{"id":361210,"date":"2026-06-15T09:54:09","date_gmt":"2026-06-15T09:54:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/361210\/"},"modified":"2026-06-15T09:54:09","modified_gmt":"2026-06-15T09:54:09","slug":"california-school-districts-battle-for-3-9-billion-they-argue-is-due-now-not-later-3","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/361210\/","title":{"rendered":"California school districts battle for $3.9 billion they argue is due now, not later"},"content":{"rendered":"

\t\t\t\t\tQuick Take<\/p>\n

Gov. Gavin Newsom warns it\u2019s prudent to hold back the funding in case a flood of expected new money dries up; school districts disagree.<\/p>\n

This story was originally published by EdSource.\u00a0Sign up<\/a>\u00a0for its daily newsletter.<\/p>\n

In coming days, California school districts will find out whether their pressure campaign worked to persuade Gov. Gavin Newsom to\u00a0turn over the $3.9 billion he planned to withhold<\/a>, for now, from next year\u2019s state funding for schools and community colleges.\u00a0<\/p>\n

By midnight Monday, the state Legislature must pass a balanced state budget; legislators and the governor have been negotiating how big it will be and what\u2019s in it.\u00a0\u00a0<\/p>\n

The $3.9 billion in question is about $684 per student, depending on how it\u2019s distributed; at a time of declining enrollment and rising expenses, districts say they need the money now, not later.\u00a0\u00a0<\/p>\n

Newsom says districts will get it after projected revenue turns into actual cash in hand by early next year, after more revenue is collected. Until then, it\u2019s wise to be cautious, Department of Finance officials warn.\u00a0<\/p>\n

At issue is how much funding will increase under Proposition 98, the 1988 formula guaranteeing that schools and community colleges receive about 40% of revenue from the state\u2019s general fund. Newsom is projecting that the 2026-27 Prop 98 guarantee would be a record $127.1 billion.\u00a0<\/p>\n

But state budget forecasters and the nonpartisan Legislative Analyst\u2019s Office are also hedging their bets, saying that the projection could come up short, and growth may slow or even recede. The question is not if the current boom cycle fueled by artificial-intelligence investments will slow, but when, they say.\u00a0<\/p>\n

Education advocacy groups disagree with the governor\u2019s approach. With rare unanimity, a coalition of school employee unions and groups representing school boards, school administrators, business officers, charter schools and parents have reacted with anger and indignation, and their members flooded the halls of the Legislature last month to lobby legislators to insert the $3.9 billion into the final budget.\u00a0<\/p>\n

\u201cIt\u2019s not just $3.9 billion, even though that\u2019s a tremendous amount of money, what we\u2019re confronting is an existential threat to the way that we fund public schools here in California,\u201d Troy Flint, chief information officer of the California School Boards Association, said during a news conference outside the Capitol on May 21.\u00a0<\/p>\n

\u201cThat is resources that our kids won\u2019t have, and those are opportunities they will never receive. A dollar delayed is a dollar denied.\u201d\u00a0<\/p>\n

Tatia Davenport, CEO of the California Association of School Business Officials, said, \u201cProposition 98 was passed in California by our voters to ensure that education funding could not be traded away during difficult budget years. Prop 98 is unambiguous. It is a guarantee. It is the law. It is not a suggestion.\u201d<\/p>\n

And Erika Jones, an elementary school teacher who is secretary-treasurer of the California Teachers Association (CTA), added, \u201cProp 98 is a minimum guarantee. As the fourth-largest economy in the world, California leadership should be striving to give students more than the bare minimum, let alone dipping into that minimum to cover budget shortfalls.\u201d<\/p>\n

\u201cIf state leadership cares about the future of California, they must stop diverting constitutionally guaranteed funding away from public schools, from fully funding,\u201d she said.\u00a0<\/p>\n

The remarks are compelling but also somewhat misleading. As with much of the arcane details of state financing and especially Prop 13, it\u2019s always more complicated.\u00a0<\/p>\n

The unknowns behind the estimates\u00a0<\/p>\n

The revenues on which a state budget is based every June are tied to a multi-year forecast that can be substantially off. In the last several years, the forecasts have significantly underestimated the revenues. Newsom\u2019s first pass in January at the budget for 2026-27 fiscal year starting July 1 included $21.7 billion more for Prop 98 than the Legislature had budgeted for 2025-26 in June a year ago. All of this excess money will roll forward to 2026-27.\u00a0<\/p>\n

Then, in the May budget revision, with revenues for 2025-26 continuing to pour in, he upped the Prop 98 forecast again. Newsom, who had proposed in January to withhold $5.6 billion, reduced it to $3.9 billion and used the difference to help fund a higher cost-of-living adjustment (COLA), add to the rainy day fund and increase money for special education.<\/p>\n

