Publications
2025 California Budget Challenge
The Governor released his proposed fiscal year 2025-26 budget on January 10, 2025 and his revised budget will be released in May 2025.
Following large surpluses in 2021 and 2022 due to higher-than-expected revenue and federal COVID relief funds, the state is now facing a projected deficit of $14.3 billion in 2025-26 if the proposals in the Governor’s January budget are not adopted. This is a result of lower-than-expected General Fund revenue and the expiration of the state and national COVID emergency orders. There is also uncertainty related to changes in federal policy that could impact California’s budget.
As part of the 2024 budget agreement, the Governor and Legislature included proposals to maintain funding for long-standing state priorities—such as healthcare, housing, homelessness, and education—while still closing the deficit in 2025-26. However, the California Budget Challenge allows you to decide which proposals to adopt in order to balance the budget.
The proposed budget maintains funds for programs seeking to increase financial security and opportunities for Californians. This includes maintaining the expanded eligibility to Medi-Cal to all low-income Californians and implementing universal transitional kindergarten (TK) for all 4 year-olds. The Governor’s budget also increases funding for K-12 schools and community colleges due to constitutionally required funding allocations and budget commitments made in recent years.
Under the Governor's proposed budget, California’s draws $7.1 billion from the Rainy Day Fund (also called the BSA) to sustain ongoing commitments. The balance of the Rainy Day Fund would be $10.9 billion at the end of the 2025-26 fiscal year if this proposal is adopted in the final budget.
Take the California Budget Challenge HERE
Key Major Spending Cuts:
UC & CSU
- Maintains planned deferral of $252 million General Fund dollars from 2025-26 to 2027-28 for CSU campuses
- Maintains planned deferral of $271 million General Fund dollars from 2025-26 to 2027-28 for UC campuses
Housing & Homelessness
- Unlike previous budgets, the Governor’s proposal does not provide additional state funds for affordable housing development or homeownership attainment and would cut $100 million from the Foreclosure Intervention Housing Preservation Program which provides funds to various non-profit organizations to acquire foreclosed property and operate as affordable housing.
Health & Human Services
- $380.7 million from the Behavioral Health Continuum Infrastructure Program which provides competitive grants to expand the community continuum of behavioral health treatment resources
Key Major Spending Proposals:
- $378 million one-time Prop 98 funds to support the Learning Recovery Emergency Block Grant to support districts in establishing learning recovery initiatives through the 2027-28 school year
- $1.9 billion Prop 98 funds and $1 billion from the General Fund to enable the State Preschool program to enroll eligible 2-year-old children for both part-day and full-day until July 1, 2027
- $175 million to enable CalFire to employ 3,000 seasonal firefighters for the whole year instead of only for 9 months as it is now
- Up to $7.4 million General Fund in 2025-26 for a diaper initiative that would provide a three-month supply of diapers to California families after childbirth.
- $2.4 billion ongoing Proposition 98 funds to complete the rollout of universal TK
- $2.7 billion allocation plan of Prop. 4 funds for 2025-26 for drinking water and flood resilience, wildfire prevention, biodiversity, outdoor access, clean air and energy, coastal resilience, climate smart agriculture, and extreme heat mitigation.