Prospects for State General Fund Revenues for Higher Education

California’s General Fund revenue and expenditure trend lines create an uncertain trajectory that is unlikely to both meet expected costs and provide for significant
increase in students for the state’s public higher education (California State University and the University of California) systems.

The largest such restriction is driven by Proposition 98, which mandates that a minimum percentage of the state budget be spent on K-12 education and community colleges. Proposition 98 now controls more than 40 percent of the General Fund budget. Another critical piece of the non-discretionary puzzle is Proposition 2, passed in 2014, which established new reserve and debt payment requirements, further limiting available discretionary funds. Proposition 30, passed in 2012, temporarily raised the state’s sales tax and income tax rates on high-income taxpayers for seven years, generating additional revenue. But the impending phaseout of Proposition 30 further complicates California’s revenue outlook.