TK–12 Education Budget Summary
May Revision & January Proposal

The May Revision sets the 2026–27 Prop 98 Guarantee at a record $127.1 billion — $1.6 billion above the January proposal, reflecting higher-than-projected state revenues driven largely by capital gains and AI-sector investment activity. Per-pupil Prop 98 funding reaches a new record at $21,013.

However, the published guarantee figure does not tell the full story. In January, Newsom withheld $5.6 billion in constitutionally required 2025–26 Prop 98 funds as a "settle-up" reserve. In the May Revision, he releases $1.7 billion of that holdback — but continues to defer $3.9 billion until early 2027, when the incoming governor can reassess. School organizations argue this violates Proposition 98's voter-approved constitutional guarantee and have threatened to sue.

The Prop 98 Rainy Day Fund (Public School System Stabilization Account) is proposed to reach $10.3 billion — approaching the statutory maximum — as a recession cushion against the possibility that projected AI-sector revenues do not materialize.

The May Revision's most direct impact on district operating budgets is the LCFF COLA increase from the statutory 2.87% to 4.31%. This raises LCFF funding from the $3.1 billion increase proposed in January to approximately $4 billion — adding roughly $900 million more in discretionary funds to districts across California. The 4.31% rate will become the new permanent base for future COLA calculations in coming years.

The higher COLA was also tied to a new benefit: all employees of TK–12 schools and community colleges will be entitled to up to 14 weeks of paid pregnancy disability leave beginning in 2026–27, funded through the higher COLA allocation.

The January proposal's Necessary Small Schools increase (+$30.7M ongoing) and LCFF deferral repayment ($1.9B) remain unchanged in the May Revision.

The Proposition 98 Guarantee is California's constitutional minimum funding floor for TK–14 education — set at roughly 40% of General Fund revenues plus local property taxes. The guarantee is calculated across a three-year window:

2024–25: $123.8 billion calculated guarantee. The January budget proposes fully repaying a $1.9 billion settle-up balance from the 2025 Budget Act.
2025–26: $121.4 billion calculated guarantee. However, the funded level is $115.9 billion — the Governor proposes $5.6 billion in settle-up (a deliberate underfunding reserve) due to ongoing revenue uncertainty. This settle-up will be resolved no earlier than spring 2027.
2026–27: $125.5 billion calculated guarantee. This is the primary budget year under proposal.

The budget also proposes full repayment of $1.9 billion in LCFF deferrals from prior years in 2026–27, restoring those funds to districts that had been waiting on delayed state payments.

The LCFF is the primary mechanism for distributing Prop 98 funds to all TK–12 school districts, county offices of education, and charter schools. The January 2026 budget includes three key LCFF actions:

2.41% COLA: Applied to base grants, supplemental grants, and concentration grants — adding roughly $2 billion in discretionary funds for LEAs statewide. Districts can use these funds without restrictions on how they are spent (beyond existing LCFF accountability rules).

Necessary Small Schools increase (+$30.7 million ongoing): A 20% boost to LCFF add-on funding for California's smallest rural schools, which are disproportionately affected by enrollment volatility. These schools are too small to reach minimum per-ADA funding levels through the base LCFF formula alone.

Deferral repayment ($1.9 billion): Budgetary deferrals from prior years owed to TK–12 education will be fully repaid in 2026–27 — a significant cash-flow relief for districts that had been carrying these as receivables.

Voters approved Proposition 2 (2024) — the Kindergarten through Grade 12 Schools and Local Community College Public Education Facilities Modernization, Repair, and Safety Bond Act — authorizing $8.5 billion in state General Obligation bonds for TK–12 school construction and modernization. The January 2026 budget continues allocating $1.5 billion in Prop 2 bond funds in 2026–27 to support school construction projects.

The January 2026 budget proposes a significant restructuring of how California's TK–12 system is governed — revisiting a recommendation from California's 2002 Master Plan for Education.

The proposal would amend the Education Code to move oversight of the California Department of Education (CDE) under the State Board of Education (SBE). Currently, the State Superintendent of Public Instruction (SSPI) independently manages the CDE, while the SBE sets policy — a division that has historically created friction. The budget would also strengthen the SSPI's ability to coordinate alignment across early childhood through postsecondary education.

This proposal is likely to generate significant legislative debate, as it touches the constitutional independence of the elected State Superintendent position.

The budget documents progress from the multi-year "California for All Kids" investment plan, noting the following outcomes as of January 2026:

Academic Achievement: 2024–25 statewide assessments show gains in English language arts, mathematics, and science across all grades. Nearly all student groups — including Black/African American, Hispanic/Latino, and socioeconomically disadvantaged students — showed year-over-year gains in the percentage reaching proficient or advanced levels.

Staffing: Since 2019–20, total school staff has grown despite declining enrollment — reducing staff-to-student ratios statewide. The share of teachers of color increased by 5%, and school employees with pupil personnel services credentials increased 10% since 2018–19.

Before, After & Summer School: Over 1 million children now have access to free enrichment programs under the full Expanded Learning Opportunities Program.

Behavioral Health: The Children and Youth Behavioral Health Initiative has received approximately $4.2 billion (non-Prop 98) since 2021, integrating school-based behavioral health services with county health and social services systems.

Literacy: As of the 2025–26 school year, the literacy initiative reaches 2.6 million TK–5 students, including over 800 high-need elementary schools supported by literacy coaches and reading specialists. All K–2 students are now screened annually for reading difficulties, including dyslexia.

The LCFF COLA (2.41%) is the most direct impact for most districts — it automatically increases the base, supplemental, and concentration grant amounts that every district receives. Districts can use this as discretionary spending without new restrictions.

The $2.8 billion one-time block grant is a significant flexibility tool. Districts are expected to direct these funds toward enrollment/attendance challenges (including those related to federal immigration actions), rising operating costs, and alignment with statewide priorities like literacy and math instruction.

The Special Education equalization will particularly benefit districts that historically received lower per-pupil state rates. Districts with large special education populations may see meaningful increases in their base SELPA allocations.

Transportation districts should plan around the $239.2M in new ongoing funding — this reflects acknowledgment that the prior reimbursement model was insufficient and that transportation costs have risen substantially.

Remember: These are proposed numbers. The May Revision on May 15, 2026 may significantly change LCFF COLA levels, one-time investments, and the Prop 98 funded guarantee — especially if April tax receipts come in above or below expectations. Districts should not finalize budget assumptions until after the May Revision is published.