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Source: This page summarizes The 2026-27 Budget: K-12 Proposals, published February 19, 2026 by the California Legislative Analyst's Office (LAO).
Full report: lao.ca.gov/Publications/Report/5131 ↗ |
PDF: Download PDF ↗.
LAO contacts: Edgar Cabral (Deputy Legislative Analyst, K–12 Education), Michael Alferes, Sara Cortez, Dylan Hawksworth-Lutzow.
What is the LAO? The Legislative Analyst's Office is California's nonpartisan fiscal and policy advisor to the Legislature — an independent check on the Governor's budget. Every year the LAO analyzes the Governor's January budget proposal and issues formal recommendations to the Legislature on what to adopt, reject, or modify. The LAO does not appropriate money; it advises. But its analysis carries significant weight in legislative budget negotiations.
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Governor's Budget Overview
Budget Contains Nearly $9.7 Billion in New K‑12 Education Spending Proposals. Proposition 98 (1988) establishes a minimum funding requirement for schools and community colleges, commonly known as the minimum guarantee. The administration estimates that the guarantee has increased by nearly $21.7 billion compared with the June 2025 budget level. About half of this increase is attributable to 2026‑27, with smaller portions attributable to 2024‑25 and 2025‑26. The increase is primarily due to the administration's higher General Fund revenue estimates. As Figure 1 shows, the Governor's budget allocates $9.7 billion of the increase for new school spending—more than $5.9 billion for one‑time activities and $3.7 billion for ongoing augmentations. (The rest of the increase—$12 billion—is unavailable for several reasons, including the Governor's proposal to delay some of the associated funding and deposits into the Proposition 98 Reserve.)
Figure 1
Governor's Budget Has $9.7 Billion in School Spending Proposals
(In Millions)
| Program |
Amount |
| Ongoing |
| Local Control Funding Formula COLA (2.41 percent) |
$1,893 |
| Community schools |
1,000 |
| Special Education |
509 |
| COLA for select categorical programs (2.41 percent)a |
230 |
| Expanded Learning Opportunities Program |
62 |
| Necessary Small Schools |
31 |
| COE funding to support districts and charter schools |
13 |
| Charter School Facility Grant Program |
7 |
| FCMAT salary adjustment |
1 |
| California School Information Services |
1 |
| Science performance tasksb |
1 |
| K‑12 High Speed Network |
1 |
| Subtotal |
($3,749) |
| One Time |
| Discretionary block grant |
$2,796 |
| Deferral paydown |
1,875 |
| Learning Recovery Emergency Block Grant |
757 |
| Teacher Residency Grant Program |
250 |
| Dual enrollment |
100 |
| Kitchen infrastructure and training |
100 |
| Reading difficulties screening |
40 |
| Wildfire‑related support for schools |
23 |
| Subtotal |
($5,941) |
| Total Proposals |
$9,690 |
a Applies to Special Education, State Preschool, Child Nutrition, Equity Multiplier, K‑12 Mandates Block Grant, Charter School Facility Grant Program, Foster Youth Services Coordinating Program, Adults in Correctional Facilities, American Indian Education Centers, Child and Adult Care Food Program, and American Indian Early Childhood Education.
b Reflects $890,000 ongoing, beginning in 2025‑26.
COLA = cost‑of‑living adjustment; COE = county office of education; FCMAT = Fiscal Crisis Management Assistance Team.
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LAO's Overall Message: Proceed with Caution
The LAO analyzes nine specific K–12 proposals in the Governor's 2026–27 budget and issues a consistent overarching warning: the revenue estimates underpinning the Governor's budget do not account for the currently elevated risk of a stock market downturn — and a significant decline could reduce state revenues by tens of billions of dollars.
Because the Proposition 98 guarantee declines approximately 40 cents for every $1 of lower General Fund revenue, a downturn would hit K–12 education particularly hard. The LAO recommends the Legislature "be cautious about new spending commitments; building reserves and other tools to protect existing school programs; and identifying proposals it would be willing to delay, reduce, or reject if a decline occurs."
The LAO also recommends the Legislature "set aside a significant portion of the new funding available in 2026–27 for one-time activities rather than ongoing increases" — specifically expressing concern that the Governor's $1 billion ongoing Community Schools proposal would create a long-term spending commitment the state may struggle to sustain in a downturn.
On the positive side: the LAO recommends adopting the LCFF COLA (2.41%), the $509 million Special Education increase, the $2.8 billion discretionary block grant, the $1.875 billion deferral paydown, and the $757 million Learning Recovery block grant — the core of the spending plan.
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The Numbers the LAO Is Analyzing
$9.69B
Total New K–12 Spending in Governor's Budget
Ongoing + one-time proposals combined
$3.75B
Proposed Ongoing New Spending
Permanent annual commitments (LCFF, Community Schools, Special Ed, etc.)
