Governor’s Budget Proposal Overview
The state budget development process began in earnest Friday with Governor Gavin Newsom’s presentation of his budget proposal for the 2025-2026 fiscal year. The Governor’s proposal initiates a progression of analysis, advocacy, and negotiation between the Assembly, Senate, and Governor’s office which will culminate with a final approved budget in late June. Over the course of the spring, we will learn more specific details about actual state revenues in the current year and more precise projections for future years, which will inform a revision to the initial budget proposal in May.
Governor Newsom’s budget proposal reflects the improvement the state’s fiscal situation from last year and caution for what the future holds. The increases in state revenues are largely due to capital gains tax revenues, which are dependent primarily on stock market performance. We cannot assume those revenues will continue year after year and they are often treated as one-time resources. As required by law and prudent financial management, the budget proposal would use some of these revenues to rebuild reserves, including the Public School System Stabilization Account, to safeguard against future revenue shortfalls.
The proposed state budget is $322.2 billion, an 8% increase over the prior year. Specific to public education, the Proposition 98 guarantee would increase from $98 billion in 2023-2024 to $119 billlion in 2024-2025 and be relatively flat in 2025-2026. Reflecting the one-time nature of the revenue increases projected for 2025-2026, the proposed budget would provide $358.5 million in ongoing funds for the California Community Colleges and $394.5 million in one-time funds. In total, the proposal increases community college funding by $782 million over the current year.
Local Impact
The proposed budget is welcome news for the San Diego Community College District. The COLA will ensure we have additional revenues to cover increases in employee salaries and benefits and operational expenses. The growth funding will ensure we can continue increasing enrollment opportunities for our local communities. Importantly, the proposed budget continues to fund the Dreamer Resource Liaisons program, immigrant legal services, basic needs centers, student mental health services, and the Homeless and Housing Insecurity program.
SCFF and Categorical COLAs
The 2.43% COLA will add an estimated $7.9 million to the District’s base revenue under the SCFF. The additional revenue would be distributed in accordance with the Resource Allocation Formula (RAF).
The 2.43% COLA for select categorical programs will increase funding for the Adult Education (2.41% COLA), EOPS, DSPS, Apprenticeship (2.45% COLA), and CalWORKs programs. As with recent prior years, Strong Workforce and SEAP are not proposed to receive a COLA increase.
Areas of Uncertainty
The budget proposal relies primarily on fiscal estimates created in November. The financial impact of the wildfires in the Los Angeles area and how the state may shift budget priorities in response is yet unknown. State revenues are dependent, in part, on stock market performance, which is always difficult to predict. With a new federal administration and congress, there are significant unknowns in how federal funding may change and how new policies will impact financial markets and the state of California specifically. Governor Newsom acknowledged these variables in his presentation of the budget and they may require significant changes to the to the budget proposal in the May Revision.
In Conclusion
The 2025-2026 budget proposal gives us many reasons for cautious optimism. State revenues have outpaced projections so far in the current year and we appear to be in a much healthier place, fiscally, than this time last year. Our District has done well in growing enrollment, increasing our Student Centered Funding Formula revenues, and moving out of the hold harmless protections in the funding formula over the past three years. We have rebuilt our general fund reserves and have resources to continue supporting our immigrant, LGBTQIA+, and other student communities should current funding sources be impacted. Stability in our state funding will be critical to our ability to persist through volatility we may experience in federal programs. The Governor’s budget proposal continues the state’s commitment to high quality, accessible public higher education for every member of our San Diego area community.