California’s School Funding Forecast for 2025-26
In a surprising turn of events, the Legislative Analyst’s Office (LAO) projected increased funding for TK-12 schools and community colleges in 2025-26. This forecast comes on the heels of higher revenues than anticipated, which will likely result in a modest bump in the education budget for the upcoming fiscal year. The LAO’s projection provides a glimpse into what schools and colleges can expect when Governor Gavin Newsom unveils his budget in early January.
Implications of the Forecast
According to the LAO, the additional funding will not only help reduce the state’s debt to education but also replenish a rainy day fund that was depleted by the Legislature last year. However, a constitutional provision may prevent schools and community colleges from receiving billions in funding that they would otherwise be entitled to. This unexpected twist in the forecast has left many school groups surprised, as the increase in revenue will be deposited into the Proposition 98 reserve account rather than directly benefiting educational institutions.
Principal fiscal and policy analyst for the LAO, Ken Kapphahn, emphasized the importance of building reserves with one-time funding. He highlighted how crucial reserves were in preventing budget cuts to ongoing school programs last year, underscoring the significance of maintaining a healthy reserve for future uncertainties.
Complexities in State Funding
Proposition 98, a voter-approved formula that determines the minimum amount allocated to schools and community colleges, plays a significant role in state funding. The LAO’s projection for 2025-26 suggests a $1.5 billion increase above the approved amount for the previous year. However, unforeseen factors such as the spike protection adjustment may limit the growth in funding for the upcoming year, resulting in a lower-than-expected budget for education.
The forecast also takes into account the impact of declining student attendance on TK-12 revenue. Despite a gradual recovery from the Covid-19 pandemic, attendance is projected to decrease in the following years due to demographic shifts and changes in the school-age population. The expansion of transitional kindergarten for 4-year-olds may offer a temporary boost in attendance, but long-term trends indicate a decline in student numbers.
Looking Ahead
As California navigates the complexities of education funding, stakeholders are closely watching how the projected increase in revenue will be allocated. With competing interest groups vying for a share of the budget, Governor Newsom and the Legislature face the challenge of prioritizing educational programs while balancing financial constraints. The LAO’s forecast sets the stage for critical decisions that will shape the future of education in the state.
