The Assembly Budget Subcommittee on Education Finance reviewed a May Revision proposal that would reduce the proposed 2025-26 Prop. 98 settle-up payment from $5.6 billion to $3.9 billion and put the difference into the state’s school rainy day fund.
At the hearing, the Department of Finance said the change would leave the Proposition 98 Public School System Stabilization Account at about $10.3 billion. Finance presented the smaller settle-up payment as part of a broader budget structure for school aid and reserve management, according to the subcommittee hearing summary.
The Legislative Analyst’s Office questioned that approach, and committee members pressed the administration on whether a larger reserve or a larger settle-up payment better protects ongoing school funding. The hearing summary says the LAO viewed the reserve as prudent but warned that the budget still depends on a sizable cushion and could face pressure if revenues weaken.
The same hearing also touched on other school-funding revisions, including updated LCFF estimates tied to enrollment changes, but the reserve decision was the most discrete budget choice discussed in the meeting summary.
Finance also said the administration still intends to make the full $1.9 billion settle-up payment from the prior year.
