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May Revise signals state revenue uncertainty; district expects possible Prop 98 deferrals but no K–12 cuts
Summary
CBO Stephen Choi summarized the governor’s May Revise, which projects declining major tax revenues and proposes a ‘settle up’ on Proposition 98 that could cause deferrals of school payments even though the May Revise includes no direct cuts to K–12 programs.
Chief Business Officer Dr. Stephen Choi reviewed the governor’s May Revise and told the board that while the proposal contains no direct cuts to K–12 education, it relies on one‑time funds and a proposed “settle up” that could defer payments to school districts.
Choi said California’s personal income, corporation and sales taxes are projected to decline in 2025–26, and that the governor proposes depleting remaining state rainy‑day funds (he cited about $540 million remaining) and using one‑time funds to meet obligations. Choi described the governor’s “settle up” approach—tying final Proposition 98 payments to actual revenue receipts—as likely to introduce payment timing uncertainty. “There might be deferrals,” he said, noting that deferrals already occur and could continue.
Why it matters: Proposition 98 provides minimum funding for K–12 and community colleges but does not guarantee the timing of payments. Choi said the May Revise insulates K–12 from immediate cuts but that deferrals and the end of temporary measures such as the Proposition 30 Education Protection Act raise risks for future years.
District guidance: Choi said staff are using conservative assumptions in building the 2025–26 budget (School Services of California recommended not budgeting certain proposed revenues until final numbers are available) and highlighted program‑specific uncertainties such as transitional‑kindergarten add‑on amounts and the Expanded Learning Opportunities Program (ELOP) eligibility and funding for the district.
No formal district action was taken; the session was a study presentation and the board was invited to provide feedback.