$5.94B
Proposed One-Time New Spending
Block grant, deferral paydown, Learning Recovery, residency, more
$21.7B
Prop 98 Guarantee Increase vs. June 2025
~$12B unavailable (deferrals + Prop 98 Reserve); $9.69B allocated
40¢
Prop 98 Decline Per $1 of Revenue Loss
Key fiscal risk — amplifies any downturn's impact on schools
2.41%
LCFF COLA Rate
$1,893M ongoing — LAO recommends ADOPT
⚠️ LAO Fiscal Warning
Stock market risk is not priced in. The Governor's budget revenue estimates do not account for the currently elevated probability of a stock market downturn. A significant decline could cut General Fund revenues by tens of billions of dollars — reducing the Prop 98 guarantee by roughly 40 cents per dollar of lost revenue. The LAO urges the Legislature to build reserves, favor one-time over ongoing spending, and identify proposals to cut if revenues fall by May.
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Proposition 98 Context
The LAO's detailed Prop 98 analysis is published in a companion report: The 2026-27 Budget: Proposition 98 Guarantee and K–12 Spending Plan ↗. Key context for understanding the proposals in this report:
Guarantee increase: Compared to the June 2025 budget, the Prop 98 guarantee increased by nearly $21.7 billion — primarily driven by higher General Fund revenue estimates. Of that increase, $12 billion is treated as unavailable (the Governor proposes to delay some associated funding and deposit a portion into the Prop 98 Reserve). The remaining $9.69 billion funds the new spending proposals analyzed in this report.
The 2024-25 base: Total LCFF funding exceeded $54 billion — approximately $11,200 per student — before the proposed COLA increase. The 2.41% COLA adds roughly $1,893 million in ongoing funding statewide.
Enrollment decline: The Department of Finance projects a 2.8% enrollment decline from 2026-27 through 2029-30. This affects Expanded Learning program rate calculations and will reduce LCFF totals over time even with COLA increases, as ADA-based funding falls with fewer students.
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Program-by-Program LAO Analysis
The statutory COLA rate of 2.41% applied to base, supplemental, and concentration grants for all LEAs. The LAO recommends prioritizing this COLA over other ongoing spending, noting that these funds help districts address rising costs they face in labor, facilities, and operations. The LAO recommends funding the full statutory rate unless revenue estimates decline significantly by May.
LAO Recommendation
Adopt. Priority over other ongoing proposals. The COLA is the most direct benefit to all 2,247 LEAs statewide.
The Governor proposes $1 billion in new permanent, ongoing funding for a new community schools program — open to any school enrolling 10+ students with 65%+ English Learner/Low-Income population, plus all ~2,500 existing Community School Program grantees regardless of threshold. Annual grants would range from $75,000 (10–24 students) to $400,000 (2,001+ students). About 3,700 new schools would become eligible — more than triple any previous cohort. Beginning 2027-28, the $1 billion receives an annual COLA.
Research finding: Existing Cohort 1 grantees showed chronic absenteeism declines 30% greater (~1.5 percentage points) and suspension rates 15% lower than similar non-grantee schools. Gains were most significant for Black students, English learners, and socioeconomically disadvantaged students.
LAO Analysis & Recommendation
The LAO has four major concerns: (1) Scale — 3,700 new schools at once is far beyond prior capacity; technical assistance infrastructure is not ready. (2) No requirements — new grantees would have no substantive accountability until 2029-30, three years after first receiving funding. (3) Accreditation has no detail — the process beginning 2033-34 lacks cost estimates and clear criteria. (4) Long-term cost gap — by 2030-31, when all current grantees exhaust one-time funds, estimated ongoing costs could be "a few hundred million dollars higher" than the $1B provided. LAO recommends: provide $1 billion as one-time funding for additional CCSPP grant rounds (~700 additional schools) rather than creating a new permanent program. If the Legislature wants ongoing funding, multiple modifications are needed.
Brings all LEA Special Education base rates to a uniform statewide level. Special education caseloads have grown from 12.9% of enrollment in 2018-19 to 14.9% in 2024-25, adding over 70,000 additional students receiving services even as total K-12 enrollment declined.
LAO Recommendation
Adopt — but use a lower cost estimate than the Governor's. The LAO recommends the Legislature fund the equalization but verify that the $509M figure matches actual statewide cost increases before finalizing the appropriation. Full detail in companion report LAO-5110.
Flexible one-time funds for LEAs to address enrollment and attendance declines, rising operational costs, and statewide academic priorities including literacy, math instruction, and career pathways. Distributed by ADA-based formula.
