California Signs Record $127 Billion Schools Budget Ahead of July 1 Deadline
SACRAMENTO — California Affairs | The Navarro Report
Governor Gavin Newsom signed California’s 2026-27 state budget on June 29, capping weeks of negotiations with legislative leaders over a spending plan that both sides describe as balanced, with no deficit projected this year or next, ahead of the constitutional July 1 start of the new fiscal year.
The agreement, reached with Senate President pro Tempore Monique Limón and Assembly Speaker Robert Rivas, directs a record $127.1 billion toward K-12 schools and community colleges under Proposition 98, the formula guaranteeing roughly 40 percent of the state’s general fund to education. Per-pupil funding is set to rise to a record level, alongside increased special education spending, a cost-of-living adjustment above the statutory minimum, and a new discretionary block grant districts can use largely as they see fit.
Newsom defended his administration’s education record as the negotiations concluded, telling reporters the state has made “unprecedented, historic investments per pupil, investments that are the envy of many other states.” The final agreement adopted nearly all of the governor’s May budget proposal while incorporating higher revenue projections that legislative Democrats had pushed for during two weeks of closed-door negotiations.
Limón, reflecting on the broader budget picture beyond education, thanked her negotiating partners for the final product. “Thank you to the Governor and Speaker of the Assembly for their partnership,” she said, crediting the deal with protecting core programs while building up the state’s rainy day reserves amid continued uncertainty from federal funding cuts.
Not everyone in Sacramento’s education community got everything they wanted. Earlier in the process, Newsom had proposed withholding $3.9 billion in Proposition 98 funding pending stronger revenue confirmation — mainly tied to state tax receipts from investment gains in artificial intelligence stocks — a move that prompted some education advocacy groups to threaten litigation. Barrett Snider, a Sacramento-based school consulting firm partner who tracks the budget closely for district clients, nonetheless characterized the overall package favorably, calling it “a great budget for schools” even as the fight over the withheld funds shaped much of the spring’s negotiations.
The budget also includes a $700 million allocation for districts to upgrade or add school kitchens, tied to the state’s push toward universal free, freshly prepared school meals, along with expanded paid pregnancy disability leave for TK-12 and community college employees beginning in the new fiscal year. State officials say the overall reserve position — combined general and rainy-day funds — will approach roughly $30 billion heading into the new fiscal year, among the largest such cushions in state history.
For California’s nonprofit and social-service sector, which relies heavily on state grant funding that flows through agencies tied to the general fund, the finalized budget offers a measure of fiscal certainty after months of uncertainty tied to both state revenue forecasts and reductions in federal support. Whether this year’s relatively favorable revenue picture — driven in part by unexpectedly strong tax receipts — holds up through the next budget cycle remains an open question that both the administration and legislative leaders acknowledged will require continued discipline in the years ahead.
The budget also folds in a related agreement announced in the final week of negotiations: a Veterans and Affordable Housing Bond Act aimed at expanding housing construction and homeownership assistance, which Newsom and legislative leaders described as one of the key pillars of the broader budget package. Department of Finance officials say Proposition 98 funding for the coming year will run $24.3 billion higher than what the Legislature appropriated the prior year, with roughly half of that increase representing ongoing, rather than one-time, funding — a distinction school district administrators and finance officers say matters considerably for multi-year budget planning.
As with past budget cycles, the final numbers depend heavily on revenue projections that will not be fully confirmed until tax receipts are tallied later in the year. Lawmakers on both sides of the aisle have periodically noted that California’s reliance on capital-gains-heavy income tax revenue, increasingly tied in recent years to swings in technology and AI-related stocks, makes the state’s budget more volatile than most. That volatility is part of why Newsom’s administration pushed to build reserves alongside new spending, even as school groups pressed for the withheld Proposition 98 dollars to be released without further delay.
— Jose E. Navarro, The Navarro Report / Human-Directed AI Journalism: Research, analysis, and editorial direction by the author. Drafted in partnership with Claude AI (Anthropic).