Secretary of Education Linda McMahon released her budget proposal for next year, and it’s as bad as expected.
Carol Burris, executive director of the Network for Public Education, reviewed the budget and concluded that it shows a reckless disregard for the neediest students and schools and outright hostility towards students who want to go to college.
We know that Trump “loves the uneducated.” Secretary McMahon wants more of them.
Burris sent out the following alert:
Linda McMahon, handpicked by Donald Trump to lead the U.S. Department of Education, has just released the most brutal, calculated, and destructive education budget in the Department’s history.
She proposes eliminating $8.5 billion in Congressionally funded programs—28 in total—abolishing 10 outright and shoving the other 18 into a $2 billion block grant. That’s $4.5 billion less than those 18 programs received last year.
And it gets worse: States are banned from using the block grant to support the following programs funded by Congress:
Aid for migrant children whose families move frequently for agricultural work
English Language Acquisition grants for emerging English learners
Community schools offering wraparound services
Grants to improve teacher effectiveness and leadership
Innovation and research for school improvement
Comprehensive Centers, including those serving students with disabilities
Technical assistance for desegregation
The Ready to Learn program for young children
These aren’t just budget cuts—they’re targeted strikes.
McMahon justifies cutting support for migrant children by falsely claiming the program “encourages ineligible non-citizens to access taxpayer dollars.” That is a lie. Most migrant farmworkers are U.S. citizens or have H-2A visas. They feed this nation with their backbreaking labor.
The attack continues for opportunity for higher education:
Pell Grants are slashed by $1,400 on average; the maximum grant drops from $7,395 to $5,710
Federal Work-Study loses $1 billion—an 80% cut
TRIO programs, which support college-readiness and support for low-income students, veterans, and students with disabilities, are eliminated
Campus child care programs for student-parents are defunded
In all, $1.67 billion in student college assistance is gone—wiped out on top of individual Pell grant cuts.
And yet, McMahon increased funding for the federal Charter Schools Program to half a billion dollars for a sector that saw an increase of only eleven schools last year. Meanwhile, her allies in Congress are pushing a $5 billion private school and homeschool voucher scheme through the so-called Educational Choice for Children Act (ECCA).
And despite reducing Department staff by 50%, she only cuts the personnel budget by 10%.
This is not budgeting. It is a war on public education.
This is a blueprint for privatization, cruelty, and the systematic dismantling of opportunity for America’s children.
Sen. John Laird, D-Santa Cruz, right, listens as Ken Kapphahn of the Legislative Analyst’s Office critiques Gov. Gavin Newsom’s proposed education budget at a hearing on May 22.
Credit: State Senate Media Archive
Top Takeaways
A drop in project state revenue projections from January to May, while avoiding cuts, would compound a dilemma.
Newsom also would increase funding for early literacy and after-school programs.
Key legislators share concern about draining the rainy day fund and deferring payments.
The Legislative Analyst’s Office is criticizing Gov. Gavin Newsom’s spending plan for next year for schools and community colleges. It says the May revision of the 2025-26 state budget would create new debt, rely on one-time funding to pay for ongoing operations, and drain the education rainy day fund to pay for new programs and enlarge existing ones.
The Legislature should reject the financially unsound practices, which would “put the state and districts behind the eight ball” if state revenues fall short of projections, Ken Kapphahn, senior fiscal and policy analyst for the LAO, told the Legislature’s budget committees on May 22.
The LAO provides the Legislature with nonpartisan analysis and advice on fiscal and policy issues.
In his budget for 2025-26, Newsom would protect TK-12 and community colleges from a $4.4 billion drop in projected state revenue between his January and revised May budgets and add $2 billion in spending to the administration’s priorities, which include:
Qualifying more students for coverage of summer and after-school learning through the Expanded Learning Opportunities Program ($526 million).
Hiring more math and literacy coaches and training teachers in literacy instruction ($745 million). The money would reflect legislation that the Legislature is expected to pass requiring textbooks and instruction practices to incorporate phonics and foundational skills.
Reducing the student-to-staff ratio in transitional kindergarten from 12 to 1 to 10 to 1 ($517 million).
Paying stipends for student teachers ($100 million).
The biggest budget challenge is that the projected Proposition 98 guarantee for 2025-26 — the minimum portion of the state’s General Fund that must be spent on TK-12 and community colleges — fell $4.4 billion — from $118.9 billion in the initial budget in January to $114.5 billion in May — because of revised revenue forecasts for California that project a drop in stock market earnings and uncertain impacts from President Donald Trump’s economic policies.
Newsom’s May budget would include some cuts and savings from, for example, lower projected enrollment in transitional kindergarten. It would also withdraw or reduce nearly $400 million in community college funding for updating data systems and investing in Newsom’s Master Plan for Career Education (see Page 28 of his budget summary).
But he’d primarily rely on financial tactics that the LAO cited as fiscally risky and unwise:
Committing $1.6 billion in one-time funding for ongoing funding, a strategy that could leave the state short of funding starting a year from now;
Depleting the Prop. 98 rainy day fund by $1.5 billion;
Issuing a $2.3 billion IOU by pushing back paying $1.8 billion for TK-12 and $532 million for community colleges from June 2026 to the next fiscal year in 2026-27. This deferral, though only for several weeks, creates a debt that must be repaid. Paying it off will eat into state revenue for districts and community colleges in the subsequent year.
Issuing deferrals and digging into the state’s reserves have been done before during recessions and financial emergencies, but should be viewed as “a tool of last resort,” not as solutions to difficult spending choices, Kapphahn said.
“The state historically has tried to contain spending during tight times to protect funding for core programs,” its critique said. “May Revision would task districts with hiring staff and expanding local programs based on funding levels that the state might be unable to sustain.”
Neither LAO nor Newsom is predicting a financial recession, but both project weakened state revenues over the next two years.
The LAO’s option
The LAO put forward an alternative budget that it claims would meet the revised, lower Prop. 98 minimum funding guarantee for 2025-26, including a required 2.3% cost-of-living adjustment for community colleges and schools. It would avoid deferrals, reduce $1.6 billion in ongoing spending, and reject many of Newsom’s one-time spending proposals, including literacy training and materials.
Instead, consistent with local control, it would increase an existing discretionary block grant to let districts choose how to spend much less new money.
Negotiations in the coming weeks between Newsom and legislative leaders will determine what’s in the final budget. However, two Democratic leaders who chair budget committees overseeing education in the Assembly and Senate said they shared the LAO’s skepticism.
Sen. John Laird, D-Santa Cruz, said he felt uncomfortable recommending increased funding for individual programs that “set us on for being in trouble next year.”
“If we do all this, and the projections are accurate,” he said at the May 22 hearing, “there will not be enough money to pay off deferrals and make the COLA. The decision to put us in that position we are making now, potentially creating a bad situation for next year.”
Assemblymember David Alvarez, D-San Diego, who chairs the Assembly Budget Subcommittee on Education Finance, said he too is concerned that the proposed budget would deplete the last $1.5 billion of the rainy day fund, which was $8.4 billion only two years ago.
At the same time, he agrees with Newsom’s new spending on literacy instruction and funding for stipends for student teachers. And he would add in money for ethnic studies that Newsom didn’t include. Without the funding, the mandate for a semester-long ethnic studies course that the Legislature required, starting in 2025-26, cannot take effect.
Alvarez didn’t suggest budget cuts to make room for ethnic studies.
Declining enrollments are painful for districts, yet may yield revenue options for the state.
With $15 million, districts would brainstorm new concepts for high schools of the future.
There’s a catch-22 for English learners who are too young to be tested.
Inside every governor’s voluminous state budget are items that, while not headline-grabbing, are newsworthy and illuminating.
Gov. Gavin Newsom’s May budget revision for 2025-26 is no exception, as four examples illustrate. One invites districts to redesign high schools; another adds a billion dollars to spur growth in learning. A third is a quick fix for a legal obstacle to help young English learners; a fourth reveals an important long-term funding trend. Here are the details.
Reimagining high school
Asked to describe how they felt about high school, 3 out of 4 students chose “tired,” “stressed” or “bored” in a 2020 nationwide survey by Yale University. Closer to home, about 4 out of 10 students in the 2024-25 California Healthy Kids Survey reported they lacked a relationship with a caring adult in high school.
