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Governor’s budget proposes to eliminate K–12 deferrals; LAO urges paying off earlier if possible
Summary
Administration briefed the committee on remaining K–12 deferrals created in prior budgets and said the governor’s budget pays those deferrals; the LAO recommended eliminating them as a matter of fiscal hygiene and noted the legislature could accelerate payoff by acting in early April.
Department of Finance and the Legislative Analyst’s Office described prior‑year Proposition 98 deferrals and the governor’s plan to eliminate them during the budget window.
Alex Shope told the committee that deferrals created in the 2022–23 and 2023–24 budgets total roughly $2.6 billion (2022–23) and about $4.0 billion (2023–24), split across LCFF and community college funding. The governor’s budget would pay those deferrals and would end the practice of delaying routine payments beginning in 2025–26, Shope said.
The LAO recommended eliminating the deferrals as "good fiscal hygiene," citing improved local cash flow, simplified accounting and aligning ongoing program costs with ongoing funding. The LAO also said the Legislature could elect to pay off the June 2025 deferral earlier — which would require action by early April — if it wanted districts to avoid another scheduled delay in payments.
The Department of Education representative on the panel confirmed the administration and LAO characterizations and said department staff were available for technical questions.
Why it matters: Payment deferrals affect district cash flow and planning. The LAO argued that removing deferrals improves local budget certainty and reduces administrative complexity.
What’s next: The committee will weigh whether to accelerate payoff timing in order to provide districts the greatest degree of certainty before finalizing the budget.
