California School Districts Face Mounting Fiscal Challenges

Despite increased education spending, many districts struggle with declining enrollment and rising costs

Published on Feb. 24, 2026

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California's public school system is facing significant financial challenges, even as the state has boosted education spending under Governor Gavin Newsom. Many school districts, particularly in urban areas, are struggling to balance their budgets due to declining enrollment and rising costs, including pressure from unions for teacher salary increases. The state's constitutional funding guarantee for schools, known as Proposition 98, is also creating budget pressures as the state looks to delay $5.6 billion in payments to help close its own deficit.

Why it matters

The fiscal challenges facing California's public schools have far-reaching implications. Declining enrollment and budget deficits could lead to school closures, teacher layoffs, and cuts to educational programs, ultimately impacting the quality of education for millions of students across the state. The tensions between the state, school districts, and teachers' unions over funding and spending priorities also highlight the political complexities involved in education policy.

The details

According to the article, the 2026-27 state budget proposed by Governor Newsom would allocate $88.7 billion for public education, which when combined with local property taxes and federal aid, would total nearly $150 billion, or an average of $27,418 per student. This represents a 61% increase from the $17,014 per student when Newsom took office, though adjusting for 29% inflation during that period would cut the real gain in half. Despite this increased funding, many school districts are still struggling to balance their budgets, facing issues such as declining enrollment, pressure from unions for salary increases, and the state's efforts to delay $5.6 billion in Proposition 98 funding payments.

  • The 2026-27 state budget proposed by Governor Newsom would allocate $88.7 billion for public education.
  • Newsom became governor in 2019.

The players

Gavin Newsom

The current governor of California who has proposed increased education spending in the state.

Proposition 98

A 1988 ballot measure that established a constitutional funding guarantee for California's public schools.

Gabe Petek

The legislative fiscal analyst who commented on the state's proposal to delay $5.6 billion in Proposition 98 funding payments.

San Francisco Unified School District

The school district that recently underwent a teacher strike, resulting in an agreement that will raise costs by an estimated $180 million-plus.

Sacramento City Unified School District

A school district that has been teetering on the edge of insolvency for years due to outlays that are greater than income.

Los Angeles Unified School District

The nation's second-largest school system, which is facing a $191 million budget deficit, the latest in a string of budget gaps.

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What they’re saying

“This delay shifts costs to the future when the state must 'settle up' and meet this obligation.”

— Gabe Petek, Legislative fiscal analyst (redbluffdailynews.com)

What’s next

The state legislature will need to work with the governor and school districts to find a sustainable solution to the funding challenges facing California's public education system.

The takeaway

California's public schools are facing a complex set of fiscal challenges, including declining enrollment, rising costs, and tensions over funding priorities between the state, school districts, and teachers' unions. Resolving these issues will require a collaborative effort to ensure the state's students receive the high-quality education they deserve.