State Board of Education President Linda Darling-Hammond has read those numbers and similar data. She has also seen schools, like MetWest High School in Oakland Unified, and districts like Anaheim Union High School District, that have explored project-based learning, work internships, team teaching, and individual learning plans with alternative measures of achievement. One of the challenges has been scaling models within a learning system that measures learning in terms of periods, course credits, and minutes of seat time.
That’s why Darling-Hammond encouraged Newsom to include $15 million in the May budget revision for a pilot program to redesign middle and high schools “to better serve the needs of all students and increase student outcomes.”
“If public schools are to survive, they will have to be transformed to be more responsive,” Darling-Hammond said. “Students should not have to leave public schools for microschools and school pods to get a personalized environment.”
Newsom is proposing that a yet-to-be-chosen county office of education guide a network of between 15 and 30 districts in a multi-year program to examine innovations, propose alternatives, and learn from each other.
State law allows districts to seek waivers from state requirements, and existing independent study regulations permit some flexibility for experimentation. But an independent study was designed to accommodate individual schedules, not a systemic response that reorients the school day to a changing vision for a high school graduate, Darling-Hammond said.
“The state board can’t spend time doing workarounds for 2,000 districts,” she said.
Ron Carruth, the retired superintendent of the El Dorado Union High School District, said he is encouraged by the proposal. This month, he helped establish the California High School Coalition, which will hold its first conference in Sacramento on Oct. 26-28.
Anaheim Union High School District Superintendent Michael Matsuda said that “in the age of AI, we need to be more innovative than ever, considering tectonic shifts in jobs and employment. If we’re not preparing students for that world, shame on us.”
The state-funded network will be “an opportunity to innovate,” he said, while noting that changing systems and culture are a lot harder than people think. “School leaders need to think more like entrepreneurs.”
Ideas for accelerating learning?
Parents and community members with ideas for moving districts beyond their post-pandemic learning lag will have a chance to share them under the May budget revision, with an extra $1.1 billion for districts to spend on them.
Newsom is proposing to add $378 million in each of the next three fiscal years to the Learning Recovery Emergency Block Grant program — a massive, five-year state grant program approved in 2022-23. The grant program, targeted for the most struggling students, provides what districts in other states lack: state money to replace federal Covid funding that expired in September 2024.
It’s unclear how much of the original $6.8 billion remains. As of a year ago, $4.8 billion hadn’t been spent, according to an analysis of the most recent state data by School Services of California. The proposed $1.1 billion would add to what’s left.
Under the terms of the program, districts must solicit community views on spending the money on “evidence-based practices,” like tutoring or investing in teacher residences to retain new teachers. Districts will then have to spell out uses for the funding as a new entry in their annual Local Control and Accountability Plans.
The timing is good. For example, the Legislature is likely to move districts toward adopting effective early literacy textbooks and effective ways to teach them. This new block grant money could amplify the more than $700 million that Newsom is also proposing for districts to improve early math and reading instruction.
More districts are also indicating interest in high-impact tutoring, with additional research showing its effectiveness. Along with providing districts with a free, step-by-step guide and counseling for setting up a program, Stanford University-based National Student Support Accelerator is cosponsoring an effort for 40 California districts to design their own tutoring programs over the next year (go here for information on signing up).
TK English learner funding workaround
A decision by the Legislature that 4-year-olds in transitional kindergarten (TK) are too young to be tested for English proficiency could delay funding for services the children need before kindergarten.
Recognizing the problem, Newsom proposes a temporary fix in the May budget revision by providing $7.5 million in one-time money for 2025-26 and 2026-27.
All students who speak a language other than English at home are required to take the English Language Proficiency Assessments for California (ELPAC) when they enroll in school to determine if they are English learners. But the law that legislators passed last year exempts students in transitional kindergarten from taking the test because of concerns that it was not age-appropriate. Without identifying English learners and providing funding for them under the state’s Local Control Funding Formula, schools are not required to provide unidentified students with language services or report their academic progress on the state dashboard.
“It’s critical that we have funding to support our children, that we have the requirement to support our children, and that we’re doing so in the age and developmentally appropriate way that really keeps their assets in mind,” said Carolyne Crolotte, director of policy for Early Edge California, an organization that advocated for the exemption of TK students from ELPAC testing.
Crolotte said Early Edge California has been researching what other states do to identify young English learners and is working with the State Board of Education and the National Institute for Early Education Research to identify alternative assessments.
Newsom is also proposing $10 million for selecting and making available a new screener for schools to use with TK students to identify their language needs. However, there is a catch. The language the governor is suggesting for the budget bill states that the screener should not be used to identify students as English learners. Unless the Local Control Funding Formula is changed, schools would still not receive funds specifically for these students or be required by law to provide them with help to learn English.
Declining enrollment’s ‘dividend’
There’s a silver lining to the continued decline in TK-12 student enrollment in California. Per-student funding could grow statewide during much of the next decade if, according to state projections, student enrollment statewide drops by nearly 10%, to 5.25 million by 2033-34.
That’s because the state will be apportioning money through what’s called Test 1 under Proposition 98, the formula that determines the minimum portion of the state’s General Fund that must be spent on TK-12 schools and community colleges. Under Test 1, that’s about 40% of the total. If state revenues grow at the same time as the number of kids shrinks, the result will be more money per student.
The increase won’t be enough to prevent spending cuts or school closures in those districts with big drops in enrollment. But it should help ease the pain, and for districts with flat or growing enrollment, provide a modest increase in their share of the Local Control Funding Formula, which provides the bulk of their state funding; it is tied to average daily attendance.
Funding through Test 1 is a relatively recent development. In 1988, when they wrote Prop. 98, its authors didn’t foresee a period of declining enrollment. For the first 25 years, as student enrollment grew by more than 1 million, growth in student attendance, along with increases in personal income (Test 2) or increases in General Fund revenue plus 0.5% (Test 3), determined funding levels above or below the previous year.
First invoked in 2011-12, Test I has been used in seven of the past eight years and will be in effect in 2025-26, and likely in the coming years.
The extra money systemwide will also give the Legislature and future governors new options. They could decide which new programs with soon-to-expire one-time funding, such as community schools, should receive permanent support. Or they could choose to phase in much-talked-about changes to the Local Control Funding Formula. These could include raising the base funding for all districts or building in a regional cost adjustment. Those are among the ideas in Assembly Bill 1204, which will get serious attention next year.
The declining enrollment “dividend,” as it’s been called, “is kind of a boon for the education system,” said Julien Lafortune, senior fellow at the Public Policy Institute of California.
State Sen. Roger Niello, R-Fair Oaks, vice chairman of the Senate Budget and Fiscal Review Committee, back to camera, urges lawmakers to reject a measure to reduce the state budget deficit at the Capitol in Sacramento on April 11, 2024.
Many details of the spending plan will be hashed out in the coming days and weeks, but Thursday’s action will allow lawmakers to continue getting paid because it meets the constitutional requirement that they pass a budget before June 15.
The bare-bones plan passed Thursday would increase the size of the can lawmakers had previously contemplated kicking down the road in order to deal with lagging revenue. It would increase the amount of Proposition 98 funding — the amount of the overall general fund that must go to K-12 education and community colleges — that would be suspended in the current year, but with the expectation that much of it will be repaid and revenue will increase in the coming year.
Plenty of details remain unresolved. The Senate and the Assembly rejected $895 million that Gov. Gavin Newsom had proposed in one-time funding to purchase zero-emission school buses, and instead reinstated a cut that Newsom had proposed for the Golden State Teachers Grant Program, which pays $20,000 to teacher candidates who agree to teach in priority schools for four years. A supplemental bill that has not been released will detail how the rest of the money would be used. The Legislature accepted Newsom’s proposed cut of $550 million in facilities for transitional kindergarten and full-day kindergarten on the assumption that money will be included in a facilities bond that the governor and legislative leaders are negotiating to place on the November election ballot.
