San Diego Community College District Chancellor Gregory Smith addresses key takeaways from California Governor Gavin Newsom's budget proposal.
- Driven by higher-than estimated stock market returns and a resilient economy, state revenues are estimated to be $42.3 billion higher than anticipated over the three-year forecast window (2024-25 through 2026-27), including an estimated $18 billion increase from fiscal year (FY) 2026 to FY27.
- COLA is proposed at 2.41% for the Student Centered Funding Formula and select categorical programs
- COLA would not apply to Strong Workforce or the Student Equity and Achievement programs
- Enrollment growth funding is proposed at 0.5% for 2026-2027
- An additional 1% in enrollment growth funding is proposed for 2025-2026
- $120.7 million in one-time deferred maintenance funding is proposed
- A one-time $100 million student support block grant is proposed
Governor’s Budget Proposal Overview
Governor Gavin Newsom presented his budget proposal for the 2026-2027 fiscal year, kicking off the annual budget negotiation process. The Governor’s proposal initiates a progression of analysis, advocacy, and negotiation between the Assembly, Senate, and Governor’s office which will culminate with a final approved budget in late June. Over the course of the spring, we will learn more specific details about actual state revenues in the current year and more precise projections for future years, which will inform a revision to the initial budget proposal in May.
Governor Newsom’s budget proposal reflects a more optimistic outlook on the state’s fiscal situation than had been anticipated but with some serious cautions for what the future holds. The increases in state revenues are largely due to capital gains tax revenues, which are dependent primarily on stock market performance. We cannot assume those revenues will continue year after year as stocks, particularly in the tech sector, are highly volatile.
The total state budget is $348.9 billion, an 8.7% increase over the approved current year budget. Specific to public education, the Proposition 98 guarantee is projected to increase more than $21 billion combined over the 3-year period from 2024-25 through 2026-27. The minimum guarantee would grow to $125.5 billion in FY27, up from $114.6 billion budgeted for FY26. The increased funds for the current and prior year allow for the state to fund adjustments to the SCFF based on updated data, increase current growth, and fund other one-time initiatives as detailed below. The proposed budget would make significant increases to K-12 education funding, with more modest investments in community colleges. This will be a point of advocacy for our District throughout the spring.
Local Impact
The proposed budget is welcome news for the San Diego Community College District. The COLA will ensure we have additional revenues to cover increases in employee salaries and benefits and operational expenses. The growth funding will ensure we can continue increasing enrollment opportunities for our local communities. The one-time resources proposed will allow us to support the basic needs of our students and address facility needs at our college sites.
SCFF and Categorical COLAs
The 2.41% COLA will add an estimated $8.2 million to the District’s base revenue under the SCFF. The additional revenue would be distributed in accordance with the Resource Allocation Formula (RAF). The estimated value to our District is based on enrollment projections for the current year. The exact increase in revenue will be determined once final enrollment data is reported.
The 2.41% COLA for select categorical programs will increase funding for the Adult Education, EOPS, DSPS, Apprenticeship, and CalWORKs programs. As with recent prior years, Strong Workforce and SEAP are not proposed to receive a COLA increase.
One-time resources
The increase in revenues grows the Proposition 98 minimum guarantee in the current
year, which allows the Governor to propose significant new one-time resources, including
$120.7 million for deferred maintenance and an additional $100 million for the Student
Support Block Grant.
Other one-time items include $37M for Credit for Prior Learning, $38 million for Calbright,
and $41 million to support the build out of the Common Cloud Data Platform.
Areas of Uncertainty
The budget proposal relies primarily on fiscal estimates as of November. State revenues are largely dependent on stock market performance, which is difficult to predict. Indeed, there has been much discussion that recent stock market growth is disproportionately driven by a handful of companies benefitting from an AI bubble that may not be sustainable. If the markets fall, that could have a significant impact on FY27 revenue estimates. The federal administration further injects significant unknowns into the economic picture and as to how federal funding is applied nationally and to the state of California specifically. Also, Governor Newsom endeavors to plan budgets two years out and notes that the FY28 budget currently projects a deficit of $22 billion. He pledges to make compensating adjustments as the budget process progresses, which may affect the proposals for all areas of the budget including Community Colleges. We will get further news in May.
In Conclusion
The 2026-2027 budget proposal gives us many reasons for cautious optimism. State revenues have outpaced projections so far in the current year and we appear to be in a much healthier place, fiscally, than was anticipated. Our District has done well in growing enrollment, increasing our Student-Centered Funding Formula revenues, and moving out of the hold harmless protections in the funding formula in recent years. We have built stronger general fund reserves and have resources to continue supporting our diverse student communities should current funding sources be impacted. Stability in our state funding will be critical to our ability to persist through any volatility we may experience in federal programs. While we believe there is room to shape the budget in ways more favorable to our students (we will advocate for more growth funding and increases for SEAP and Strong Workforce, for example), the Governor’s budget proposal continues the state’s commitment to high quality, accessible public higher education for every member of our San Diego area community.