TK-12 schools and community colleges can expect the same funding in 2025-26 that they received this year, plus a small cost-of-living adjustment, and there will be a big boost for early literacy, Gov. Gavin Newsom revealed Wednesday in the revision to his January state budget plan.

Schools and community colleges will be shielded from the pain facing other state services because of the revised forecast of a $12 billion drop in state revenues that Newsom blamed on the “Trump slump” — the president’s erratic tariff and other economic policies that are affecting California.

For the University of California and California State University, the news was better than anticipated. The systems would face a 3% cut for 2025-26, notably less than the nearly 8% reduction Newsom proposed in January. The smaller cut may provide some relief at a time when higher education leaders in California and across the nation are worried about losses in federal research grants and other funding under the Trump administration policies.

(This article originally appeared on EdSource.)

The 2.3% cost-of-living adjustment in 2025-26 for community colleges and most TK-12 programs is determined by a federal formula that does not factor in the cost of housing, the biggest expense facing teachers and other employees.

In his May budget revision, Newsom keeps significant money for TK-12 programs that he proposed in January for fully rolling out transitional kindergarten for 4-year-olds, along with reducing the average student-to-adult ratio from 12:1 to 10:1 in every transitional kindergarten classroom, and for providing summer school and after-school learning to more districts.

An Injection of Money for Early Literacy

Newsom would also add $200 million to his earlier $543 million proposal for early literacy instruction, with money to buy instructional materials, hire literacy coaches and train teachers in “evidence-based literacy instruction,” which is code for teaching phonics and word decoding as well as other fundamental reading skills.

That funding would take a significant step toward creating and funding a comprehensive early literacy strategy and coincides with compromise legislation, pushed by Assembly Speaker Robert Rivas, on spelling out what the instruction and reading materials should look like.

“We’re thrilled. We’re excited,” said Marshall Tuck, CEO of EdVoice, a Sacramento-based nonprofit organization that co-sponsored early literacy legislation. “In a really tight budget year, prioritizing reading for California kids and investing $200 million is real leadership.”

Martha Hernandez, executive director of Californians Together, an organization that advocates for English learners, agreed. Funding for training on teaching reading and for universal screening in the early grades for reading challenges recognizes the unique needs of English learners, she said. “We are heartened by Gov. Newsom’s continued commitment to literacy, especially for our English learners.”

Newsom would also add to past efforts to recruit teachers by including $64.2 million in one-time funding for the Golden State Teacher Grant Program, under which teachers receive college tuition in exchange for agreeing to teach in underserved districts and in subjects facing critical shortages, and $100 million to pay stipends to student teachers. Unpaid student teaching has been cited as one of the primary reasons teacher candidates fail to complete their credentials.

He also would spend $15 million on a pilot program to redesign middle and high schools to better serve all students and create a network of districts to share what they learn.

The Legislature has a month to reshape Newsom’s budget before the June 15 constitutional deadline to pass a budget for the fiscal year that starts on July 1.

Federal Cuts and State Priorities

What the budget doesn’t include, however, is any funding to cover the potential loss of billions of federal dollars in Medi-Cal funding for school health services, cuts in Head Start, training grants for new teachers, and research grants for UC and CSU. He assailed the “assault on AmeriCorps — $400 million just whacked under the guise of ‘efficiency’ — and praised AmeriCorps volunteers who helped fire recovery efforts in Los Angeles and provide high-intensity tutoring in public schools.

“Our ability to backfill all these federal cuts — no, we’re not going to be in a position to do that, we just are not in that position,” Newsom said. “It’s the old adage, you can’t do everything, but you can do anything. There may be areas where we can make adjustments.”

As he had already indicated he would do, Newsom included no money to implement high school ethnic studies. Although the Legislature mandated in 2021 that every school provide the course, starting in fall 2025, there is no mandate without funding; districts can choose not to offer it.

In one cost-cutting measure, Newsom is proposing to roll back California’s health insurance program for undocumented immigrant adults, by charging premiums and freezing new enrollment, a move that advocates said will affect their children, many of whom are U.S. citizens. One in 10 California children is estimated to have an undocumented parent.

“When a parent or family member is sick and unable to work or provide care, kids suffer as a result,” said Mayra Alvarez, president of the nonprofit organization The Children’s Partnership.  “Ripping away these family members’ access to health care, while they are also under threat of cruel immigration enforcement and other anti-immigrant policies, in turn puts the well-being of our children at risk.”