The framework with the California Teachers Association last month settled the question of how the state would account for an $8.8 billion shortfall in revenue below what the Legislature appropriated for 2022-23. The deal calls for suspending funding still owed for the current year ending June 30 — something that had been done only twice in the past 40 years — by $5.5 billion and delaying paying $2.6 billion appropriated for 2023-24 until 2024-25.
Suspending a portion of the Proposition 98 obligation requires creating a type of IOU that must be repaid in coming years. Newsom avoided outright cutting of TK-12 and community college funding by suspending some state funding and pushing off paying districts from the end of one fiscal year to the start of the next one — a tactic known as deferrals.
The placeholder budget passed on Thursday increases the funding that will be suspended by $2.8 billion. The Legislature assumes that higher income tax revenue next year, based on updated projections that Newsom didn’t have for his revised May budget, will help to pay down the suspended funding. The Legislature also would generate a new source of revenue by accelerating a three-year postponement of deductions that corporations can claim from net operating losses and various business tax credits. That would bring in temporarily $5 billion, of which about $2 billion would go to schools and community colleges under Proposition 98.
Newsom had proposed the three-year interruption to begin in 2025-26. Since businesses haven’t had time to plan an accelerated schedule, Newsom hasn’t said if he’d go along. Resuming the operating deductions and credits would then reduce revenues in future years.
Republicans in the Legislature criticized addressing the state’s budget deficit by raising taxes on the business community and shifting funds around. The budget is “little more than a shell game meant to hide the bleak truth of our financial situation,” said Senate Minority Leader Brian W. Jones, R-San Diego, who blamed overspending for the swing from a massive budget surplus to a deficit in two years.
The advocacy group Children Now, generally an ally of the Democratic leaders on children’s issues, criticized increasing the amount of Proposition 98 suspension and the use of funding deferrals. Suspension, the group said, “should be a last resort, not a tool to manipulate education spending,” adding that suspension, with its creation of an IOU, subjects education to funding volatility and uncertainty about when the money will be repaid.
“While we understand the necessity of suspending Proposition 98 under the current circumstances, a suspension isn’t ideal, and its size should be minimized as California still ranks fifth worst in the nation in terms of student-to-teacher ratios and, similarly, has among the lowest staffing levels for other educators, including support staff, nurses, and administrators,” the letter said.
Senate President pro Tempore Mike McGuire, D-Geyserville, predicted a deal between lawmakers and Newsom as early as next week and that the final budget would be similar to what the Legislature approved.
Gov. Gavin Newsom answers a reporter’s question about his revised 2024-25 state budget during a news conference in Sacramento on May 10, 2024.
Credit: AP Photo/Rich Pedroncelli
True to Gov. Gavin Newsom’s promise, the 2024-25 budget compromise that the Legislature announced Saturday and will pass this week will spare TK-12 and community colleges from cuts that other state operations will bear.
TK-12 funding will be flat and will continue Newsom’s major commitments to multiyear, multibillion-dollar programs, including community schools and before- and after-school expansion.
Update: State Budget Signed
On June 26, Gov. Newsom signed Assembly Bill 107, the main budget bill, and Senate Bill 154, the Proposition 98 suspension bill. On June 28, Newsom signed SB 153, the education trailer bill.
The budget will even throw in a couple of billion in new revenue that Newsom didn’t call for in January or in his May budget revisions. Newsom and legislators, meanwhile, struggled to squeeze an additional $28 billion out of a $211 billion general fund spending.
But protection for schools and community colleges will carry risk. To balance the budget, Newsom and legislative leaders rely on budget maneuvers that would give a button-down accountant acid reflux.
They include creating a $6 billion debt that won’t be fully repaid to the state treasury for a dozen years, and draining the $8.4 billion education rainy day fund.
The deal also requires delaying payments to schools and community colleges and suspending — for only the third time in its 36-year history — Proposition 98 obligations for the current school year, on the assumption the money will be repaid quickly. Proposition 98, a constitutional amendment voters passed in 1988, established a formula for determining the minimum level of general fund spending on transitional kindergarten through grade 12 and community colleges — generally about 40%.
Rather than punish schools for money already spent, the budget bill creates a $6.2 billion debt that the general fund, not schools and community colleges, will repay the state treasury over a decade, starting in 2026-27. The remaining $2.6 billion will be a Proposition 98 obligation pushed ahead to 2023-24; that unfunded amount is called a deferral.
The California State University and the University of California won’t fare as well in the budget deal, although better than Newsom had proposed in January, even with a drop in state revenues since then. Both will get a 5% budget increase in 2024-25 that Newsom had proposed delaying, equal to $227.8 million for UC and $240.2 million for CSU, to support enrollment growth of California residents this fall.
Another promised 5% budget increase for both systems in 2025-26, however, will be put off a year. UC and CSU also face one-time cuts in 2024-25 of $125 million and $75 million, respectively, which will be restored in 2025-26.
Both CSU and UC will also face a 7.95% cut in their administrative expenses in 2025-26.
There will be no reforming the Cal Grant program in 2024-25, but, at the Legislature’s insistence, the $637 million ongoing funding for middle-class scholarships will continue, with a $289 million one-time increase.
Late spending changes
The final budget will also restore some TK-12 and child-care cuts that Newsom had proposed in his May budget revision while maintaining others. They include:
Restoring $60 million for the Golden State Teachers Program, which provides $20,000 in scholarships to teacher candidates, although a new means test may pare back $10 million in eligibility.
Restoring $100 million in funding to help preschools prepare classrooms and train teachers in order to enroll more children with disabilities, while withdrawing larger plans to expand the program.
Continuing the existing agreement to serve 200,000 more children in the state-subsidized child care system but pushing back the timetable for full compliance to 2028.
Rescinding $895 million in one-time spending on electric-powered school buses that Newsom had made a priority. Instead, the money will be used to reduce some of the late payments in state funding for schools.
School districts receive the bulk of their funding through the Local Control Funding Formula, which is based on daily student attendance and a yearly cost-of-living adjustment. So, even though overall state funding won’t be cut, many districts with declining enrollments and high absenteeism rates will face financial challenges.
The cost-of-living adjustment (COLA), which is based on a federal formula tied to the cost of goods and services but does not factor in regional costs, including housing, will be only 1.07% for 2024-25, forcing further belt-tightening. One option for school districts, giving layoff notices to staff, will be off the table. State law allows an additional round of layoffs in August in years when the COLA is less than 2%, but, at the urging of public employee unions, Newsom and legislative leaders included a clause prohibiting late summer layoffs. They have done the same statutory override before.
The initial reaction from two veteran TK-12 budget watchers was mixed. “This budget remarkably insulates K-14 funding from cuts, abides by constitutional requirements to restore funding in the future, and even provides a modest cost-of-living increase, all amid a record budget shortfall. Pretty amazing,” wrote Kevin Gordon, president of Capitol Advisors Group, a school consultancy firm.
Rob Manwaring, senior policy and fiscal adviser with the nonprofit advocacy organization Children Now, was cautious. “While the final budget is perhaps the best schools could anticipate given the budget challenges, we worry about the size of the suspension for schools, $8.3 billion,” he wrote. “Schools will eventually get paid back those funds in future years on top of the minimum guarantee, but these payments will result in increased school funding volatility and uncertainty until they are paid back.”
And if revenues falter next year, schools and community colleges will no longer have a rainy day fund to turn to; it will be depleted by the end of 2023-24, with the possibility of replenishing it by $1.1 billion in 2024-25.
Proposition 98 juggling act
The proposed 2024-25 budget for schools and community colleges will be balanced, if revenue projections hold true, by juggling three years of Proposition 98 shortfalls, with one year’s solution creating the next year’s dilemma.
The big drop was in 2022-23 when the Legislature “over-appropriated” the minimum Proposition 98 guarantee by $8.8 billion, while state revenue from the post-Covid stock market and the tech sector plummeted. Legislators didn’t see the warning signals because winter storms had pushed back the tax filing deadline from April to November.
Under the mechanics of Proposition 98, the funding level for 2022-23 becomes the base level for 2023-24, even though the state still lacks the revenue to pick up the tab. So all but $1 billion of the $8.4 billion in the education rainy day fund will be drained to cover some of the 2023-24 deficit and the $2.6 billion deferral from the year before.