LAO Recommendation
Adopt. "A reasonable approach to address district costs." The LAO also recommends rejecting the standalone Dual Enrollment ($100M) and Reading Difficulties Screening ($40M) proposals and redirecting those dollars here instead — giving LEAs more flexibility to decide how to use the funds.
Full repayment of budgetary deferrals owed to TK-12 education from prior years — restoring cash-flow certainty to districts that had been carrying these as receivables on their books.
LAO Recommendation
Adopt. "Eases future budget pressures." Paying down the deferral reduces the state's obligation and gives districts cleaner financial footing.
Final tranche of the multi-year COVID learning recovery investment. LEAs may use funds through the 2027-28 school year. Total program lifetime investment: $7.2 billion statewide.
LAO Recommendation
Adopt. "A reasonable approach" to continued pandemic recovery support. Flexible use through 2028 gives districts time to plan.
The Governor proposes raising the Tier 2 minimum per-pupil rate to $1,800 for LEAs with under 55% unduplicated pupils. Context: the Tier 2 rate has fallen 23% since 2022-23 — from $2,054 to $1,579 — due to enrollment declines freeing up program funds. The proposed rate of $1,800 is still below the 2022-23 peak. The program total is $4.6 billion across both tiers.
LAO Recommendation
Reject the rate increase. The LAO finds the $221 increase "is not tied to program costs" and "we see no clear rationale for providing a rate increase" at this time. The LAO also flags that allowing the rate to float above $1,800 based on available funds "would create funding uncertainty." Recommendation: fix the Tier 2 rate at current $1,579 and let excess funds revert to the state. If the Legislature wants a higher rate, base it on a formal analysis of actual program costs.
Raises funding for 144 geographically isolated small schools in 108 rural districts — concentrated in northern California. These schools are too small to reach per-ADA funding equity through LCFF base grants alone. Current annual funding per school ranges from $277K (1-teacher, 1-24 ADA) to $1.09M (4-teacher, 73-96 ADA). The 20% increase is across all funding bands.
LAO Recommendation
The proposal "has some merit" but the 20% increase "is not aligned with any particular assessment of cost." Bigger concern: the proposal creates a steep fiscal cliff — a necessary small high school with 286 ADA (last eligible) would receive ~$2,637 more per student than one with 287 ADA (just over the limit), versus a $22 per-student difference today. LAO recommends modifying to eliminate the cliff — for example, by adding a new funding band or extending the ADA threshold range. The Legislature may also want to consider a different funding increase level.
The Governor proposes both more money and major structural changes to the program that identifies and assists low-performing LEAs: COE base allocation increases from $300K to $500K; identification frequency changes from annual to once every three years; assistance duration extends from minimum 2 years to minimum 3 years; and — most significantly — removes statutory performance criteria, giving the State Board of Education broad authority to set them instead. In 2025, 553 LEAs were eligible for differentiated assistance.
LAO Recommendation
Reject both the funding increase and the structural changes. The LAO calls the changes "premature" — the SBE is required to update performance criteria by July 15, 2026 and has not yet done so. The Legislature cannot assess whether the new funding level is appropriate without knowing how many LEAs will be newly identified. Separately, removing performance criteria from state law "limits input from Legislature" in setting accountability standards — a concern about legislative authority. LAO recommends revisiting both in the 2027-28 budget after SBE adopts new criteria.
Extends the teacher residency program through 2029-30. Each resident receives at least $40,000 ($20,000 minimum as stipend). Outcomes from prior rounds: 1,178 residents completed 2019-2023; ~80% were hired by the LEA where they trained. California has invested $655 million in residencies since 2018-19; $78 million currently available from prior rounds.
LAO Recommendation
Adopt if the Legislature wants to address teacher shortages. The LAO notes the program has shown strong retention outcomes (~80% hired where they trained). However, the LAO flags that the program has not reached smaller rural districts as well, and a formal evaluation is due December 1, 2029. The Legislature could choose to wait for that evaluation before committing more funds. The $250M combined with the $78M remaining would fund the program through 2029-30 either way.
Expands high school dual enrollment through CCAP and MCEC programs. Context: $200M was provided in 2022-23 ($33M remains unspent in MCEC). CCAP enrollment grew 82% from 2020-21 to 2023-24 (13,100 to 24,000+ FTE). The $33M in unspent prior-round funds is still available.
LAO Recommendation
Reject. The LAO finds "no clear fiscal barriers to implementing dual enrollment" — LEAs can use the $2.8B discretionary block grant for the same purposes. Prior round funds remain available. Dedicating a separate $100M creates redundancy with the block grant.
