Today, the Department of Finance released the proposed budget details, and Director Joe Stephenshaw provided additional comments on the proposed budget. He opened the press conference by acknowledging the devastating effects of the fires in Southern California, which occurred after the budget proposal had been prepared. When asked how the fires may affect this year’s budget process, Mr. Stephenshaw noted that a lot of the costs should be reimbursed by the Federal government, and he highlighted numerous items that support fire prevention and response throughout the budget.

Today’s more casual public release reinforced the Governor’s primary message from Monday: because the FY 24-25 budget included two years of solutions aimed at stabilizing a large deficit, the FY 25-26 budget should be relatively straight-forward and uneventful. Mr. Stephenshaw indicated that this two-year budget framework positioned California on more stable fiscal footing. The FY 25-26 budget remains “roughly balanced” and anticipates a modest $363 million surplus, and there is no need for additional solutions beyond what was agreed to in FY 24-25.  

The Governor’s budget includes $322.2 billion in total spending ($228.9 billion General Fund). On Monday, the Governor stated that revenues are $16.5 billion above what was predicted for FY 24-25, but he cautioned that we should remain mindful of the revenue volatility associated with California’s progressive tax system, which relies disproportionately on high income earners. As such, the Governor’s budget proposes changes to the Budget Stabilization Account to mandate increased deposits during revenue boom years. 

The Governor indicated that this budget “holds the line” on commitments to education spending made in the FY 24-25 budget. The revised Proposition 98 Minimum Guarantee for K-12 and community colleges is calculated to be $98.5 billion in 2023-24, $119.2 billion in 2024-25, and $118.9 billion in 2025-26. This is an increase of approximately $7.5 billion over the three-year period relative to the 2024 Budget Act. However, the budget proposes to appropriate the Guarantee at $117.6 billion (instead of $119.2 billion) in 2024-25 to mitigate risk of appropriating more resources than are ultimately available. 

CCC Capital Outlay Program and Proposition 2 Implementation

The Governor’s budget begins to implement Proposition 2, the state school bond passed by voters in November 2024. The budget includes $80.1 million General Obligation bond funds for 31 community college capital outlay projects. Of that, $51.5 million (one-time Proposition 2 bond funds) will be provided to 29 new community college capital outlay projects for the preliminary plans and working drawings (and in one case for performance criteria) phases. Click here for a list of all the proposed projects.

Student Housing

The FY 2025-26 budget summary does not include any reference to additional investments for student housing. The Chancellor’s Office has requested an additional $1.1 billion for affordable student housing projects using the statewide lease-revenue bond approach adopted in the 2024 state budget. To date, $1.1 billion in state funds have been awarded to 19 projects.

Deferred Maintenance 

The FY 2024-25 budget did not include any support for deferred maintenance and instructional support. The FY 2025-26 budget summary does not include any reference to additional investments for deferred maintenance.

Proposition 4 – Climate Bond 

The budget allocates resources to begin implementing Proposition 4, the $10 billion climate bond passed by voters in November 2024. The budget proposes to allocate $2.7 billion in FY 25-26 for programs to address water quality, wildfire and forest resilience, coastal resilience, extreme heat mitigation, biodiversity and nature-based solutions, climate smart agriculture, outdoor access, and clean air and energy. 

Master Plan for Higher Education

In 2023, the Governor called for a new Master Plan for Career Education through Executive Order. The purposes of the Master Plan are to align state education and workforce development programs with the needs of the future economy, better coordinate and streamline those programs regionally and across state agencies, and ensure that the state’s students and adult learners have affordable access to needed educational and career development opportunities over the course of their working lives.

The FY 25-26 budget includes the following proposals to advance the new Master Plan for Career Education:

• $100 million (one-time Proposition 98 General Fund) for community colleges to expand Credit for Prior Learning and begin building the infrastructure for the state’s first “Career Passport” system to allow students to create formal documentation of their marketable skills and abilities developed through work, classes, apprenticeships, internships, or other experiences both inside and outside the classroom, with the intent of scaling the system in future years to be applicable at both the secondary and higher education levels.
• $5 million (ongoing General Fund) for the Government Operations Agency to establish a state planning and coordinating body for TK-12 education, higher education, and state economic and labor agencies, to improve forecasting of needed skills and coordination of resources and initiatives across state government in alignment with recommendations from the Master Plan for Career Education. 
• $4 million (one-time General Fund) to support regional coordination for career education and training.
  

Other CCC Issues

• CCC Apportionments – The budget includes an increase of $230.4 million (ongoing Proposition 98 General Fund) to provide a 2.43% cost-of-living adjustment (COLA) for Student Centered Funding Formula apportionments and $30.4 million (ongoing Proposition 98 General Fund) for 0.5% enrollment growth.
• CCC Categorical Program COLA – $16.0 million (ongoing Proposition 98 General Fund) to provide a 2.43% COLA for select categorical programs and the Adult Education Program. 
• Statewide Technology Transformation – The budget includes $168 million (one-time Proposition 98 General Fund) for the completion of the Statewide Technology Transformation project to standardize and streamline data collection across the system. Project goals include automation of credit transfers between institutions, enhancing data security, cost savings relating to operational efficiencies, and the adoption of a cloud-based common enterprise system to unite college staff across the system.
• Systemwide Common Data Platform – The budget includes $162.5 million (Proposition 98 General Fund, of which $29 million is ongoing) for scaling of a common cloud data platform across the community college system to provide direct benefits to student supports. 

Next Steps

The Governor’s budget is a starting point for negotiations between the Administration and the Governor. The Legislature will review the Governor’s budget proposal, holding budget subcommittee hearings over the coming months. The Governor will update his budget proposal in May to reflect updated revenue projections based on 2024 income tax receipts. The Legislature will work to meet a constitutional deadline of adopting a budget by June 15. CCFC will provide additional information as it becomes available during this process.

Rebekah Kalleen
CCFC Executive Director