On June 24, Gov. Gavin Newsom and the California Legislature agreed upon the final 2025-26 California state budget, preventing any further funding cuts to the University of California for this academic year. The final deal defers a planned funding increase to the 2026-27 budget and allows university campuses to take out zero-interest loans from the state to cover the loss of general funding.
In 2022, Newsom pledged a 5% budget increase every year for the following five years in a funding compact deal with the UC system. However, Newsom’s proposal from January 2025 suggested an 8% cut to the UC’s funding — a $396.6 million reduction — as opposed to the expected 5% increase. Following backlash from California lawmakers, Newsom reduced this cut to 3% in May. In June, the Legislature rejected any cut at all but permitted Newsom to defer the 5% increase.
The final budget did not cut or increase funding to the UC, allocating the same amount as in 2024-25: $4.85 billion in state general funding. The UC system is also anticipated to generate $5.7 billion from student tuition and fees.
The 5% increase to the UC’s base budget has been deferred into two payments in the upcoming years: 2% to the 2026-27 budget and the remaining 3% to the 2028-29 budget.
To compensate for the lack of a budget increase, Newsom has authorized the California Student Aid Commission to borrow interest-free loans from the state’s General Fund.
The budget also approved revisions to the CalGrant program, the Middle Class Scholarship Program, and the Higher Education Student Housing Grant Program.
Federal funding cuts continue to bring on freezes to research projects and hiring within the UC system. Former UC President Dr. Michael Drake — who was in office when the agreement was announced — reacted to Newsom’s final budget with gratitude.
“State support is crucial during this challenging moment for higher education — UC campuses are feeling the impacts of rising operational costs and significant cuts in federal funding, while facing the prospect of even more federal cuts in the future,” Drake’s June 28 statement read. “The final state budget is a major improvement over the original 8% cut proposed earlier this year, even though it defers $130 million of our funding to the 2026-27 fiscal year. We appreciate the confidence and support of our elected leaders and look forward to our continued partnership in service of our great university.”
