CCFC Budget Update: Legislature Takes Action on FY 2025-26 Budget & Capital Outlay Program

Sunday, June 15 is the constitutional deadline for the California Legislature to pass a balanced budget for FY 2025-26. On Friday, June 13, both the Assembly and Senate passed budget bill SB 101, which contains the “Legislature’s Version” of the budget and signals a “two-party agreement.” This action means that the Legislature and Governor were not able to come to an agreement on the final budget before the June 15 deadline. Passage of the Legislature’s Version sets up conditions for final negotiations between the Legislature and the Governor, as they work toward a “three-party agreement.”

SB 101 includes $232 billion in General Fund expenditures. The Governor and Legislature appear to agree on the size of the budget problem to be solved. The Legislature’s Version includes $12.3 billion in budget solutions, which aligns with the Governor’s estimate of a $12 billion deficit in FY 2025-26. These solutions include a mix of spending reductions ($3.5 billion in FY 2025-26), revenue/borrowing ($7.8 billion), and other solutions like fund shifts, deferrals, and delays ($1.0 billion). The Legislature’s Version rejects a number of the Governor’s proposals, including cuts to safety net programs and UC and CSU. It includes provisions aimed at housing affordability and emergency relief for local governments to address wildfire recovery in Los Angeles and transit challenges in the Bay Area. The Legislature’s Version cautions that the overall budget picture includes significant uncertainty tied to the economy and potential Federal policy actions.

The Legislature’s Version of the budget includes the following provisions that may affect community college facilities.

Community College Capital Outlay

We have good news to report! The Governor’s January budget proposed $51.5 million (one-time Proposition 2 bond funds) for 29 new community college capital outlay projects for the preliminary plans and working drawings phases (and in one case for performance criteria). The Governor’s May Revision made minor changes to this proposal, to remove one new project (Grossmont-Cuyamaca CCD, Grossmont College – Gymnasium) and to add one new project (Los Rios CCD, American River College – Davis Hall), maintaining the total of 29 new projects at $54.7 million in FY 2025-26 (worth approximately $775 million through construction). The Governor also proposes to fund the construction phase for one continuing project worth $13.8 million (one-time Proposition 51 bond funds): Peralta CCD, College of Alameda – Aviation Complex Replacement.

As the Legislature considered the capital outlay proposal during budget subcommittees, the Legislative Analyst’s Office raised concerns, including that the share of funding allocated for modernization projects could be too low, and that nearly one third of the projects are gymnasiums (9 out of 29). See this prior CCFC update for more information.

CCFC advocated in support of the Governor’s January budget, with the adjustments made at the May Revision. We urged that any changes to the scoring system used to select state-funded projects should be done through a robust stakeholder engagement process, and should be applied prospectively to future funding rounds (not the FY 2025-26 funding round). We offered for CCFC to serve as a resource and partner in any such process to update the scoring criteria.

The Legislature’s Version of the budget adopts the Governor’s January budget proposal, as amended at the May Revision, without making changes to the selected projects. While not final until the Governor and Legislature reach agreement on the full FY 2025-26 budget, it is a good sign that they appear to be in alignment.

Click here to see the list of projects proposed for funding by the Governor. 

California Environmental Quality Act (CEQA)

The Legislature remains very focused on ways to improve housing production and affordability in California. As such, the Legislature’s Version of the budget includes a plan to adopt trailer bill language to amend the CEQA process for infill housing and other infrastructure projects. CCFC has not seen any details on this, but we have received indications that schools and community colleges could be included.

Student Housing

The Legislature’s Version of the budget does not include any new investments for student housing, in alignment with the Governor’s budget proposals. SB 101 includes a technical local assistance item providing $2.5 million to support payment of lease revenue bond debt service, as provided for in the schedule submitted by the Public Works Board.

Two colleges have indicated they are no longer moving forward with SB 169 affordable student housing projects, worth a total of $136.9 million. Additionally, there is $81.3 million in unspecified lease revenue bond authority within the SB 169 program. The Legislature’s Version of the budget does not appear to make any changes to these associated lease revenue bond authorizations (i.e. does not rescind the authority) or to any other statutory provisions of the SB 169 program, in alignment with the Governor’s proposals.

Other Community College Provisions

-        Student Centered Funding Formula (SCFF) – the Legislature’s Version approves the Governor’s May Revision proposal to provide $217.4 million (ongoing Proposition 98 General Fund) to support a 2.3% cost-of-living adjustment for SCFF apportionments.

-        Proposition 98 Funding Split – the Legislature’s Version modifies the Governor’s proposal to fund Transitional Kindergarten outside of the TK-12/California Community Colleges Proposition 98 funding split. Instead of applying that split in FY 2023-24 and FY 2024-25, the Legislature’s Version would commence this proposal in 2025-26, maintaining $260 million at the community colleges for the prior and current fiscal year. This issue is related to “rebenching” the Minimum Guarantee to reflect implementation of universal Transitional Kindergarten at the K-12 level.

-        Deferral – the Legislature’s Version modifies the Governor’s May Revision proposal to defer $531.6 million (Proposition 98 GF) in SCFF funding from 2025-26 to 2026-27. Instead, the Legislature’s Version defers $377.5 million.

-        Student Support Block Grant – the Legislature’s Version includes $80 million (one-time Proposition 98 General Fund) to support a student support block grant.

-        Technology Systems – the Legislature’s Version approves the Governor’s May Revision proposals to:

o   Withdraw the proposal for the Collaborative Enterprise Resource Planning Project – to achieve $168 million in Proposition 98 savings.

o   Reduce the investment in the Common Cloud Data Platform to $12 million (one-time Proposition 98) – to achieve $150.5 million in Proposition 98 savings.

Next Steps

It is important to emphasize that the work to pass California’s FY 2025-26 budget is still not complete. The Governor now has twelve days to sign, veto, or line-item veto SB 101. There will almost certainly be additional budget bills to amend SB 101 and reflect the final negotiated agreement. Additional trailer bills to implement budget policy changes will likely be forthcoming in the coming days and weeks, and again in August when the Legislature returns from summer recess. Stay tuned for additional information from CCFC on any significant changes to the provisions highlighted above in the final negotiated budget for FY 2025-26.

Rebekah Kalleen
CCFC Executive Director