On top of that, the budget deal calls for suspending $8.3 billion of the Proposition 98 funding for 2023-24. That has the effect of lowering the minimum guaranteed funding by that amount, while freeing up money to avoid deeper cuts in other state operations. That’s how the Legislature can restore cuts in 2024-25 for child care and preschool that Newsom had planned.
The architects of Proposition 98 wanted to discourage the Legislature from suspending the law. So it requires the Legislature to declare a fiscal emergency and to make the suspended funding a priority for repayment as soon as there is new revenue. The 2024-25 budget assumes the state will have enough new revenue to pay back at least $4 billion of the suspended $8 billion, maybe more. But if revenues falter, districts won’t get what they’re entitled to, with no set date for repayment.
That’s why the deal is also a gamble for schools and community colleges.
There’s one more wrinkle. To raise revenue quickly, the Legislature has accelerated the temporary, three-year suspension of two tax benefits for large and medium-sized businesses: net operating loss deductions and tax credits. The period will start in 2024-25, one year ahead of schedule. It will yield a projected $5 billion, with $2 billion going to Proposition 98 — funding that will be used to pay down deferrals.
Between this new money and the $4 billion payback for suspended funding, the Proposition 98 minimum guarantee is expected to rise to a record $115.3 billion in 2024-25.
As with all deadline negotiations, legislators will have at most three days to review hundreds of pages of budget details spread over 16 separate bills. Newsom, Senate President pro Tempore Mike McGuire, D-Healdsburg, and Speaker of the Assembly Robert Rivas, D-Hollister, are expecting that legislators will demand some changes when they return from vacation in August.
The West Contra Costa Unified School District may be on the verge of turning over control of its budget to the county after the school board rejected the district’s Local Control Accountability Plan on Wednesday night, limiting the chance of passing a 2024-25 district budget by July 1, as required by state law.
Without passing a Local Control Accountability Plan (LCAP) — a document that sets district goals to improve student outcomes and how to achieve them — the board cannot vote on the proposed budget, said Kim Moses, associate superintendent of business services at West Contra Costa Unified School District (WCCUSD). The two are linked; the LCAP is a portion of the budget and gives the district a road map on how to allocate funding for its $484 million budget. The district risks losing local control over funding decisions. Trustees voting no said it didn’t reflect priorities of the community and was not transparent.
It’s a rare situation. Districts routinely pass budgets at the end of June to close the fiscal year and start a new one.
District and Contra Costa County Office of Education officials warn that a failure to pass a budget and LCAP by July 1 will cede financial control to the county office. The district can still act by midnight Sunday to avert a takeover, but district officials are assuming that will not happen.The board would still need to vote on the budget presented by the county.
The district also would face difficulties getting the county’s approval of the budget.The state Fiscal Crisis and Management Assistance Team (FCMAT), which focuses on helping districts solve and prevent fiscal challenges, found in a recent analysis that the district had overspent, and concluded that the school board had been unable or unwilling to make cuts.
In a statement to EdSource, Moses wrote she was “deeply disappointed” that the board didn’t pass the LCAP. The responsibility to adopt the LCAP and 2024-25 school year budget will be in the hands of county officials. Until they impose the new plan and budget, Moses said, the district will revert to operating under last year’s budget.
“We are confident that the county will review our circumstance with a student-focused lens and do what is necessary to support our students,” the statement said. “In the interim, we will be able to continue processing payroll without interruptions, and we will be able to maintain all expenses related to the general operating costs within the district, such as utilities, required materials and supplies, and other operational necessities.”
But because the district is functioning on last year’s budget, some schools won’t receive the funds they need, and the district can’t move forward with new goals set, said Javetta Cleveland, a school business consultant for West Contra Costa.
“This is really serious to go forward without a budget — the district cannot operate without a budget,” Cleveland said during the meeting. “The district can’t meet or establish priorities without a budget.”
Cleveland asked the board to reconsider approving the LCAP and have the Contra Costa County Office of Education approve the LCAP with conditions that would allow revisions after receiving feedback from parents. But that didn’t happen.
Budget shortfalls
District officials are projecting a $31.8 million budget deficit over the next three school years, with about $11.5 million in shortfalls projected for the upcoming school year. The plan was to use reserve funds over three school years to make up the shortfall.
To address budget shortfalls, the board has also had to eliminate more than 200 positions since last year. The most recent cuts were voted on in March. But at the same time, the district was dealing with three complaints, including allegations that the district is out of compliance with the law because teacher vacancies have not been filled and classes are being covered by long-term or day-to-day substitutes, which district officials acknowledged was true.
“While the result of last night’s board meeting complicates an already challenging financial situation, members of the community should know that WCCUSD schools will continue to operate, and employees will continue to be paid as we work through the LCAP approval process,” said Marcus Walton, communications director for county office. “At this point, it is the role of the Contra Costa County Office of Education to support WCCUSD staff to address the board’s concerns and implement a budget as soon as possible.”
FCMAT conducted a fiscal health risk analysis on West Contra Costa in March and found the district is overspending.
While the FCMAT analysis concluded the district has a “high” chance of solving the budget deficit, it highlighted areas it considers high-risk, including some charter schools authorized by the district also being in financial distress; the district’s failure to forecast its general fund cash flow for the current and subsequent year, and the board’s inability to approve a plan to reduce or eliminate overspending.
FCMAT’s chief executive officer, Michael Fine, was not available for comment.
The vote
President Jamela Smith-Folds was the only trustee to vote yes on the LCAP. She said she wants to see more transparency but that it’s important to keep local control over the LCAP and budget.
“I would be remiss if I didn’t say that there are things we need to do differently, but I think everyone is acknowledging that,” Smith-Folds said. “Now the next step after you acknowledge that is to show change and consistency.”
Trustees Leslie Reckler and Mister Phillips voted down the LCAP. Phillips said it was because he doesn’t believe that what the community asked for is reflected in the document.
“I have consistently advocated for a balanced and focused budget since joining the school board in 2016,” Phillips said in an email. “The proposed budget was neither. With my vote, I invited our local county superintendent to the table. I hope that she will work with us to create a balanced and focused budget that prioritizes the school district’s strategic plan.”
Reckler said that for the last two years, she had continued to ask staff to show how programs and the LCAP performed, how community feedback is being incorporated, and how money is being spent.
“I’m frustrated I have to spend an entire weekend trying to figure out the changes in the LCAP. It should be self-evident,” Reckler said during the meeting. “This document seems to be less transparent than ever before. I don’t know how else to get your attention, and I won’t be held hostage. For these reasons, I am voting ‘no.’”
Trustee Otheree Christian abstained, saying that there needs to be more transparency in the LCAP but did not elaborate further or respond to requests for comments on why he chose not to vote.
Board member Demetrio Gonzalez Hoy was absent because of personal family reasons, according to his social media post. He called the vote a failure of the board, including his absence.
In a recent meeting with the District Local Control Accountability Plan Committee (DLCAP), made up of parents and members of community organizations, committee members shared their frustrations, saying they didn’t feel heard and needed more information about programs, Superintendent Chris Hurst said. Gonzalez Hoy said he agreed with the committee that there needs to be more transparency and in regards to spending priorities, community leaders need to be heard.
“With that said, what we should have done is ensure that this does not happen in the future and that the DLCAP committee is taken seriously in their charge,” Gonzalez Hoy’s post said. “Unfortunately, instead of advocating for that and ensuring this occurs, I believe that some on our board want certain adults leading our district to fail and that’s really what led to a vote last night.”
During Wednesday night’s meeting, many community members asked the board to stop making staffing cuts and to reject the LCAP and budget proposals, saying that both proposals didn’t meet student needs, and disenfranchised low-income, English learners, and students of color. Some speakers questioned if the LCAP complied with the law.
The district team that put together the LCAP said the planning document complies with the law, according to Moses, as do the officials at the county office of education that reviewed the document. The county gives the final stamp of approval after the board passes the LCAP, and if something needs to be fixed, they can approve the document with conditions, she added.
“I do know, with any large document, nothing is perfect in the first draft,” Moses said during the meeting. “I’m not sure if there is something we need to take a look at, but if so, I’ll restate this is a living document; if we do find that there is an area that needs more attention, we’ll give attention to that area.”