Higher Education Funding and Prop 98

State funding for the state’s system of 116 community colleges would change little from last year, receiving 0.6% less, at $8.9 billion. However, some of its important funding — $531.6 million from Proposition 98 revenues — would be deferred for a year under the proposal.

UC would have its funding cut by $129.7 million, while CSU would lose $143.8 million. In January, the Newsom administration had proposed deeper cuts of $396.6 million and $375.2 million, respectively.

“It feels like we’ve gone from a five-alarm fire to something lesser than that. But we can’t call the emergency response off,” said Joshua Hagen, vice president of policy and advocacy for the Campaign for College Opportunity.

The revised budget maintains a proposal to defer previously promised 5% budget increases until 2027-28 for both systems. Those deferrals, which were part of Newsom’s multiyear compact agreements with the systems, were also included in Newsom’s January budget proposal.

The compacts, originally agreed to in 2022, promised annual budget increases for UC and CSU in exchange for the systems working toward goals such as increasing graduation rates and enrolling more California residents.

“We were able to hold strong to that over a two-year period. And we’re struggling now with some challenges,” Newsom said during a news conference Wednesday, though he added that the compacts are “sacrosanct” and that the systems would get their deferred dollars in 2027-28.

By reducing the proposed cut to UC’s budget for 2025-26, the 10-campus system will be able to minimize cuts to student support services and preserve “critical investments like affordable student housing construction,” President Michael V. Drake said Wednesday in a statement.

CSU Chancellor Mildred García warned in January that a nearly 8% state budget reduction would result in larger class sizes and fewer course offerings, hampering students’ prospects for graduating on time. With those cuts dialed back to 3%, García praised the May revision as a “thoughtful and measured approach to addressing the state’s fiscal challenges.”

In total, the May revision proposes $45.7 billion for the state’s higher education institutions and the California Student Aid Commission.

The minimum funding for 2025-26 for Proposition 98, the formula that determines the portion of the general fund that must go to TK-12 and community colleges, would be $114.6 billion, down from $118.9 billion in 2024-25 because of shrinking state revenues.

Newsom proposes to make up the difference by shifting numbers around, depleting what was left in the Proposition 98 rainy day fund. Among other maneuvers, he would:

• Drain the remaining $540 million from a fund that was $8.4 billion only two years ago, when the state faced a fiscal crisis.
• Defer $1.8 billion that would be due to schools in June 2026 by a month, to July 2026. Schools should notice little difference, although the maneuver does create a state obligation that must be repaid.
• Withhold $1.3 billion due to schools and community colleges in 2024-25 in anticipation that the revenues for the rest of the year might come up short because of the further decline in state revenues.

This last maneuver grabbed the attention of the California School Boards Association, which filed a lawsuit last year over a related effort, still in litigation, and is threatening to do so again.

“Even in lean times, investing in public schools is California’s best economic strategy, so we cannot sidestep constitutional protections for public education nor underfund Prop 98 to offset shortfalls in other sections of the budget,” Association President Bettye Lusk said in a statement.

The immediate reaction to the budget proposal was positive, with some caveats.

“The bottom line is that amid a budget crisis, the governor is protecting every major investment in education,” said Kevin Gordon, president of Capitol Advisors, a consultant for school districts. “We want to make sure Prop 98 funding is accounted for. As long as that’s the case, there’s not much to complain about.”

Scott Moore, head of Kidango, a nonprofit that runs many Bay Area child care centers, praised the commitment to universal transitional kindergarten while criticizing Newsom’s decision to suspend a cost-of-living adjustment for child care providers for low-income children and freeze funding for emergency child care services for foster and homeless children.

“We know that small class sizes and highly qualified teachers are two of the most important quality standards to ensure children benefit from pre-K. This budget invests wisely in TK,” he said. “The proposed cut to the COLA (cost of living increase) for child care providers must be restored. Now is the worst time to eliminate a small, but very much-needed and deserved COLA for those who take care of our youngest and most vulnerable children.”

About the Authors

John Fensterwald writes about education policy and its impact in California.

Diana Lambert is based in Sacramento and among other topics writes about teachers and teaching in California.

Emma Gallegos covers equity issues in education and is based in California’s Central Valley.

Amy DiPierro covers higher education and the California State University system.

Karen D’Souza arts education, literacy and early education.

Zaidee Stavely covers English learners and immigrant families and hosts EdSource’s Education Beat podcast.

Michael Burke is based in Los Angeles and writes about higher education