May Revise Reflects New Economic Realities for 2025-26
On May 14, Governor Newsom released his May Revision to the January Budget proposal, which utilizes a combination of reductions, fund shifts, deferrals, delays, and reserves to close an estimated $12 billion shortfall.
Proposition 98, encompassing the funding for K-12 and community colleges, falls $4.6 billion below the January estimate across budget years 2024-25 and 2025-26, resulting from $3.9 billion in reduced General Fund and a $753 million decrease in local property taxes. Despite this, California Community Colleges are slated for important increases for next year over the 2024-25 budget, including:
- $217.5 million for a 2.3% Cost of Living Adjustment (COLA) in base apportionments (decrease of $12.9 million from the proposed January figure of 2.43%)
- $27.7 million for a 2.3% COLA applied to certain categoricals (decrease of $122,000 from the January figure of 2.43%)
- $139.9 million to fund growth at 2.35% (increase of $109.5 million from the proposed January figure of 0.5%)
- $210.2 million base adjustment to fully fund the SCFF in 2024-25
- $104.7 ongoing base adjustment to fully fund the SCFF in 2025-26
- $10 million increase to the Rising Scholars program (decrease of $20 million from the January figure of $30 million)
- $3.8 million one-time increase for 2024-25 and $8.1 million one-time increase for 2025-26 to backfill decreased property taxes for community college districts impacted by wildfires
- Other rollbacks in statewide technology and Master Plan for Career Education proposals
Most problematic for the community colleges is a proposed rebenching of how funding for Transitional Kindergarten is considered within Proposition 98. With its legislative origins in 2010, the commitment to universal access to Transitional Kindergarten began in 2021-22 with the decision to place it on the K-12 side of the Proposition 98 ledger (statutorily divided with community colleges at roughly 89/11 percent). The May Revise for 2025-26 proposes a removal of Transitional Kindergarten from the 89/11 equation, with the net effect of redirecting $492 million from community colleges to Transitional Kindergarten over a three-year period—2023-24, 2024-25, and 2025-26—of which $230 million is ongoing.
To soften the impact of this move, the May Revise offers a reappropriation of community college savings—prior unspent money that had been previously allocated—to fully fund the SCFF with one-time and ongoing funds. Additionally, the May Revise proposes deferring $531.6 million in SCFF funding from 2025-26 to 2026-27, akin to internal borrowing as this will be paid back.
While the League is not opposed to the expansion of Transitional Kindergarten, it is objecting to the redivision of Proposition 98 as the proposal would negatively impact community college funding. Similarly, while the League typically supports deferrals over cuts, the May Revise usage of deferrals as a mitigation strategy to accommodate changes in Proposition 98 could compromise available options should the state experience a more severe downturn in the future. This is particularly noteworthy insofar as economic conditions for 2025-26 have statutorily triggered a depletion of the designated reserves for Proposition 98 programs.
Both the Assembly and Senate are conducting hearings on the May Revise and will be voting on a final budget package by June 15. With the state’s fiscal year beginning July 1, the Legislature retains the ability to modify the budget by June 30.
Review the May Revise Summary on Higher Education, LAO Analysis of the May Revise, Joint Analysis of the May Revise, and related budget trailer bills.