Moses said she agrees with the advocates — the district needs to serve students better. She and the district are committed to strengthening communication with the community and explaining how the strategies in the 203-page document are helping students.
As of Thursday evening, an emergency meeting has not been scheduled. The next board meeting is scheduled on July 17.
The story has been updated to clarify how operations of the district will proceed moving forward.
The burned remains of the Paradise Elementary school on Nov. 9, 2018, in Paradise. Blocks and blocks of homes and businesses in the Northern California town were destroyed by a wildfire.
Credit: AP/Rich Pedroncelli
Starting next March, California school districts will be required to post a plan on their websites outlining how they will provide instruction to students within 10 school days of an emergency that keeps children from attending classes. They should also make contact with students and families within five days of the emergency. Last week, Gov. Gavin Newsom signed the education trailer bill as part of the 2024-25 budget.
The plan must be operative by July 1, 2025.
Local educational agencies — school districts, charter schools and county offices of education — that do not develop an instructional continuity plan as part of their school safety plan will not be eligible to recover lost state attendance funding if schools close or a significant number of students are unable to attend because of an emergency.
In a separate action, the trailer bill also addresses chronic absenteeism by authorizing school districts to provide attendance recovery programs during school breaks, weekends or after school, to allow students to make up for up to 10 days of school missed for any reason. Beginning next July, districts that offer the programs will be able to recover state funds lost when students in the program were previously absent from school.
The legislation comes four years after California schools closed for more than a year because of a worldwide pandemic. Since then, chronic absenteeism rates have more than doubled. Wildfires and flooding also have closed schools across the state with increasing frequency in recent years.
“Given the effects of public health emergencies and the significant and growing number of natural disasters that the state has faced in recent years, there is an increased need for local educational agencies to provide instructional continuity for pupils when conditions make in-person instruction infeasible for all or some pupils,” according to the trailer bill.
The instructional continuity plan must describe how districts will provide in-person or remote instruction to students, including potentially temporarily reassigning them to other school districts. Students who are reassigned during an emergency will not have to comply with any residency requirements for attendance in that district.
Penalties removed
The legislation has changed dramatically since the May budget revision, which would have given districts five days to offer students instruction after an emergency, and penalized them financially if they didn’t.
The revisions are due, in part, to heavy opposition from a coalition of nine education organizations, including the California Teachers Association, California School Boards Association and California County Superintendents.
“There are countless instances where the physical infrastructure and human capacity necessary to comply with this requirement does not exist: roads, landlines, internet connectivity, access to devices, access to shelter, family and staff displacement, etc.,” said California County Superintendents in a May letter to the chairs of the Senate and Assembly budget committees. “When this occurs, a LEA may find it impossible to offer remote instruction.”
Derick Lennox, senior director for governmental relations and legal affairs for the association said, “There was the feeling that the state does not understand the challenges that schools face to locate and serve the basic needs of their students and families during a serious emergency.”
As an alternative, the coalition asked for a proactive planning process without financial penalties, and lawmakers agreed, Lennox said.
El Dorado County Superintendent of Schools Ed Manansala said that the proactive, constructive tone of the new legislation is more productive than the punitive tack legislators took in the original version.
Manansala said it isn’t feasible to expect schools to deliver instruction 10 days after schools close in an emergency.
El Dorado County has had at least 70 wildfires of varying sizes between 2004 and 2023, the largest being in August 2021, according to CalFire. It burned 221,835 acres and razed Walt Tyler Elementary School in Grizzly Flats.
“We had teachers and students that were being displaced out of their communities,” Manansala said.
Mendocino County Superintendent of Schools Nicole Glentzer first experienced the extended closure of schools in 2017 when a fire burned 36,000 acres.
Glentzer, who worked at nearby Ukiah Unified School District at the time, had to evacuate her home. She moved into the district office and went to work making decisions about school closures. The district’s schools were closed for five days.
Since then, the county on the state’s north coast has been ravaged by numerous fires, including two of the nation’s largest, which together burned more than 1.41 million acres in multiple counties in 2018 and 2020.
Schools in Mendocino County also have been closed recently because of flooding and power outages.
Glentzer said that while she is satisfied with the revamped language in the legislation, she cringes when she hears that small districts, with small staffs, are expected to come up with plans similar to larger districts. The Mendocino County Office of Education will help the 12 school districts in its county by providing sample plans and templates, she said.
Attendance recovery
State chronic absentee numbers have skyrocketed from 12.1% in 2018-19 to 30% in 2021-22, according to an analysis of California data. Chronic absenteeism rates are determined by the number of students who miss at least 10% of school days in a given year.
Attendance recovery programs like the one required by the new legislation can help districts reduce their chronic absenteeism and regain the average daily attendance funding lost when students miss school. The programs must be taught by credentialed teachers and be aligned to grade-level standards and to each student’s regular instructional program, according to the legislation.
Attendance recovery programs can be funded through the Expanded Learning Opportunities Program at school sites where the after-school or summer enrichment programs are being offered and operated by the school district.
“In my mind, it’s a whole theme that the administration and Legislature are going for, around addressing chronic absenteeism — one of the top issues facing students today,” Lennox said. “And, they basically outlined a few different strategies to do it.”
West Contra Costa Unified’s Stege Elementary School in Richmond.
Photo: Andrew Reed/EdSource
Most school districts across California have already approved budgets for the upcoming school year along with a required planning document that gives a road map on how funds should be spent. It’s a routine process that by state law must happen by June 30, the end of the fiscal year.
But what happens when a board fails to approve both by the deadline?
After the West Contra Costa school board last month voted down the planning document, better known as the Local Control Accountability Plan (LCAP), Contra Costa County Office of Education officials are stepping in to support the district as it works to secure approval. The board didn’t get to vote on the budget at the June 26 meeting because the LCAP must be approved first.
The accountability plan, which also includes district goals to improve student outcomes and how to achieve them, and the budget are linked; one cannot exist without the other. There’s $64.8 million of funding in the LCAP that can’t be used until the plan is approved by the board.
“You have to adopt the plan first before you can adopt the budget,” said Michael Fine, chief executive officer of the state’s Fiscal Crisis and Management Assistance Team (FCMAT).
“The budget becomes subsidiary to the plan in that it just becomes a supporting role to the plan, it’s one of the mechanisms that facilitates getting the plan done and implemented.”
Although the West Contra Costa Unified School District doesn’t currently have an adopted accountability plan or budget, the district is using its $484 million 2024-25 proposed budget in the interim to pay salaries and general operating costs, said Marcus Walton, director of communication at the county office of education. Previously, district officials thought they would revert to using the 2023-24 budget, but that has since changed.
At the June 26 meeting, district officials and some board members had the same concern — that rejecting the 203-page LCAP and not voting on a budget would mean losing local control. At the time, district staff didn’t have all the answers about what would happen next because they had never dealt with this situation. One district consultant even asked the board to consider voting on the LCAP again because without one, it would put the district in an unprecedented situation.
West Contra Costa is not losing local control.
The county office of education isn’t taking control of the LCAP or budget, confirmed Lynn Mackey, the county superintendent of schools. Since the vote, Mackey said she’s spoken with district Superintendent Chris Hurst, and the county and district’s LCAP teams have met. But there are no plans to re-create the LCAP or budget for the district, she said.
This isn’t a scenario where a district would need to be taken over, Mackey said. That happens when a district goes insolvent and runs out of cash.
“The LCAP can be a very complex document, it’s a beast,” Mackey said. “They’re (district staff) doing a great job, and they have done a great job. We will be meeting with them and supporting them as it goes back to the district for a vote.”
The next board meeting is set for July 17, but it’s unlikely the accountability plan will be brought back for a vote then, Mackey said. Key West Contra Costa staffers who work on the plan have been on vacation and are just starting to return. There won’t be enough time to post the LCAP before the meeting, which is a requirement, Mackey said. Neither the budget nor LCAP are currently on the agenda to be discussed or voted on at that meeting.
What happens if the board rejects the LCAP again?
“Unfortunately, the California education code does not address what happens when an LCAP is not adopted by a school district,” Hurst said in his message to community members. “This is an unprecedented event in the state of California.”
