and pathways programs remain proposed allowable uses of funds in the Student Support and Discretionary Block Grant and the Budget continues to include an increase of $3 million ongoing Proposition 98 for the California College Guidance Initiative and the Cradle-to-Career Data System.
Other K-12 Budget Adjustments
|
 |
What’s Next
The legislature will hold hearings in the budget committees and subcommittees to discuss the May Revision over the coming weeks. The Legislature has until June 15th to pass a balanced State Budget.
The Governmental Relations Team will host a webinar discussing the details of the May Revision on Monday, May 19th at 1:00 p.m. Free for CASBO members with advanced registration.
Materials
Governor Newsom’s May Revision Presentation
Statement from Senate President Pro Tempore Mike McGuire and Budget Chair Scott Weiner
Statement from the Assembly Speaker Robert Rivas and Budget Chair Jesse Gabriel
