CCFC State Budget Update: Legislature Considers Governor’s Proposals & CCFC Budget Advocacy

As we await the Governor’s updated May Revision budget proposal, the Legislature continues its in-depth review of the Governor’s January budget proposal for FY 2026-27. Below is an update on state revenues, capital outlay proposals, and CCFC’s budget advocacy.

State Revenue Projections Adjusted Upward

In January, the Governor estimated that the state would face a modest budget deficit of $2.9 billion in FY 2026-27. This was in contrast to a larger deficit of $18 billion projected by the Legislative Analyst’s Office (LAO) in November 2025. In February 2026, the LAO revised its revenue estimates, predicting that revenues from the state’s three largest taxes (income, corporation, and sales) are likely to come in ahead of the Governor’s assumptions for current year 2025-26 and are about in line with the Governor’s assumptions for budget year 2026-27. However, the LAO still cautions that the risk of a revenue downturn in the next year or so is still too great to ignore, with income tax collections boosted by a roaring stock market that has doubled since 2020 and is up 70% in the last three years alone. Jason Sisney, the Assembly Speaker’s chief budget consultant, estimates that an upward revenue adjustment of between $10 billion and $30 billion could be possible across the two fiscal years of 2025-26 and 2026-27.

The Governor and the LAO estimate ongoing structural deficits of between $22 billion and $35 billion beginning in FY 2027-28. As such, this week the Governor shared that he will propose additional budget cuts at the May Revision despite revenue increases, to address the structural deficit in his final year as Governor.

If the Governor and Legislature recognize additional revenues, there will likely be an increase in funds available for TK-12 and community colleges under the Proposition 98 Minimum Guarantee. What remains to be seen is how they will treat an increase to Proposition 98 in the current year 2025-26. In January, the Governor estimated an increase of constitutionally-guaranteed Proposition 98 funding to $121.5 billion, but he proposed to appropriate only $115.9 billion in FY 2025-26 and defer payment of $5.6 billion to TK-14 to future years, creating a “settle-up” obligation. This proposed settle-up obligation could increase if 2025 tax revenues come in above the January projections. Education management groups oppose creation of a settle-up payment and are urging the state to fully fund TK-14 education. The LAO raised concerns with creating a settle-up payment that would need to be repaid in future years that face looming structural deficits. Instead, the LAO recommends fully funding the Proposition 98 Minimum Guarantee, but depositing some of the additional funding into the Proposition 98 reserve. Increases in one-time funding provide a potential source for priorities such as deferred maintenance.

Legislative Budget Subcommittees Discuss CCC Facilities Funding Proposals

The Governor’s budget includes the following proposals in FY 2026-27 for community college facilities funding:

• Capital Outlay: $736.9 million (Proposition 2 bond funds), including:
  • $27.8 million for the design phase (Preliminary Plans and Working Drawings) of 10 new projects worth $399 million in State funding through construction
  • $709 million for construction of 29 continuing projects
• Deferred Maintenance: $120.7 million (one-time Proposition 98 General Fund) for the Scheduled Maintenance and Instructional Support Program.

The Assembly Budget Subcommittee No. 3 on Education Finance discussed these proposals on April 21, 2026. Regarding the capital outlay program, the LAO noted that the budget proposal is a “reasonable starting point,” but stated that the Legislature could choose to adjust how much funding it provides in FY 2026-27. If more projects were authorized, they could avoid construction cost escalation in future years. Alternatively, if fewer projects were funded, then resources would be available for high-priority projects, including life safety projects, that could emerge in the next few years. Additionally, the LAO raised the idea of directing the Chancellor’s Office to adjust the scoring system to address issues such as allocating a larger share of funding toward modernization projects, limiting each campus to one Proposition 2 project across all years, or capping the share of funding going toward “campus completion” projects. Chris Ferguson, Executive Vice Chancellor of Finance and Strategic Initiatives at the California Community Colleges Chancellor’s Office, indicated that they did an in-depth review of the scoring system, which was updated in 2020, after the LAO raised questions about the projects proposed for funding in FY 2025-26.

The Department of Finance noted that there will be approximately $249 million remaining in Proposition 2 bond authority for future new projects if the Governor’s budget is adopted.

CCFC Budget Position and Advocacy

CCFC has adopted the following budget positions for FY 2026-27:

• Capital Outlay Projects – CCFC supports the Governor’s January budget proposal to provide $736.9 million in Proposition 2 General Obligation bond funds, including $27.8 million for the design phase of 10 new capital outlay projects and $709 million for the construction phase of 29 continuing projects.
• Deferred Maintenance – CCFC supports the Governor’s January budget proposal to provide $120.7 million (one-time Proposition 98 General Fund). We request an increase to this funding if economic conditions allow for additional one-time investments. We also request trailer bill language to eliminate the statutory project funding caps for architectural barrier removal and seismic retrofit projects, which are currently capped at $1,103,000.

We expressed these positions during public comment in the Assembly Budget Subcommittee hearing. Additionally, we recommended that any potential changes to scoring methodology should be prospective, applying only to projects funded by a future bond, as districts have already prepared their applications using the scoring methodology currently in place.

Next Steps

Final decisions will be made on the community college capital program and deferred maintenance as part of the final negotiated FY 2026-27 budget. The Governor will release his May Revision budget, updated with revenues from April tax revenues, by May 14. The Legislature must adopt a balanced budget by June 15.

Rebekah Kalleen
CCFC Executive Director