\"\"California Gov. Gavin Newsom speaks at a news conference in Los Angeles in October 2025. Credit: Damian Dovarganes \/ Associated Press<\/p>\n

A primary reason for soaring revenues is that, over the past few years, AI has been the state\u2019s ATM. Unanticipated income and capital gains tax receipts from the state\u2019s wealthiest taxpayers\u2019 investments in artificial intelligence-related corporations are propelling state tax revenues.\u00a0<\/p>\n

And yet a lot is still unknown. Some corporate and individual taxpayers didn\u2019t pay their 2025 taxes by April 15. Their late payments and previous estimated taxes may be substantially less than anticipated.\u00a0<\/p>\n

Lessons from the floods of \u201823<\/p>\n

What Newsom wants to avoid is overcommitting to Prop 98. That happened three years ago, following massive winter storms and flooding<\/a> in late December 2022 and January 2023. In pushing back the filing date for 2022 taxes from April 15 to Nov. 16, 2023, for almost all counties, Newsom and the Legislature were left guessing at revenues when they passed the 2023-24 budget the previous June.<\/p>\n

They guessed wrong and appropriated $8 billion more than Prop 98 was entitled to. Rather than short schools and community colleges midway through the school year, Newsom and the Legislature, in effect, took out a short-term loan against the non-Prop 98 side of the general fund, the portion of the state budget that covers private childcare, California State University and the University of California. It also includes areas, such as Medi-Cal, with the fastest rising rate of spending that are driving forecasts of budget deficits.\u00a0<\/p>\n

The Legislature is not likely to bail out schools again using this strategy if there\u2019s another Prop 98 shortfall.\u00a0<\/p>\n

The Legislative Analyst\u2019s Office has studied how close the Legislature comes to annually estimating state revenue, and found it ran between 4% over or under projections, said Ken Kapphahn, LAO senior fiscal and policy analyst.\u00a0 Holding back $3.9 billion on a $127 billion Prop 98 guarantee falls in that range.\u00a0<\/p>\n

No lock-solid timing of the settle-up<\/p>\n

In his budget message, Newsom said that he would take another look at revenues early next year (actually, his successor<\/a> will) and settle up the revenues then, as statutes require.\u00a0<\/p>\n

But there\u2019s a catch: State law doesn\u2019t state when the money must be repaid \u2014 in one year or over several. When education advocates use \u201cgimmick\u201d and \u201ctheft\u201d of Prop 98, they\u2019re implying that Newsom and future governors might use Prop 98 obligations as a piggy bank to shore up other parts of the budget.\u00a0<\/p>\n

Michael Fine, the CEO of the Fiscal Crisis and Management Assistant Team, the state agency that oversees financially troubled school districts, says he understands all the arguments.<\/p>\n

\u201cThis is a difficult topic as I agree with both sides,\u201d he wrote in an email. \u201cI understand the risk the administration is hedging against and agree the risk is real, and I recognize the constraints placed in recent years on how to handle over-appropriations of Proposition 98 are problematic. I also fully understand and appreciate the argument around the intent of Proposition 98 being made by advocates.\u201d<\/p>\n

Since the May revision, three blockbuster AI corporations \u2014 SpaceX, Anthropic and OpenAI \u2014 announced they will go public with stock offerings in coming months, signaling billions more in taxable earnings in a frenzy of stock sales \u2014 or not, if they\u2019re a bust. Unstable oil prices and rising inflation also complicate revenue projections.\u00a0<\/p>\n

The Ed Coalition can count on the Democratic majorities in the Senate and in the Assembly. Both have gone on record supporting restoring full funding in the final budget.\u00a0<\/p>\n

In their alternative proposal, Senate leaders would build back the $3.9 billion, and specify how to spend it:<\/p>\n

Raise the discretionary block grant by $1.5 billion<\/p>\n

Add to the rainy day fund by $1.2 billion<\/p>\n

Raise the grant program for career\/technical education by $300 million<\/p>\n

Fund schools\u2019 kitchen infrastructure by $900 million<\/p>\n

Democratic leaders in the Assembly are vague about how to fund the $3.9 billion, but in the Assembly\u2019s budget outline, they make their priority clear: \u201cThe Governor\u2019s January proposal shortchanged schools by billions. The state constitution requires those dollars to flow \u2014 and they will.\u201d<\/p>\n

Under the state constitution, the Legislature must pass a state budget by June 15. If not then, certainly by June 30, there will be an answer to the $3.9 billion question.\u00a0<\/p>\n

Have something to say? Lookout welcomes letters to the editor, within our policies, from readers. Guidelines here<\/a>.<\/p>\n

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