A fourth round of competitive grants for kitchen equipment, infrastructure, training, and universal school meals implementation. Round 1 ($150M, formula-based), Round 2 ($600M, formula-based — must commit by June 30, 2026), Round 3 ($155M, competitive — just being awarded, must commit by June 30, 2028). Total to date across three rounds: $905 million.
LAO Recommendation
Reject. The $600M Round 2 is still being spent (commitment deadline June 30, 2026); Round 3 ($155M) is just being awarded. The LAO notes "limited information about the impact of earlier funding" — the Legislature should wait for spending data and outcome information before launching a fourth round.
Continues Year 2 of mandatory K-2 screening for reading difficulties and dyslexia (required by SB 114, 2023). Funds cover administration costs, distributed by share of statewide K-2 enrollment. Two of the four state-approved instruments are available free of charge. The state provided $25M in 2024-25 (training year) and $40M in 2025-26 (implementation year).
LAO Recommendation
Reject as a standalone $40M item. Year 2 costs should be lower — less training is needed and free screener options exist. The LAO recommends redirecting any amount the Legislature wants to provide into the discretionary block grant, giving LEAs flexibility to determine what their actual screening support needs are.
Ongoing funding to maintain and expand the ATLAS (Authentic Tasks for Learning and Assessment in Science) website — a statewide repository of science performance tasks created by LA County Office of Education. The site went public January 1, 2026; in its first month: 4,200 active users, 480 registered users. The state provided $7M one-time in 2024-25 to create it.
LAO Recommendation
Reject ongoing funding — "too early to know if the new resources are helpful" based on one month of usage data. If the Legislature wants to continue supporting the program, consider 3-year limited-term funding instead of making it a permanent ongoing line item. This allows an evaluation before the commitment becomes permanent.
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LAO Recommendations at a Glance
| Program |
Governor's Proposal |
Amount |
LAO Rec. |
| LCFF COLA (2.41%) |
Ongoing |
$1,893M |
✓ Adopt |
| Special Education Equalization |
Ongoing |
$509M |
✓ Adopt* |
| Discretionary Block Grant |
One-Time |
$2,796M |
✓ Adopt |
| LCFF Deferral Paydown |
One-Time |
$1,875M |
✓ Adopt |
| Learning Recovery Block Grant |
One-Time |
$757M |
✓ Adopt |
| Teacher Residency Program |
One-Time |
$250M |
◐ Conditional |
| Necessary Small Schools (+20%) |
Ongoing |
$30.7M |
~ Modify |
| Community Schools — $1B New Program |
Ongoing |
$1,000M |
✗ Reject |
| ELOP Rate Increase (Tier 2) |
Ongoing |
$62.4M |
✗ Reject |
| Differentiated Assistance Overhaul |
Ongoing |
$13M |
✗ Reject |
| Dual Enrollment Expansion |
One-Time |
$100M |
✗ Reject |
| Kitchen Infrastructure (Round 4) |
One-Time |
$100M |
✗ Reject |
| Reading Difficulties Screening |
One-Time |
$40M |
✗ Reject |
| Science Performance Tasks (ATLAS) |
Ongoing |
$890K |
✗ Reject Ongoing |
* Special Education note: The LAO recommends adopting the $509M Special Education equalization but using a lower cost estimate than the Governor's — verify actual statewide cost increases before finalizing the appropriation.
On rejections: When the LAO rejects the Dual Enrollment ($100M) and Reading Difficulties Screening ($40M) proposals, it recommends those funds be redirected into the discretionary block grant — not cut from school spending entirely.
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What This Means for Your District
The core of the budget is likely safe. The LAO recommends adopting the LCFF COLA, Special Education increase, $2.8B block grant, $1.875B deferral paydown, and $757M Learning Recovery grant — the items that most directly affect district budgets. These are unlikely to be cut in the legislative process.
Community Schools uncertainty is significant. The Governor's $1B ongoing Community Schools proposal is the single largest point of contention. The LAO recommends converting it to one-time funding — meaning districts should not count on permanent annual Community Schools funding when planning multi-year budgets. Watch the May Revision and legislative budget hearings closely.
Enrollment decline will erode gains over time. Even with a 2.41% COLA, a projected 2.8% enrollment decline means total LCFF dollars will decrease for many districts over the next four years as ADA falls. Districts should factor declining enrollment into long-range financial planning — the per-pupil rate goes up, but total revenue may still fall.
The fiscal risk is real. The LAO's stock market warning is not academic. If revenues fall sharply before May 15, the May Revision could reduce the Prop 98 guarantee significantly — cutting or eliminating the LCFF COLA and other proposed investments. Districts should plan conservatively until final budget enactment in June.
Look for the May Revision on May 15, 2026. That is when the Governor's updated revenue picture will determine whether these proposals survive, shrink, or grow. The LAO will issue updated analysis shortly after.