California’s Final 2025-26 Budget: A Lifeline for Vulnerable Students Amid Federal Rollbacks

In the face of a $12 billion state budget deficit and growing national uncertainty, California’s final budget agreement for Fiscal Year (FY) 2025-26 sends a critical message to historically underserved students who make up two-thirds of the state’s undergraduate population: their access to and success in higher education matters, and they deserve the investment to earn a degree, transform our communities, and use their talents to make our state economically resilient.

We commend Governor Newsom and the Legislature for their leadership in finalizing a challenging budget, choosing a path of opportunity by protecting core higher education programs and services and shielding our public universities from a 3% funding cut. The budget also makes targeted investments to promote higher education coordination, strengthen college affordability and outreach efforts, safeguard access for undocumented students, and proactively support state departments and agencies to respond to federal funding delays or cuts.  

California continues to weigh difficult decisions while working to make sure that our investments grow opportunity and an economy that works for everyday Californians. Advancing higher education is thus paramount as one of the strongest tools our leaders have to build a thriving and inclusive state. The Campaign for College Opportunity remains committed to offering its expertise and advocacy in meeting this purpose. We will be working closely with the Governor, the Legislature, student leaders, and higher education systems to ensure that today’s investments best support the students of tomorrow, who will help California overcome the pressing challenges ahead.

Promoting Access & Success in Public Higher Education

The Governor and Legislature promote college access and success in the final state budget by continuing to invest in our state’s public systems of higher education, despite addressing a $12 billion state budget shortfall through reductions in state program spending, deferrals or delays in spending, and cost shifts. At a time when federal support for students is highly uncertain and poised to further limit college opportunity, our higher education systems and campuses must strategically advance the recruitment, enrollment, persistence, and success of our most underserved students. To meet this moment, the Campaign will launch a campaign over the next few months featuring new publications, thought leadership pieces, and student storytelling that underscore the urgency and importance of advancing college access and cultivating the conditions for student success.

Highlights:

• Defers a proposed 3% base reduction for the University of California (UC) and California State University (CSU) in FY 2025-2026 to 2026-27.
• Defers a 5% Compact base increase to the UC and CSU to 2026-27 and 2028-29, providing the UC and CSU a 2% increase in 2026-27 and 3% increase in 2028-29.
• Provides $5 million to immediately assist low student enrollment at CSU campuses through increased outreach efforts.
• Provides $100 million in FY 24-25 and $39.9 million ongoing in FY 25-26 to fund a 2.35% enrollment growth over two years. 
• Provides $217 million for FY 25-26 to account for a 2.3% Cost-of-Living Adjustment (COLA) to the Student Centered Funding Formula (SCFF), and a $26.8 million COLA for select categorical programs at the California Community Colleges (CCC). The final budget agreement also defers $408.4 million in SCFF funding from 2025-2026 to 2026-2027 to help balance the state budget.

Bolstering College Affordability

The final budget agreement ensures that vulnerable students, particularly undocumented students and those of mixed-status families, receive the aid they need to pursue their college dreams through emergency grants and financial aid outreach. The California Undocumented Higher Education Coalition (CUHEC), co-led by the Campaign, is spearheading further action through SB 323 (Pérez), to ensure that every eligible student is empowered with the choice to apply for state and institutional financial aid through the California Dream Act Application (CADAA) if they are unable or uncertain to submit a Free Application for Federal Student Aid (FAFSA). Learn more about SB 323 and CUHEC’s advocacy

Highlights:

• Provides $5.1 million to the CCC to provide grants to California Community-Based Organizations (CBOs) for financial aid outreach and application assistance supporting current and prospective community college students.
• Provides $20 million to the CCC for emergency financial assistance grants to students attending a CCC who file a CADAA.
• Provides $15 million to the CCC to support Dreamer Resource Liaisons in delivering student support services and to provide direct emergency financial assistance to AB 540 students.
• Provides $918 million in 2026–27 to pay for the cost of Middle-Class Scholarship (MCS) awards in 2025–26, with MCS awards covering 35% of a student’s remaining financial need.
• Covers the cost of MCS awards in 2025–26 through a state loan, waiving interest charges, authorized by the Department of Finance.
• Requires each Cal Grant participating institution to, on or before March 31, 2026, annually report disaggregated data on enrollment, persistence, and graduation for all Cal Grant undergraduate recipients, by gender, ethnicity, Pell Grant status, first-generation status, transfer status, student parent status, foster youth status, and eligibility used of state financial aid received, including Cal Grant A, Cal Grant B, Cal Grant C, Cal Grant Access Awards, and the Middle-Class Scholarship program, to the extent data is available.

Ensuring Higher Education Coordination

The final budget agreement positions California to join every other state in the nation by establishing a higher education coordinating body, a longtime priority for the Campaign. This entity comes at a timely moment, aligning TK-12, higher education, and workforce partners to work together to support students for economic success and swiftly respond to federal crises. Stay tuned for opportunities to join us as the Campaign supports the rollout of this crucial intersegmental coordination.

Highlights:

• Provides $1.5 million in ongoing funding for the creation of a state higher education coordinating entity.

“In a year defined by tough fiscal choices and federal uncertainty, we commend Governor Newsom and the Legislature for advancing key investments in higher education and shielding our public university systems from cuts that would have disproportionately harmed historically underserved students. This includes broadening financial aid for community college and undocumented students, bolstering student enrollment at the CSU, and—for the first time in decades—reestablishing the higher education coordinating body California needs to truly serve students and advance economic justice. As national threats seek to limit our efforts to support college access and success for all students, our commitment to this work remains unwavering. The Campaign stands ready to courageously fight alongside our partners to ensure these essential investments support the students who need them most,” said Jessie Ryan, President of the Campaign for College Opportunity.