Higher than anticipated state revenues are set to provide a modest funding boost for California’s TK-12 schools and community colleges in 2025-26, according to the Legislative Analyst’s Office (“LAO”). However, much of this revenue will go toward paying down education debt and replenishing the Proposition 98 reserve, leaving limited new funds for direct spending.
Moreover, a rarely used constitutional “spike” protection will cap funding growth, likely dampening schools’ expectations despite overall revenue gains. The LAO’s forecast offers a detailed look at how education funding priorities will balance debt relief, reserve-building, and competing demands.
This funding dynamic raises important questions for stakeholders about how to balance immediate classroom needs with California’s fiscal health and related priorities.
Higher revenues than Gov. Gavin Newsom and legislators predicted will likely produce a modest increase in funding in 2025-26 for TK-12 schools and community colleges, the Legislative Analyst’s Office projected on Wednesday. The growth in revenues will also pay down a big portion of the state’s debt to education, with enough to sock away money into a rainy day fund for education that was depleted by the Legislature last year. But at the same time, a rarely invoked constitutional provision would deny schools and community colleges billions in funding that they would otherwise get, the LAO said.