Mackey said she would need to confer with state officials for next steps.
In a message to the community, district Superintendent Hurst said the county has advised the district to pass the accountability plan by Aug. 15, the county’s deadline to review LCAPs. After school boards pass them, the county must make sure the plans comply with the requirements, then give final approval.
The county then has until Aug. 30 to respond to districts if they have questions or need clarifications on the documents, Mackey said.
If the board approves the accountability plan and the budget by the Aug. 15 deadline, Mackey said, it signals to the county that major revisions aren’t necessary. However, the county still needs to impose that budget because it wasn’t passed before the June 30 deadline required in the state education code.
The county could bill the district for helping it get the LCAP and budget approved, Mackey said, but the county has no intention of doing that.
What happens if the board does not pass a budget?
Mackey said the county would review the proposed budget, and as long as it meets all requirements, that budget would be imposed by her office.
It would be “foolish” for the board not to approve a budget, Fine said. “They need to approve the budget because that would give the county superintendent information, plus, then the district owns its budget. And that’s important.”
Passing the LCAP
Between now and when the accountability plan will return for a vote, district officials are working to get it to a place where the board will approve it.
The two district board members who voted down the LCAP — Leslie Reckler and Mister Phillips — said a major problem for them was the lack of transparency in the document. Board President Jamela Smith-Folds was the only “yes” vote. Otheree Christian abstained, and Demetrio Gonzalez Hoy was absent.
Many parents and other community members addressed the board during the June 26 meeting, asking the board to reject the LCAP and the budget, saying community input wasn’t reflected in the document. Public commenters said there was a lack of transparency in both proposals, that neither met student needs, and that they disenfranchised low-income students, English learners and students of color. Some speakers questioned whether the accountability plan complied with the law.
It’s rare for districts to turn in an accountability plan that fully complies with the law, Mackey said. However, when a board approves it, the county can work with districts to bring the documents into compliance.
Trustee Phillips said community concerns and not having a balanced budget were other reasons he voted down the LCAP.
“I want to be very clear: The community needs to be heard,” Phillips said. “That’s not me saying everything the community wants should be put in there, but they are supposed to be heard, and I don’t feel like that happened.”
Some trustees have called the vote a failure of the board, but Phillips said that’s not accurate.
“It was an opportunity for me to put brakes on another unbalanced budget. That’s why I did what I did. But it was not a failure,” Phillips said. “It was a conscious decision, I did it on purpose.”
District officials are projecting a $31.8 million budget deficit over the next three school years, with about $11.5 million in shortfalls projected for the upcoming school year. The plan was to use reserve funds over three school years to make up the deficit, which is a typical move, Fine said.
West Contra Costa has been in “financial distress for quite a while,” Fine said. “They were deep in distress, and they are working their way out of that hole.”
In an emailed statement, Reckler said the district should now “retool their presentation to the board and public and re-present it, tailoring it to specific questions” raised by board members and the District Local Control Accountability Plan Committee (DLCAP), which consists of parents and members of community organizations.
The board can then give district staff comments and direct it to take any additional steps, Reckler said.
Christian also said he abstained from voting on the accountability plan because the document lacked transparency and failed to include parent feedback. He said the document should plainly state how money is being spent to meet district goals and how programs are benefiting students, which hasn’t happened.
“Those who get paid the big bucks should be the ones to make sure this stuff is done right,” Christian said. “Let’s do it right, let’s make it right, let’s not have hidden agendas, and let’s spell it out.”
If there are substantial changes to the LCAP, it could mean big changes to the budget. It’s too soon to know what kind of changes are being made, but Mackey said even if money needs to be shifted around, it doesn’t appear there will be major revisions.
“It’s challenging,” Mackey said. “As much work as you do on transparency, I do feel like there’s always going to be somebody who doesn’t feel the LCAP is very transparent.”
Even if the accountability plan meets all the state requirements, some boards want more or for staff to go “above and beyond, which is understandable,” Mackey said.
“My hope is that they (board members) don’t hold it hostage for things that you can’t go back and fix,” Mackey said. “If they want something different in the future, set that up now so as the LCAP writers are going forward, they know exactly what is expected so this doesn’t happen again.”
May 19, 2025, by Dean Hoke: In my recent blog series and podcast, Small College America, I’ve highlighted the essential role small colleges play in the fabric of U.S. higher education. These institutions serve as academic homes to students who often desire alternatives to larger universities, and as cultural and economic anchors, especially in rural and small-town America, where, according to IPEDS, 324 private nonprofit colleges operate. Many are deeply embedded in the towns they serve, providing jobs, educational access, cultural life, and long-term economic opportunity.
Unfortunately, a wave of proposed federal budget cuts may further severely compromise these institutions’ ability to function—and in some cases, survive. Without intervention, the ripple effects could devastate entire communities.
Understanding the DOE and USDA Budget Cuts
The proposed reductions to the U.S. Department of Education (DOE) and U.S. Department of Agriculture (USDA) budgets present a two-pronged threat to small colleges, particularly those in rural areas or serving low-income student populations.
Department of Education (DOE)
The most significant concerns center on proposed changes to Pell Grants, a vital financial resource for low-income students. One House proposal would redefine full-time enrollment from 12 to 15 credit hours per semester. If enacted, this change would reduce the average Pell Grant by approximately $1,479 for students taking 12 credits. Students enrolled less than half-time could become ineligible entirely.
Additionally, the Federal Work-Study (FWS) and Supplemental Educational Opportunity Grants (SEOG) programs face serious threats. The House Appropriations Subcommittee has proposed eliminating both programs, which together provide over $2 billion annually in aid to low-income students.
Programs like TRIO and GEAR UP, which support first-generation, low-income, and underrepresented students, have been targeted in previous proposals; however, current budget drafts maintain level funding. Nonetheless, their future remains uncertain as negotiations continue.
The Title III Strengthening Institutions Program, which funds academic support services, infrastructure, and student retention efforts at under-resourced colleges, received a proposed funding increase in the FY 2024 President’s Budget, though congressional appropriations may differ.
Department of Agriculture (USDA)
The USDA’s impact on small colleges, while less direct, is nonetheless critical. Discretionary funding was reduced by more than $380 million in FY 2024, reflecting a general pullback in rural investment.
Programs like the Community Facilities Direct Loan & Grant Program, which supports broadband access, healthcare facilities, and community infrastructure, were level-funded at $2.8 billion. These investments often benefit rural colleges directly or indirectly by enhancing the communities in which they operate.
While some funding has been maintained, the broader trend suggests tighter resources for rural development in the years ahead. For small colleges embedded in these communities, the consequences could be substantial: delayed infrastructure upgrades, reduced student access to services, and weakened town-gown partnerships.
Why Small Colleges Are Particularly Vulnerable
Small private nonprofit colleges—typically enrolling fewer than 3,000 students—operate on thin margins. Many are tuition-dependent, with over 80% of their operating revenue derived from tuition and fees. They lack the substantial endowments or large alumni donor bases that buoy more prominent institutions during hard times.
What exacerbates their vulnerability is the student profile they serve. Small colleges disproportionately enroll Pell-eligible, first-generation, and minority students. Reductions in federal financial aid and student support programs have a direct impact on student enrollment and retention. If students can’t afford to enroll—or stay enrolled—colleges see revenue declines, leading to cuts in academic offerings, faculty, and student services.
Additionally, small colleges are often located in areas experiencing population decline. The so-called “demographic cliff”—a projected 13% drop in the number of high school graduates from 2025 to 2041 will affect 38 states and is expected to hit rural and non-urban regions the hardest. This compounds the enrollment challenges many small colleges are already facing.
Economic and Social Impact on Rural Towns
The closure of a small college doesn’t just mean the loss of a school; it signifies a seismic shift in a community’s economic and social structure. Colleges often rank among the top employers in their towns. When a college closes, hundreds of jobs disappear—faculty, staff, groundskeepers, maintenance, food services, IT professionals, and more.
Consider Mount Pleasant, Iowa, where the closure of Iowa Wesleyan University in 2023 cost the local economy an estimated $55 million annually. Businesses that relied on student and faculty patronage—restaurants, barbershops, bookstores, and even landlords—felt the immediate impact. Community organizations lost vital volunteers. Town officials were left scrambling to figure out what to do with a sprawling, empty campus in the heart of their city.
