Today, the Senate and Assembly leaders announced a joint Legislative Budget proposal that they will use to negotiate with Governor Newsom to achieve a final budget deal by the end of the month.

Most noteworthy is that the Legislature approves the Governor’s under-appropriation of the Prop 98 guarantee by $1.3 billion. This will be highly controversial and if enacted will likely be subject to litigation from the education community.

The Legislature also lowers the one-time discretionary block grant in 2025-26 from $1.7 billion to $500 million, makes a $650 million discretionary deposit into the Prop 98 Rainy Day Fund, lowers the inter-year deferrals by $1 billion, delays the ELOP expansion to January 1, provides $150 million for CTE, and $170 million for a Universal School Meals Implementation Block Grant, among other things.

Below we provide a summary of the Legislature’s proposal. We expect additional details about some of the new proposals in the coming days.

A summary of the Legislature’s entire state budget proposal can be found here.

What’s Next?

We are at the stage where the Governor and Legislative leaders will work behind closed doors to hammer out a final budget deal. What’s represented in the Legislature’s proposal is by no means a done deal. It looks to us like many of these proposals are designed to spark negotiations. For example, the Legislature rejects several smaller but important proposals championed by Newsom. However, the main issue of contention with the education community, the $1.3 billion under-appropriations of Prop 98, is likely to remain in the final deal as all three parties agree. This will almost certainly prompt litigation, at least from the California School Boards Association (CSBA) and possibly others.

The budget committees are poised to act this week to approve this two-house proposal. We are told to expect meetings between the Governor, Speaker, and Pro Tem this week and into the weekend, with action possible on Father’s Day.

This Sunday (June 15, 2025) is the deadline for lawmakers to meet their Constitutional requirement to send a balanced budget to the Governor, or risk not receiving a paycheck. However, a fully negotiated budget isn’t required until June 27, 2025.

Prop 98 and Overall Funding

$1.3 billion Under-Appropriation of Prop 98

The Legislative Budget approves the Governor’s proposal to under-appropriate the Prop 98 guarantee at $117.6 in 2024-25, compared to the calculated level of $118.9 billion, using the $1.3 billion to support the non-education side of the state budget. Under their proposal, “this amount will be appropriated during the 2026-27 budget development as the Prop 98 minimum guarantee for 2024-25 is calculated using actual revenue data.”

The Legislature also rejects the Governor’s proposal to fund transitional kindergarten (TK) outside of the TK-12/California Community Colleges split within Prop 98 in 2023-24 and 2024-25, but commences the new calculation in 2025-26, which gives $260 million back to the California Community Colleges.

Lowers One-Time Discretionary Funding to $500 million

Appropriates $500 million Prop 98 General Fund for the Student Support and Discretionary Block Grant, that “includes support for dual enrollment, career pathways approaches, and professional development for educators in English Language Arts and mathematics, allocated based on the LCFF.” We are working to get additional details on this proposal.

Discretionary Prop 98 Rainy Day Fund Deposit

Makes a discretionary deposit into the Public School System Stabilization Account of up to $650 million, upon the recalculation of the 2024-25 Proposition 98 minimum guarantee. Details forthcoming.

Rainy Day Fund Changes

Mimicking statements from Governor Newsom, the Legislature is working to craft a Constitutional Amendment to change the Rainy Day Fund (unclear if this also applies to the Prop 98 Rainy Day Fund) and make other automatic budgeting changes, including the following:

• Increases the size of the Rainy Day Fund from 10% of the General Fund to 25%
• Increases deposits into the Rainy Day Fund
• Excludes deposits into the Rainy Day Fund and other statutory reserves (excluding the Special Fund for Economic Uncertainties) from the State Appropriations Limit calculation
• Adds repayment of the federal Unemployment Insurance loan to the debts that can be repaid with Proposition 2 funds
• Removes the Legislative Analyst’s Office from the Legislature’s “budget cap”

Smaller Deferrals and Rejection of Program Proposals

The Legislature proposes to significantly reduce the June to July 2026 deferral from $1.8 billion to $846 million, with the intent that up to $579 million of this deferral will be paid off in 2026-27, and an additional deferral of $267.4 million be added from 2026-27 to 2027-28.

