LAO: California faces $18 billion budget deficit California lawmakers will have a $18 billion deficit to make up in 2026-27, according the Legislative Analyst’s Office.

On Nov. 19, the nonpartisan office released its annual fiscal outlook, showing the budget problem is about $5 billion larger than anticipated at the end of last year’s budget cycle in June.

“This is because constitutional spending requirements under Proposition 98 (1988) and Proposition 2 (2014) almost entirely offset revenue gains,” according to the LAO’s outlook. “Moreover, we estimate costs in other programs to be about $6 billion higher than anticipated.”

The LAO also projects that starting in 2027‑28, structural deficits will grow to about $35 billion annually due to spending growth continuing to outstrip revenue growth.

ACSA Legislative Advocate Kordell Hampton said that of the state’s big three revenue streams — personal income tax, corporation tax and sales tax — personal income tax is the only one that is exceeding expectations. But statutory obligations — namely the Prop. 98 funding guarantee and Prop. 2 “rainy day” reserve — are taking up much of that new revenue.

“Because revenue is so closely tied to personal income tax, particularly due to the tech sector and these high-salary jobs and also captial gains, it’s created a lot of volatility,” Hampton said on ACSA’s Legislative Lunch Break. “So really what’s caused this deficit to grow is just the volatility in revenue and the ongoing commitment that the state has to meet that is exceeding what the state is actually bringing in.”

The LAO estimated that Proposition 98 formulas require a $5.1 billion increase in General Fund spending across the 2024‑25 through 2026‑27 period (relative to the June 2025 estimates). In addition, the preexisting “settle‑up” obligation from the June 2025 approved budget will increase spending by $1.9 billion.

As schools await Gov. Gavin Newsom’s proposed budget in January, Hampton said districts can “plan with caution” knowing that funding from the state will be tighter this year and in coming years.

LEAs can no longer preapprove tribal graduation attire Starting Jan. 1, California LEAs can no longer require that students obtain preapproval to wear tribal regalia to graduation ceremonies under a new law signed by Gov. Gavin Newsom.

According to a recent client news brief from attorneys at Lozano Smith, Assembly Bill 1369 strengthens and clarifies students’ existing right to wear traditional tribal regalia or recognized objects of religious or cultural significance during graduation ceremonies and related school events.

Under existing law, students are permitted to wear traditional tribal regalia or recognized objects of religious or cultural significance as adornments during school graduation ceremonies. However, LEAs retain discretion to prohibit any item they deem likely to cause a substantial disruption or material interference with the ceremony. Many LEAs also require students to obtain preapproval to ensure adornments comply with the law and the LEA’s policies in advance of the ceremonies. The law previously defined “adornment” as something that must be attached to or worn with, but not replace, the traditional cap and gown worn at graduation. This restriction limited the types of items students were permitted to wear to graduation as adornments.

Effective Jan. 1, 2026, AB 1369 amends Education Code Section 35183.1. Under the amended law, students and their families can determine whether an adornment constitutes traditional tribal regalia or a recognized object of religious or cultural significance. AB 1369 also now provides that LEAs cannot require a preapproval process for intended adornments.

As a result of AB 1369, LEAs should review and revise their existing graduation dress code policies and administrative procedures to ensure compliance with the law. For more information, read the full brief at www.lozanosmith.com/news-clientnewsbriefdetail.php?news_id=3435.

District takes crucial step toward splitting into two The Santa Monica-Malibu Unified School District Board of Education took a decisive and historic step voting 7-0 to approve three critical agreements paving the way for the separation of SMMUSD into two independent entities: the Santa Monica Unified School District and the Malibu Unified School District.

The unanimous vote in support of unification occurred during a special board meeting on Dec. 1, and signals the culmination of years of dedicated negotiations between the SMMUSD unification subcommittee and the City of Malibu. The approved documents, including the Property Tax Revenue Sharing Agreement, the Operational Transfer Agreement, and the Joint Powers Agreement, establish the framework for the equitable division of resources, assets, and liabilities to ensure the fiscal health and educational success of both successor districts.

SMMUSD Board Member Jon Kean, who also serves on the unification subcommittee, spoke to the guiding principles of the agreements: “As for the agreements, I will be voting in favor of them. They meet our two most important criteria; both cohorts of students will benefit, and each cohort will receive a comparable education on the last day of SMMUSD as they will on day one of SMUSD and MUSD,” said Kean. “Delivering local control while not harming students is driving my decision.”

The school board’s approval is a significant milestone, but the process continues. The City of Malibu will now review the same three agreements for its final approval. The Malibu City Council is scheduled to discuss and vote on the unification agreements at its upcoming meeting on Dec. 8.

If approved by the Malibu City Council, both bodies will then work together to pursue the necessary special legislation and state approvals required to formally establish the two independent school districts.