Colleges also provide cultural enrichment that is often otherwise absent in small towns. Lectures, concerts, art exhibitions, and sporting events bring together diverse groups and add vibrancy to the local culture. Many offer healthcare clinics, counseling centers, or continuing education for adults—services that disappear with a campus closure.
USDA investments in these communities are often tied to colleges, whether in the form of shared infrastructure, grant-funded development projects, or broadband expansions to support online learning. As these federal investments diminish, so too does a town’s ability to attract and retain both residents and employers.
Real-Life Implications and Stories
The headlines tell one story, but the real impact is felt in the lives of students, faculty, and the surrounding communities.
Presentation College in Aberdeen, South Dakota, ceased operations on October 31, 2023, after citing unsustainable financial and enrollment challenges. Hundreds of students, many drawn to its affordability, rural location, and nursing programs, were forced to reconsider their futures. The college quickly arranged teach-out agreements with over 30 institutions, including Northern State University and St. Ambrose University, which offered pathways for students to complete their degrees. The Presentation Sisters, the founding order, are now seeking a buyer for the campus aligned with their values, while local officials explore transforming the site into a technical education hub to continue serving the community.
Birmingham-Southern College in Alabama, a 168-year-old institution, closed its doors on May 31, 2024, after a $30 million state-backed loan request was ultimately rejected despite initial legislative support. The college had a $128 million annual economic impact on Birmingham and maintained partnerships with K–12 schools, correctional institutions, and nonprofits. The closure triggered the transfer of over 150 students to nearby colleges like Samford University, but left faculty, staff, and the broader community facing economic and cultural losses. A proposed sale of the campus to Miles College fell through, leaving the site’s future in limbo.
Even college leaders who have weathered the past decade worry they’re nearing a breaking point. Rachel Burns of the State Higher Education Executive Officers Association (SHEEO) has tracked dozens of recent closures and warns that many institutions remain at serious risk, despite their best efforts. “They just can’t rebound enrollment,” she says, noting that pandemic aid only temporarily masked deeper structural vulnerabilities.
Potential Closures and Projections
College closures are accelerating across the United States. According to the State Higher Education Executive Officers Association (SHEEO), 467 institutions closed between 2004 and 2020—over 20% of them private, nonprofit four-year colleges. Since 2020, at least 75 more nonprofit colleges have shut down, and many experts believe this pace is quickening.
A 2023 analysis by EY-Parthenon warned that 1 in 10 four-year institutions—roughly 200 to 230 colleges—are currently in financial jeopardy. These schools are often small, private, rural, and tuition-dependent, serving large numbers of first-generation and Pell-eligible students. Even a modest drop of 5–10% in tuition revenue can be catastrophic for colleges already operating on razor-thin margins.
Compounding the challenge, the Federal Reserve Bank of Philadelphia released a 2024 predictive model forecasting that as many as 80 additional colleges could close by 2034 under sustained enrollment decline driven by demographic shifts. This figure accounts for closures only—not mergers—and spans public, private nonprofit, and for-profit sectors.
Layered onto these economic and demographic vulnerabilities are the potential impacts of proposed federal education funding cuts. The Trump administration’s FY 2026 budget blueprint once again targets student aid programs, proposing the elimination or severe reduction of subsidized student loans, TRIO, GEAR UP, Federal Work-Study, and the Supplemental Educational Opportunity Grant (SEOG). Although similar proposals from Trump’s first term (FY 2018–2021) were rejected by Congress, the renewed push signals ongoing political pressure to curtail support for low-income and first-generation students.
To assess the potential impact of these policy shifts, a policy stress test was applied to both the Philadelphia Fed model and the historical closure trend. The analysis suggests that if these cuts were enacted, an additional 50 to 70 closures could occur by 2034.
Philadelphia Fed model baseline: 80 projected closures
With policy cuts: Up to 130 closures
Historical average trend (2020–2024): ~14 closures/year
10-year projection (status quo): ~140 closures
With policy cuts: Up to 210 closures
In short, depending on the scenario, anywhere from 130 to 210 additional college closures may occur by 2034. Institutions most at risk are those that serve the very populations these federal programs are designed to support. Without intervention—through policy, partnerships, or funding—the number of closures could rise sharply in the years ahead.
These scenario-based projections are summarized in the chart below.
Why Should Congress Care
According to the National Association of Independent Colleges and Universities (NAICU), a private, nonprofit college or university is located in 395 of the 435 congressional districts. These institutions are not only centers of learning but also powerful economic engines that generate:
$591.5 billion in national economic impact
$77.6 billion in combined local, state, and federal tax revenue
3.4 million jobs supported or sustained
1.1 million people are directly employed in private nonprofit higher education
1.1 million graduates are entering the workforce each year
As such, the fate of small private colleges is not just a higher education issue—it is a national economic and workforce development issue that should command bipartisan attention.
Strategies for Resilience and Policy Recommendations
There are clear, actionable strategies to reduce the risk of widespread college closures:
Consortium and shared governance models: Small colleges can boost efficiency and sustainability by sharing administrative functions, faculty, academic programs, technology infrastructure, and enrollment services. This allows institutions to reduce operational costs while maintaining their distinct missions and brands. In some cases, these arrangements evolve into formal mergers. An emerging example is the Coalition for the Common Good, a new model of mission-aligned institutions that maintain individual identities but operate under shared governance. This structure offers long-term financial stability without sacrificing institutional purpose or community impact.
Strategic partnerships: Collaborations with community colleges, online education providers, regional employers, and nonprofit organizations can expand reach, enhance curricular offerings, and improve student outcomes. These partnerships can support 2+2 transfer pipelines, workforce-aligned certificate programs, and hybrid learning models that meet the needs of adult learners and working professionals, often underserved by traditional residential colleges.
State action: States should establish stabilization grant programs and offer targeted incentive funding to support mergers, consortium participation, and regional collaboration. Policies that protect institutional access in rural and underserved areas are especially urgent, as closures can leave entire regions without viable higher education options. States can also play a role in convening institutions to plan for shared services and long-term viability.
Federal investment: Continued and expanded funding for Pell Grants, TRIO, SEOG, Title III and V, and USDA rural development programs is essential to sustaining the institutions that serve low-income, first-generation, and rural students. These investments should be treated as critical infrastructure, not discretionary spending, given their role in expanding educational equity, enhancing workforce readiness, and promoting rural economic development. Consistent federal support can help stabilize small colleges and enable long-term planning.
College leaders, local governments, and community groups must advocate in unison. The conversation should move beyond institutional survival to one of community survival. As the saying goes, when a college dies, the town begins to die with it.
Conclusion
Small colleges are not expendable. They are vital threads in the educational, economic, and cultural fabric of America, especially in rural and underserved communities. The proposed federal budget cuts across the Departments of Education and Agriculture represent a direct threat not only to these institutions but to the communities that depend on them.
If policymakers fail to act, the consequences will be widespread and enduring. The domino effect is real: reduced funding leads to fewer students, tighter budgets, staff layoffs, program cuts, and eventually, campus closures. And when those campuses close, entire towns are left to absorb the fallout—economically, socially, and spiritually.
We have a choice. We can invest in the future of small colleges and the communities they anchor, or we can stand by as they vanish—along with the promise they hold for millions of students and the towns they call home.
References
U.S. Department of Education, FY 2025 Budget Summary and Justifications
National Association of Student Financial Aid Administrators (NASFAA), Analysis of Proposed Pell Grant and Campus-Based Aid Reductions
State Higher Education Executive Officers Association (SHEEO) and Higher Ed Dive, Data on College Closures and Institutional Viability Trends
Fitch Ratings, Reports on Financial Pressures in U.S. Higher Education Institutions
Iowa Public Radio and The Hechinger Report, Case Studies on Rural College Closures and Community Impact
Council for Opportunity in Education (COE), Statements and Data on TRIO Program Reach and Effectiveness
Federal Reserve Bank of Philadelphia, Predictive Modeling of U.S. College Closures (2024)
EY-Parthenon, 2023 Report on Financial Vulnerability Among Four-Year Institutions
U.S. Department of Agriculture (USDA), Rural Development and Community Facilities Loan & Grant Program Summaries
Interviews and commentary from institutional leaders, TRIO program directors, and SHEEO policy staff
Integrated Postsecondary Education Data System (IPEDS), Data on Enrollment, Institution Type, and Geographic Distribution
Dean Hoke is Managing Partner of Edu Alliance Group, a higher education consultancy. He formerly served as President/CEO of the American Association of University Administrators (AAUA). With decades of experience in higher education leadership, consulting, and institutional strategy, he brings a wealth of knowledge on small colleges’ challenges and opportunities. Dean is the Executive Producer and co-host for the podcast series Small College America.
