By Wes Harlan, State Politics Reporter

As California faces a historic budget shortfall, state lawmakers have rejected a proposed reduction in higher education spending, opting instead to preserve full funding for the University of California and California State University systems.

Governor Gavin Newsom’s May revision had suggested a modest 3% cut to UC and CSU funding in response to the state’s financial challenges. The Legislature, however, chose to fully reverse that plan, restoring $130 million to UC and $144 million to CSU as part of a broader joint budget agreement between the Assembly and Senate. Though the payments will be deferred until July 2026, universities will be permitted to seek short-term loans from the state’s General Fund to bridge the gap.

The decision comes as demand for traditional four-year degrees appears to be shifting. In recent years, more Californians—especially working adults and younger students—have turned to digital platforms, online certifications, and nontraditional learning models to build skills. Public universities, meanwhile, have faced declining enrollment in certain regions and programs, prompting some campuses to draft “turnaround plans” for increasing student numbers and managing costs.

Still, Sacramento’s budget maintains funding for expanded enrollment at both UC and CSU, and avoids changes to long-standing administrative budgets, which critics have argued have grown disproportionately compared to classroom instruction.

Supporters of the restored funding include several public college employee unions and advocacy groups, many of whom spoke in support during recent budget hearings. The California Faculty Association, the Cal State Student Association, and others praised the Legislature’s “ongoing commitment” to public universities.

In addition to higher education allocations, the Legislature’s plan also includes significant one-time spending for community colleges and financial aid, including $405 million for the Middle Class Scholarship program.

While California’s TK-12 schools will continue to receive constitutionally protected levels of support under Proposition 98, some observers note the contrast between how different sectors of education are adapting to the digital age. Online learning, once seen as a supplement, has become the primary tool for many seeking affordable, flexible education—raising quiet questions about whether traditional institutions remain the only or best model for preparing Californians for the workforce.

The Legislature’s budget must be sent to the governor by June 15. Newsom has until June 27 to approve or amend it.