Legislative leaders and the governor reached agreement on a 2025-26 budget package on June 24. It reflects weaker than anticipated state revenues and tremendous uncertainty related to unpredictability in the federal government. The budget agreement addresses a $12 billion deficit in the state general fund through a variety of measures, including withdrawals from the state’s reserves and notable cuts to health care.  Public education funding from TK through community college is largely protected through Prop. 98, and the final deal also prevented large proposed cuts to the University of California and the California State University.

The $321 billion deal includes $228 billion in General Fund expenditures and a Prop. 98 minimum guarantee of $114.6 billion for 2025-26.  The statutory COLA (2.3%) is fully funded, and will apply to core funding for TK-12 and community colleges. A base funding increase of 5% that was previously proposed for the University of California is deferred, but no cuts were made to the system’s state funding base. 

This year’s state budget negotiations took place against the backdrop of a constantly changing federal policy and budget developments. Threats and actions to withhold, cancel, or cut federal programs and/or funding that California receives from the federal government exacerbate the state revenue outlook uncertainty.  As a result, special legislative sessions or early actions that re-open the state budget for the 2025-26 fiscal year are a possibility.

The budget bill package includes several budget bills and 19 trailer bills. Of particular interest for CFT are the overall 2025 budget bill (AB 102), the TK-12 education trailer bill (AB 121), the higher education trailer bill (AB 123).  The budget items in the final agreement are summarized below and are based on the enacted budget bill package.  

Download the full research brief:
Research Brief: State Budget 2025-2026

FOR ADDITIONAL INFORMATION, CONTACT: 

Aimee Shreck Research Director ashreck@cft.org 
Tiffany Mok Legislative Advocate tmok@cft.org 
Telephone (916) 446-2788