Reduces or rejects proposed new spending that is the Legislature sees as duplicative of existing programs or whose goals are unclear, in order to “significantly” minimize the $1.8 billion deferral in 2026 and leave a balance in the Proposition 98 reserve. These include:

• Rejection of $100 million for the National Board Certification Incentive Grant Program, with the Legislature claiming that there is a money still available from the prior appropriation of $250 million.
• Rejection of $15 million for the Secondary School Redesign Pilot Program.
• Rejection of $10 million for the UCSF Dyslexia Center.
• Rejection of $30 million for the Mathematics Professional Learning Partnership and $12.5 million for the Statewide Math Network. According to the Legislature, $20 million for the Mathematics Professional Learning Partnership was recently appropriated in the 2024 Budget and was announced on April 25, 2025, and is available until 2028. The Legislative Budget proposes to modify the 2024 Budget investment to ensure that the prior appropriated funds can be used for statewide coordination. There are also other various professional and instructional support programs related to mathematics that are available through 2027 and 2028.

Education Program Funding

Expanded Learning Opportunities Program

Delays the proposed expansion of the ELOP to January 1, to allow the newly classified Tier 1 LEAs to prepare and plan for their program and approves the increased minimum grant award amount to $100,000 (previously $50,000). The Legislative Budget also proposes to “set” the Tier 2 Rate. We are working to get additional details.

Career Tech Programs

Appropriates $150 million (Prop 98) to increase investments in career technical education (CTE) programs and workforce development and streamlines all major CTE program applications, reporting, and evaluation through the Department of Education and Community College Chancellor’s Office.

Literacy funding

Approves $200 million Prop 98 General Fund for Literacy Instruction Professional Development and support. This would be implemented through AB 1454. The Legislature also appropriates $100 million Proposition 98 General Fund for literacy and math coaches.

Teacher Workforce

Approves the Student Teacher Stipend Program and augments this program with $500 million for a total $600 million (Prop 98) investment. The Legislative Budget also proposes to increase the Golden State Teacher grant awards back up to $20,000 per recipient and restore the four-year service and teacher shortage area requirements.

Universal Meals

Appropriates $170 million (one-time Prop 98) for the Universal School Meals Implementation Block Grant, a competitive grant which will prioritize kitchen infrastructure, nutrition staff support and recruitment, and local food procurement. Includes $50 million for training, $20 million for school meal worker recruitment, and $5 million for a study of school meal nutrition standards.

Facilities Funding Shift

Approves Governor’s proposal to revert $177.5 million General Fund in unexpended balance of a one-time statutory appropriation from the 2023 Budget Act for the School Facility Program.

Universal PreK

Extends the encumbrance deadline for the Universal Pre-Kindergarten Block Grant, and appropriates an additional $35 million Proposition 98 General Fund.

California Youth Behavioral Health Initiative (CYBHI)

Appropriates $20 million Prop 98 General Fund for a CYBHI Fee Schedule Bridge Program, to ensure that services and staffing are not disrupted as the CYBHI fee schedule continues to be implemented.

LA Wildfire Response Package

The Legislature appropriates $1.8 million for impacts due to the 2025 Los Angeles Wildfires and approves the Governor’s proposals to:

• Protect funding based on attendance in the ELOP
• Protect funding for charter schools impacted by the fires
• Use savings from Multi-Tiered Systems of Support to assist fire-impacted local educational agencies
• Hold enrollment harmless for purposes of calculating allocations in the Student Support and Professional Development Discretionary Block Grant
• Appropriate $9.7 million to backfill property tax losses for basic aid districts impacted by the fires

Special Olympics

Modifies Governor’s proposal to fund Special Olympics with $30 million Prop 98 General Fund. Details forthcoming.