Behind every budget line item in a school district’s budget is a child who wants to learn. A teacher who drove two hours to afford rent. A counselor stretched across too many classrooms.
Across California, those choices are getting harder and more consequential. Despite higher-than-expected state revenue this year, education leaders know the reality: this is one of the most challenging school budget cycles in recent years. Rising operational costs, declining enrollment, expiring federal relief funds, and growing cost-of-living challenges for teachers and school staff are colliding at once. The result is already evident: staffing and program cuts, labor unrest, and approaching fiscal cliffs across the state. The gap between what schools need and what California provides has never been more visible. This isn’t just an education problem. It’s an economic problem. And it’s one we have the tools to solve.
The Warning Signs Are Flashing
The consequences of chronic underfunding are no longer on the horizon–they’re here.
Strikes Are Spreading: This past February, San Francisco teachers went on strike for the first time in nearly 50 years, shutting down schools for roughly 50,000 students. Their demands of competitive pay, sustainable staffing, and safe school conditions reflect pressures shared statewide. In Los Angeles, educators and school workers prepared for what would have been the third LAUSD strike in seven years before LAUSD and the teachers union reached a tentative agreement that included salary increases and additional student support staffing. This labor unrest underscores a broader statewide reality: when districts can’t offer wages that keep up with local housing prices, inflation, transportation, and other costs of living, educators can’t afford to stay in the profession. And when they leave, our students pay the price.
Layoff Notices Are Back: With pandemic‑era federal dollars gone and attendance still below pre‑2019 levels, many districts are once again warning of staff reductions. Even when the state provides a cost‑of‑living adjustment, district leaders note that it falls short of covering escalating costs, including utilities, transportation, pension obligations, and special education services.
Receivership Is No Longer Rare: In 2025, Plumas Unified entered state receivership – where the state takes control of the district – to avoid insolvency. Several large districts including Oakland, San Francisco, and Hayward have appeared on fiscal danger lists. When a district enters receivership, local communities lose control of their schools, long-term debt obligations pile up, and students lose programs and services. Without structural change, more districts will follow.
Why Is This Happening?
At the center of these challenges is the structure of California’s school finance system—an outdated system that doesn’t reflect the real cost of educating students today.
California’s Proposition 98 funding guarantee, established by voters in 1988, sets a minimum funding level for TK-12 education based largely on state revenues, attendance, and economic conditions. Since school funding is tied to economic conditions, not the actual costs of running schools and educating diverse learners, funding levels are not responsive to the rising costs of meeting students needs. So, even as per pupil funding levels are at an all-time high, education funding still falls woefully short.
Most significantly, California’s public TK–12 system is grappling with sustained enrollment declines driven by falling birth rates, decreased immigration, families relocating out of state, and more recently immigration enforcement concerns that are keeping students out of classrooms. Fewer students mean fewer dollars flowing into school systems because funding is tied to student attendance, but the fixed costs of keeping schools don’t shrink at the same pace. This mismatch is forcing districts to make difficult decisions while still being expected to maintain and improve student outcomes.
Moreover, these challenges are not evenly distributed across the state. Housing costs, wages, and labor markets vary significantly across California. A uniform base funding amount that works in the Central Valley doesn’t work in San Francisco, where housing and wages make recruiting and retaining teachers deeply challenging. The Public Policy Institute of California estimates a regional cost adjustment could require roughly $2.5 billion to implement–but without it, districts in high‑cost regions face continued chronic teacher vacancies and turnover.
This is Bigger Than Education
A child who is hungry, unhoused, or without mental health support cannot learn. A school without a counselor can become a crisis moment without support. A community without a stable school loses one of its most important anchors. The whole-child reality is that investing in schools is investing in public health, economic mobility, neighborhood stability, and California’s long-term prosperity – and vice versa. These issues are not in competition. They are deeply and inescapably connected.
Revenue Policy Solutions That Work for Everyone
The good news is that California has a range of viable options to explore that would relieve the growing financial pressures districts are experiencing; it’s just a matter of exercising the will to move them forward. The five options below are ranked by their potential to generate substantial, stable, and equitable revenue to support public education over time.
The biggest lever is reforming Prop 13, a law passed nearly 50 years ago for nonresidential properties, and requiring commercial, industrial, and vacant properties to be taxed at market value rather than decades-old assessments. It would require a constitutional amendment, but the return is unmatched: an additional $18.2 to $25.1 billion annually, with a good portion of the additional funds going to education.
Close behind in scale is another revenue boosting option – modernizing the state’s sales tax base to include services. California’s economy has long shifted away from manufacturing goods and instead toward providing services, yet the tax system hasn’t kept up. Expanding the sales tax to cover business services would generate an estimated $14.2 to $36.5 billion annually, with a good portion of the additional funds going to education.
A third major lever is making the Prop 55 income tax rates permanent. These taxes on California’s highest earners have been in place since 2012, and they’ve helped fund the Local Control Funding Formula and a wide range of other programs. Allowing them to expire in 2030 would trigger a fiscal cliff that would undermine progress across education and beyond. Keeping them generates an estimated $9 to $10 billion annually for schools and healthcare and protects the revenue foundation that current programs depend on.
Closing corporate tax loopholes, such as eliminating one of the key ways multinational corporations avoid paying taxes on oversea profits, as proposed in AB 1790, would ensure large corporations pay a fairer share of state taxes. This proposal is estimated to generate roughly $3 billion annually for California while promoting greater tax fairness.
Finally, a billionaire wealth tax would apply a small tax on the total wealth of California’s billionaires, capturing assets that currently go untaxed. This option is being discussed largely in response to anticipated federal safety net cuts, and the one-time revenue is estimated to raise $100 billion through 2031. This funding would primarily support those programs with about 10 percent directed towards schools.
These aren’t radical ideas. They’re corrections to a tax system that has drifted far out of alignment with California’s economy, its actual costs, and its values.
What’s at Stake and What You Can Do
The stakes here are simple: the decisions California makes in the next budget cycle will shape the future. Not just for families with kids in school, but for all of us.
The teacher shortage, the district insolvencies, the strikes are all symptoms of a system that has been asked to do more with less for too long. We have the revenue solutions. We have the evidence. What we need now is the will to treat our children’s futures as the shared priority they have always been.
If you want to get involved, sign up for the EdTrust-West mailing list to stay updated on school funding issues as they move through the legislature, and register for the Ed Equity Forum to continue engaging directly in discussions about school funding and education policy.
Our kids can’t wait. Neither should we.