Gov. Gavin Newsom presents his revised 2025-26 state budget during a news conference in Sacramento on May 14, 2025.
Credit: AP Photo/Rich Pedroncelli
TK-12 schools and community colleges can expect the same funding in 2025-26 that they received this year, plus a small cost-of-living adjustment, and there will be a big boost for early literacy, Gov. Gavin Newsom revealed Wednesday in the revision to his January state budget plan.
Schools and community colleges will be shielded from the pain facing other state services because of the revised forecast of a $12 billion drop in state revenues that Newsom blamed on the “Trump slump” — the president’s erratic tariff and other economic policies that are affecting California.
For the University of California and California State University, the news was better than anticipated. The systems would face a 3% cut for 2025-26, notably less than the nearly 8% reduction Newsom proposed in January. The smaller cut may provide some relief at a time when higher education in California and across the nation is worried about losses in federal research grants and other funding under Trump administration policies.
The 2.3% cost-of-living adjustment in 2025-26 for most TK-12 programs is determined by a federal formula that does not factor in the cost of housing, the biggest expense facing teachers and other employees.
In his May budget revision, Newsom keeps significant money for TK-12 programs that he proposed in January for fully rolling out transitional kindergarten for 4-year-olds, along with additional funding to reduce class sizes, and for expanding summer school and after-school learning to more districts.
And Newsom would add $200 million to his earlier $543 million proposal for early literacy instruction, with money to buy instructional materials, hire literacy coaches and train teachers in “evidence-based literacy instruction,” which is code for teaching phonics and word decoding as well as other fundamental reading skills.
That funding would take a significant step toward creating and funding a comprehensive early literacy strategy and coincides with compromise legislation, pushed by Assembly Speaker Robert Rivas, on spelling out what the instruction and reading materials should look like.
“We’re thrilled. We’re excited,” said Marshall Tuck, CEO of EdVoice, which pushed early literacy legislation. “In a really tight budget year, prioritizing reading for California kids and investing $200 million is real leadership.”
Newsom would also add to past efforts to recruit teachers by including $64.2 million in one-time funding for the Golden State Teacher Grant Program, under which teachers receive college tuition in exchange for agreeing to teach in underserved districts and in subjects facing critical shortages, and $100 million to pay stipends to student teachers. Unpaid student teaching has been cited as one of the primary reasons teacher candidates fail to complete their credentials.
The Legislature has a month to reshape Newsom’s budget before the June 15 constitutional deadline to pass a budget for the fiscal year that starts on July 1.
What the budget doesn’t include, however, is any funding to backfill for the potential loss of billions of federal dollars in Medi-Cal funding for school physical and mental health services, cuts for Head Start programs, training grants for new teachers and research grants for the University of California and California State University, and the dismantling of the AmeriCorps program, which supplies teachers aides and tutors in hundreds of low-income schools.
“Our ability to backfill all these federal cuts — no, we’re not going to be in a position to do that, we just are not in that position,” Newsom said. “It’s the old adage, you can’t do everything but you can do anything. There may be areas where we can make adjustments.”
“I think we should be cautious about eliminating consideration of x, y, and z until we see the totality of the challenges as they present themselves.”
In one cost-cutting measure, Gov. Newsom is proposing to roll back California’s health insurance program for undocumented immigrant adults, by charging premiums and freezing new enrollment, a move that advocates said will affect their children, many of whom are U.S. citizens. One in 10 California children are estimated to have an undocumented parent.
“When a parent or family member is sick and unable to work or provide care, kids suffer as a result,” said Mayra Alvarez, president of the nonprofit organization The Children’s Partnership. “Ripping away these family members’ access to health care, while they are also under threat of cruel immigration enforcement and other anti-immigrant policies, in turn puts the well-being of our children at risk.”
Higher education
State funding for the state’s system of 116 community colleges would change little from last year, receiving 0.6% less, at $8.9 billion. However, some of its important funding — $531.6 million from Proposition 98 revenues — would be deferred for a year under the proposal.
UC would have its funding cut by $129.7 million, while CSU would lose $143.8 million. In January, Newsom’s administration had proposed deeper cuts of $396.6 million and $375.2 million, respectively.
The revised budget maintains a proposal to defer previously promised 5% budget increases until 2027-28 for both systems. Those deferrals, which were part of Newsom’s multiyear compact agreements with the systems, were also included in Newsom’s January budget proposal.
The compacts, originally agreed to in 2022, promised annual budget increases for UC and CSU in exchange for the systems working toward goals such as increasing graduation rates and enrolling more California residents.
“We were able to hold strong to that over a two-year period. And we’re struggling now with some challenges,” Newsom said during a news conference Wednesday, though he added that the compacts are “sacrosanct” and that the systems would get their deferred dollars in 2027-28.
By reducing the proposed cut to UC’s budget for 2025-26, the 10-campus system will be able to minimize cuts to student support services and preserve “critical investments like affordable student housing construction,” President Michael V. Drake said Wednesday in a statement.
CSU Chancellor Mildred García in January warned that a nearly 8% state budget reduction would result in larger class sizes and fewer course offerings for the system’s more than 460,000 students, hampering their prospects for graduating on time. With those cuts now dialed back to 3%, García praised the May revision as a “thoughtful and measured approach to addressing the state’s fiscal challenges.”
Proposition 98 maneuvers
In total, the May revision proposes $45.7 billion for the state’s higher education institutions and the California Student Aid Commission.
The minimum funding for 2025-26 for Proposition 98, the formula that determines the portion of the general fund that must go to TK-12 and community colleges, would be $114.6 billion, down from $118.9 billion in 2024-25 because of shrinking state revenues.
Newsom proposes to make up the difference by shifting numbers around, depleting what was left in the Proposition 98 rainy day fund. Among other maneuvers, he would:
Drain the remaining $540 million from a fund that was $8.4 billion only two years ago, when the state faced a fiscal crisis.
Defer $1.8 billion that would be due to schools in June 2026 by a month, to July 2026. Schools should notice little difference, although the maneuver does create a state obligation that must be repaid.
Withhold $1.3 billion due to schools and community colleges in 2024-25 in anticipation that the revenues for the rest of the year might come up short because of the further decline in state revenues.
This last maneuver grabbed the attention of the California School Boards Association, which filed a lawsuit over a similar effort last year and is threatening to do so again.
“Even in lean times, investing in public schools is California’s best economic strategy, so we cannot sidestep constitutional protections for public education nor underfund Prop 98 to offset shortfalls in other sections of the budget,” association President Bettye Lusk said in a statement.
The immediate reaction to the budget proposal was positive, with some caveats.
“The bottom line is that amid a budget crisis, the governor is protecting every major investment in education,” said Kevin Gordon, president of Capitol Advisors, a consultant for school districts. “We want to make sure Prop 98 funding is accounted for. As long as that’s the case, there’s not much to complain about.”
Scott Moore, head of Kidango, a nonprofit that runs many Bay Area child care centers, praised the commitment to universal transitional kindergarten (TK) while criticizing Newsom’s decision to suspend a cost-of-living adjustment for child care providers for low-income children and freeze funding for emergency child care services for foster and homeless children.
“We know that small class sizes and highly qualified teachers are two of the most important quality standards to ensure children benefit from pre-K. This budget invests wisely in TK,” he said. “The proposed cut to the COLA (cost of living increase) for child care providers must be restored. Now is the worst time to eliminate a small, but very much needed and deserved COLA for those who take care of our youngest and most vulnerable children.”
