No cuts for schools, more funding for early literacy, in Newsom’s revised 2025-26 budget

TK-12 schools and community colleges can expect the same funding in 2025-26 that they received this year, plus a small cost-of-living adjustment, and there will be a big boost for early literacy, Gov. Gavin Newsom revealed Wednesday in the revision to his January state budget plan.

Schools and community colleges will be shielded from the pain facing other state services because of the revised forecast of a $12 billion drop in state revenues that Newsom blamed on the  “Trump slump” – the president’s erratic tariff and other economic policies that are affecting California.

For the University of California and California State University, the news was better than anticipated. The systems would face a 3% cut for 2025-26 –  notably less than the nearly 8% reduction Newsom proposed in January. The smaller cut may provide some relief at a time when higher education in California and across the nation is worried about losses in federal research grants and other funding under the Trump administration policies. 

The 2.3% cost-of-living adjustment in 2025-26 for most, but not all TK-12 programs, is determined by a federal formula that does not take into account the cost of housing, the biggest expense facing teachers and other employees.

In his  May budget, Newsom keeps significant money for TK-12 programs that he promised in January for fully rolling out transitional kindergarten for four-year-olds, along with extra funding to reduce class sizes, and for expanding summer and after-school learning to more districts.

And he would add $200 million to his earlier $543 million proposal for early literacy instruction, with money to buy instruction materials, hire literacy coaches, and train teachers in “evidence-based literacy instruction,” which is code for teaching phonics and word decoding as well as other fundamental reading skills.

That funding would take a significant step toward creating and funding a comprehensive early literacy strategy and coincides with compromise legislation, pushed by Assembly Speaker Robert Rivas, on spelling out what the instruction and reading materials should look like.

“We’re thrilled. We’re excited,” said Marshall Tuck, CEO of EdVoice, which pushed early literacy legislation. “In a really tight budget year, prioritizing reading for California kids and investing $200 million is real leadership.”

Newsom would also add to past efforts to recruit teachers by including $64.2 million in one-time funding for the Golden State Teacher Grant Program, under which teachers receive college tuition in exchange for agreeing to teach in underserved districts and in subjects facing critical shortages, and $100 million to pay stipends to student teachers. Unpaid student teaching has been cited as one of the primary reasons teacher candidates fail to complete their credentials. 

The Legislature has a month to reshape Newsom’s budget before the June 15 constitutional deadline to pass a budget for the fiscal year that starts on July 1.

What the budget doesn’t include, however, is any funding to backfill for the potential loss of billions of federal dollars in Medi-Cal funding for school physical and mental health services, cuts for Head Start programs, training grants for new teachers and research grants for UC and CSU, and the dismantling of the AmeriCorps program, which supplies teachers aides and tutors in hundreds of low-income schools.

“Our ability to backfill all these federal cuts –  no we’re not going to be in a position to do that, we just are not in that position,” Newsom said. “It’s the old adage, you can’t do everything but you can do anything. There may be areas where we can make adjustments.”

“I think we should be cautious about eliminating consideration of x, y, and z until we see the totality of the challenges as they present themselves.”

Higher education

State funding for the state’s system of 116 community colleges would be close to flat from last year. The system would receive about 0.6% less than last year, at $8.9 billion. However, some of its important funding — $531.6 million from Proposition 98 revenues — would be deferred for a year under the proposal.  

UC would have its funding cut by $129.7 million, while CSU would lose $143.8 million. In January, Newsom’s administration had proposed deeper cuts of $396.6 million and $375.2 million, respectively. 

The revised budget maintains a proposal to defer previously promised 5% budget increases until 2027-28 for both systems. Those deferrals, which were part of Newsom’s multi-year compact agreements with the systems, were also included in Newsom’s January budget proposal. 

The compacts, originally agreed to in 2022, promised annual budget increases for UC and CSU in exchange for the systems working toward goals such as increasing graduation rates and enrolling more California residents. 

“We were able to hold strong to that over a two year period. And we’re struggling now with some challenges,” Newsom said during a press conference Wednesday, though he added that the compacts are “sacrosanct” and that the systems would get their deferred dollars in 2027-28.

By reducing the proposed cut to UC’s budget for 2025-26, the 10-campus system will be able to minimize cuts to student support services and preserve “critical investments like affordable student housing construction,” President Michael V. Drake said Wednesday in a statement.

CSU Chancellor Mildred García in January warned that a nearly 8% state budget reduction would result in larger class sizes and fewer course offerings for the system’s more than 460,000 students, hampering their prospects for graduating on time. With those cuts now dialed back to 3%, García praised the May revision as a “thoughtful and measured approach to addressing the state’s fiscal challenges.”

Proposition 98 maneuvers

In total, the May revision proposes $45.7 billion for the state’s higher education institutions and the California Student Aid Commission.

The minimum funding for 2025-26 for Proposition 98, the formula that determines the portion of the General Fund going to TK-12 and community colleges, would be $114.6 billion, down from $118.9 billion  – $4.3 billion – from 2024-25 because of shrinking state revenues.

Newsom proposes to make up the difference by shifting numbers around,  depleting what was left in the Prop. 98 rainy day fund. Among other maneuvers, he would:

• drain the remaining $540 million from a fund that was $8.4 billion only two years ago, when the state faced a fiscal crisis;
• defer $1.8 billion that would be due schools in June 2026 by a month, to July 2026. Schools should notice little difference, although the maneuver does create a state obligation that must be repaid;
• withhold $1.3 billion due to schools and community colleges in 2024-25 in anticipation that the revenues for the rest of the year might come up short because of the further decline in state revenues.

This last maneuver grabbed the attention of the California School Boards Association, which filed a lawsuit over a similar effort last year and is threatening to do so again.

“Even in lean times, investing in public schools is California’s best economic strategy, so we cannot sidestep constitutional protections for public education nor underfund Prop 98 to offset shortfalls in other sections of the budget,” CSBA President Bettye Lusk said in a statement.

The immediate reaction to the budget proposal was positive, with some caveats.

“The bottom line is that amid a budget crisis, the governor is protecting every major investment in education,” said Kevin Gordon, president of Capitol Advisors, a consultant for school districts. “We want to make sure Prop. 98 funding is accounted for. As long as that’s the case, there’s not much to complain about.”

Scott Moore, head of Kidango, a nonprofit that runs many Bay Area child care centers, praised the commitment to universal TK while criticizing Newsom’s decision to suspend a cost-of-living adjustment for child care providers for low-income children and freeze funding for emergency child care services for foster and homeless children. 

“We know that small class sizes and highly qualified teachers are two of the most important quality standards to ensure children benefit from pre-k. This budget invests wisely in TK,” he said. “The proposed cut to the COLA for child care providers must be restored, Now is the worst time to eliminate a small, but very much needed and deserved COLA for those who take care of our youngest and most vulnerable children.”