California’s Education Funding to Drop by $2.2 Billion: LAO

California’s education budget is projected to drop by $2.2 billion for the next fiscal school year, according to the state’s Legislative Analyst’s Office (LAO).

LAO’s annual budget prediction, released earlier this month, anticipates the 2-percent decrease in education funding from the current year’s $128 billion “based upon recent signs of weakness in the economy.”

The predictions are a minimum guarantee, calculated by the state each year for public education funds based upon a set of formulas established in 1988 under Proposition 98.

These predictions typically provide the basis for the state’s budget planning, which is formally adopted by Gov. Gavin Newsom in the summer.

Meanwhile, California projects an overall state budget shortfall of $25 billion for the upcoming fiscal year. About 40 percent of the state’s general fund is usually allocated to public schools and community colleges.

Though funding is expected to, LAO forecasts a recovery in the 2023–24 school year if the state dips into its education reserve, making up for the shortfall and covering a projected 8.7 percent increase in
inflation.

This means schools and community colleges will have enough money to sustain themselves through cost increases, but no funds for new programs.

LAO expects the state’s $8.7 billion in reserve funds to be drained over the next three years, but plans to start rebuilding it in 2026–27.

In addition, the state could reallocate some unspent one-time education funding from this year if necessary, according to LAO.

Though Proposition 98 funds typically rise annually. This is the second time in recent years it is projected to take a downturn, with spring 2020 being the other recent dip due to the COVID-19 pandemic.

The year after that, however, the minimum jumped nearly 40 percent – or $31.3 billion – the biggest increase over a two-year period in Proposition 98’s history.

The LAO prediction warns that the state’s overall and education budgets will drop even further if the economy falls into a recession in 2022–23; however, the prediction does not assume a recession.