Governor Releases May Revision

Governor Releases May Revision: Updated 5/15/25

Today, the Governor released his May Revision budget update for FY 2025-26, which includes $321.9 billion in total spending (including $226.4 billion in General Fund).

The Governor opened his press conference by discussing the climate of “deep uncertainty” that California faces as a result of Federal policy changes. He highlighted that California is currently the fourth largest economy in the world, with $4.1 trillion per year in output. As such, the Governor indicated that tariffs and other Federal policy changes have had a “disproportionate” impact on California. The Governor said he does expect cuts from the Federal government, but this assumption has not been built into the May Revision presented today. The May Revision does not forecast a traditional recession, but it does reflect changing national conditions that “economists consider to be a ‘growth recession’ – marked by a substantial slowdown in Gross Domestic Product growth combined with lower job growth and higher unemployment.”

The Governor shared that revenue from January to April 2025 exceeded budget expectations by $7.9 billion. However, the May Revision now estimates a $16 billion deficit over the next two years, including $12 billion in FY 25-26, due to reduced capital gains, weaker corporate taxable profits, and lower wages and Personal Income Tax withholdings, which the Governor attributed to the Federal policy changes. The Governor emphasized that the size of this problem is mild compared to prior years, calculating that the estimated deficit represents 5.8% of the General Fund budget. The May Revision includes solutions such as spending reductions, internal borrowing, and fund shifts. It maintains a planned withdrawal of approximately $7.1 billion in reserves from the Budget Stabilization Account and maintains a total reserve balance of approximately $15.7 billion at the end of FY 25-26.

Community College Capital Outlay

The Governor’s January budget proposed to begin implementation of Proposition 2, the state school bond passed by voters in November 2024. This included $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) would 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.  

The Legislature has been reviewing this proposal. For more information, see this recent CCFC update: Legislature Reviews the Governor's Prop 2 CCC Capital Outlay Budget Proposal

The May Revision does not include significant changes to this proposal. However, we are hearing there are a few adjustments to a handful of individual projects, with additional information to be available in the coming days.

Update 5/15/25: In the “Joint Analysis – Governor’s 2025-26 May Revision” document, the Chancellor’s Office reports the addition of one new project (Los Rios, American River College – Davis Hall – Total Cost $81,143,000). They also report the removal of one new project (Grossmont-Cuyamaca CCD, Grossmont College – Gymnasium) and one continuing project (Coast CCD, Golden West College: Fine Arts Renovation) at the districts’ request.

Student Housing

The Governor’s January budget did not include any 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. The Administration is continuing to work with community colleges to successfully implement projects that received funding awards in prior budgets, and we are awaiting additional detail from the Governor’s May Revision trailer bill proposals for any other proposed changes.

Update 5/15/25: On the evening of 5/14/25, the Chancellor’s Office released the “Joint Analysis – Governor’s 2025-26 May Revision” document, which states: “Since the implementation of the enacted budget, two student housing projects at College of the Canyons and San Diego City College are no longer moving forward as originally considered. The College of the Canyons has rescinded its plans, while San Diego City College has indicated its plans to utilize an alternative financing structure. In response to these changes, the May Revision rescinds its $136.9 million allocation to support these affordable student housing projects. In addition, the $81.3 million in unspecified appropriation provided in the 2023-24 State Budget for affordable housing has also been rescinded.”

Additionally, the Chancellor’s Office has shared in an email sent on the evening of 5/14/25 that, “in response to California’s fiscal condition, the Department of Finance has indicated that colleges with Higher Education Student Housing Construction Statewide Lease Revenue Bond funding will not receive additional state funding and will need to address cost overruns locally and/or build the project to the current budget.” 

CCFC is in the process of verifying this information, as it was not included in the Governor’s May Revision documents that are made available to the public, including the May Revision summary and proposed trailer bill language that was posted by the Department of Finance as of noon on 5/15/25.

The Governor’s January budget did not include any support for deferred maintenance and instructional support. The May Revision does not appear to make any change to this.

Proposition 98

The revised Minimum Guarantee for TK-14 schools is calculated to be $98.5 billion in 2023-24, $118.9 billion in 2024-25, and $114.6 billion in 2025-26. These revised Proposition 98 levels represent an increase of approximately $2.9 billion over the three-year period relative to the 2024 Budget Act, which is a decrease of approximately $4.6 billion from the Governor's January Budget. 

The May Revision proposes to appropriate the 2024-25 Guarantee at $117.6 billion, instead of the currently calculated level of $118.9 billion. This is generally consistent with the Governor’s January Budget, however the difference between the appropriated and the calculated levels is less than at the Governor's January Budget, at $1.3 billion instead of $1.6 billion. This proposal is due to the “inherent risk in revenue projections.”

The Proposition 98 Minimum Guarantee is “rebenched” to reflect continued implementation of universal Transitional Kindergarten at the K-12 level and property tax backfills related to the January 2025 fires in the county of Los Angeles. The May Revision indicates that over the three-year budget window, this has resulted in $492.4 million in increased resources for community colleges. The May Revision shifts the full TK expansion funding to the TK-12 education side of the Proposition 98 budget, reducing by a like amount from community colleges. 

Additional Community College Issues

• Student Centered Funding Formula (SCFF) Growth Adjustment, Deferral, and Reserves – An ongoing increase of $109.5 million to fund 2.35 -percent enrollment growth in the SCFF in 2025-26, which is an increase from the Governor’s January Budget proposal of 0.5 percent. To fully fund the SCFF and maintain the level of 2025-26 apportionments, the May Revision proposes deferring $531.6 million in SCFF funding from 2025-26 to 2026-27. Budgetary deferrals of $243.7 million for the CCCs from the 2024 Budget Act are fully repaid in the three-year budget window. To fully fund the SCFF, the May Revision uses $59 million from the Proposition 98 Rainy Day Fund to support SCFF costs in 2025-26.
• CCC Categorical Program COLA – To reflect a change in the cost-of-living adjustment from 2.43 percent to 2.3 percent, the May Revision includes an ongoing decrease of $12.9 million Proposition 98 General Fund for the SCFF and an ongoing decrease of $122,000 Proposition 98 General Fund for select categorical programs and the Adult Education Program.
• Reductions to January Proposals – The May Revision includes reductions to the following proposals in the Governor’s January budget:
  • Collaborative Enterprise Resource Planning (ERP) Project – Withdrawal of a one-time investment of $168 million one-time Proposition 98 General Fund for the Collaborative ERP Project, which would have funded the procurement of an ERP platform to upgrade outdated systems that aimed to standardize student and staff experience throughout the CCC system.
    
  • Common Cloud Data Platform – A $150.5 million reduction to a one-time investment of $162.5 million, of which $29 million was ongoing, for the Common Cloud Data Platform, which will leverage existing local districts’ student data systems to provide near real-time data reporting. When accounting for this reduction, the May Revision provides $12 million one-time Proposition 98 General Fund for this initiative.
  • Career Passport and Credit for Prior Learning – The May Revision reduces the Career Passport proposal from $50 million to $25 million one-time and the Credit for Prior Learning proposal from $50 million to $15 million one-time and from $7 million to $5 million ongoing. These proposals are part of the Administration's investments in the Master Plan for Career Education.

Next Steps

Over the next few weeks, the Senate and Assembly will continue to review the Governor’s budget proposals, working toward a constitutional deadline of June 15 to pass the budget for FY 2025-26. The Legislature and Governor will also develop trailer bills that contain policy changes to enact the budget.

Rebekah Kalleen
CCFC Executive Director