Lawmakers and Gov. Gavin Newsom signed off on the 2026-27 spending plan last week, directing hundreds of millions of dollars in new funding to the University of California and California State University systems. But that good news came with a catch: Democratic leaders in Sacramento passed on advancing bond measures that could have funneled billions more toward campus construction and science research.

Students, meanwhile, continued to benefit from the state’s continued commitment to the Cal Grant program, one of the most generous financial aid offerings in the country. The grant, which typically covers full tuition at UC and Cal State campuses and partial tuition at private institutions, remains fully funded — meaning grant recipients won’t feel the pinch even as both university systems keep raising tuition rates.

Jessica L. Thompson, senior vice president at The Institute for College Access & Success, a think tank focused on financial aid for low-income students, said the state’s continued investment in higher education will likely stand out as one of the defining features of Newsom’s time in office.

“We’ve never had to work to convince the executive branch that public higher education was incredibly important and central to a lot of the ambitions for the state and for the future, and that’s not something to take for granted,” Thompson said.

Not every program fared as well. The Middle Class Scholarship, a smaller aid program that helped cover costs beyond tuition, will shrink this year. Recipients who received an average of $3,000 last year will see that drop to roughly $2,000.

More Money Flowing to UC and Cal State

Both university systems will receive more than $500 million in new ongoing state funding, money that can go toward hiring faculty, absorbing enrollment growth, and covering rising costs for energy, insurance and employee health benefits.

That kind of funding boost isn’t something the universities can count on automatically. Unlike K-12 schools and community colleges, which are guaranteed roughly 40% of the state’s general fund under the California Constitution, UC and Cal State have no such protection.

In fact, the Legislature’s nonpartisan budget adviser, the Legislative Analyst’s Office, had recommended smaller increases back in February, citing looming multi-billion-dollar deficits and pointing out that both systems already generate additional revenue through annual tuition hikes.

Still, the trend over Newsom’s tenure has been one of steady growth for higher education funding. The year before he took office, both UC and Cal State received about $3.7 billion each in state general fund support. Under the newly approved budget, that figure has climbed past $5 billion for each system — a 50% increase, though smaller than the 80% growth in overall state spending during the same period.

Part of this year’s increase includes restoring more than $100 million in cuts that both systems absorbed in last year’s budget. Those earlier reductions triggered a labor dispute at Cal State that remains unresolved. The system has argued the funding cut prevented it from honoring full raises for thousands of employees, though some unions counter that a state loan covering last year’s shortfall should have made those raises possible. Cal State maintains that the loan doesn’t offset the cut, since it ultimately has to be repaid.

CSUEU, a union representing 36,000 Cal State employees in administrative and grounds-keeping roles, filed an unfair labor practice complaint last July, arguing the funding cut should have triggered contractual pay-step increases for workers — each worth a 2% raise. The union says some employees should have advanced five or more steps but were only bumped up one. A resolution could come before California’s Public Employment Relations Board issues a ruling in August. The union is also pushing for 11% annual raises over the next three years and has floated the possibility of a strike, though it hasn’t yet sought member approval to do so.

Financial Aid: Mostly Good News for Students

The state’s commitment to fully funding Cal Grants continues, even though — unlike K-12 and community college funding — there’s no constitutional guarantee behind it.

Since 2015, the number of students receiving Cal Grants has jumped from about 330,000 to more than 450,000, with state spending rising from $1.9 billion to $2.5 billion. Much of that growth traces back to 2021 reforms that opened eligibility to more than 100,000 community college students over the age of 28. The Legislative Analyst’s Office estimates those changes alone added $167 million to the program’s costs last year.

Rising tuition at UC, which began climbing in 2022, and at Cal State, starting in 2024, has also driven up Cal Grant expenses. Analysts estimate roughly a quarter of the program’s cost growth over the past decade stems directly from tuition increases at the two systems.

The Middle Class Scholarship wasn’t as fortunate. Funding dropped from nearly $1 billion last year to $680 million this year, cutting the average award for its 350,000 UC and Cal State recipients from about $3,000 to roughly $2,000. The reduction was one of several moves lawmakers made to balance a budget that, by law, cannot run a deficit. Students may need to pick up extra work hours or rely more on loans to make up the difference, though most UC and Cal State undergraduates still graduate without debt.

Bond Measures: A Mixed Bag

Higher education’s bigger disappointments this year came in the form of bond measures that failed to make it onto the ballot.

Chief among them was a $12 billion bond proposed by state Sen. Scott Wiener, a San Francisco Democrat, that would have funded science research grants for universities and research institutions. The UC system and its graduate student worker union pushed hard for the measure, viewing it as insurance against the Trump administration’s efforts to slash federal research funding.

The Trump administration has targeted grants it claims involve prohibited research into diversity or climate change, though many of the affected projects focused on diseases, pharmaceuticals, cancer and dementia research. UC alone brought in $3 billion in federal research funding during the 2024-25 academic year, accounting for nearly half of its total research budget.

At one point last year, the federal government froze or canceled more than 1,000 California research grants from the National Institutes of Health and National Science Foundation. Court challenges have restored most of that funding, but tens of millions of dollars remain frozen, and nearly $900 million in Environmental Protection Agency funding is still on hold, according to legislative analysis tied to Wiener’s proposal.

Wiener has argued that California needs to insulate its research institutions from federal unpredictability. His bond measure cleared the Senate but stalled in the Assembly, failing to clear a key committee before the deadline to qualify for the November ballot.

A spokesperson for Assembly Speaker Robert Rivas, a Salinas Democrat, said in a statement that the ongoing federal pressure on California has forced lawmakers into difficult tradeoffs. Sources familiar with the negotiations told CalMatters that some legislators worried backing the science bond might hurt the chances of a separate $11 billion affordable housing bond — an Assembly priority — passing in November.

A second stalled measure would have helped UC and Cal State tackle a growing backlog of aging campus buildings and fund new construction. Assemblymember David Alvarez, a Chula Vista Democrat, had pushed for such a bond, but the effort collapsed by late June after Newsom’s Department of Finance determined the state wouldn’t have enough money in future budgets to repay the debt.

The need is real: More than half of Cal State’s academic buildings are at least 50 years old, and the system’s five-year construction plan includes $24 billion in projects. UC, meanwhile, reports a $46 billion shortfall in infrastructure funding across its campuses and hospitals. Students and faculty have complained in recent years about broken air conditioning during heat waves, failed heating systems in winter, and flooding that has damaged sensitive lab equipment.

Voters haven’t approved a facilities bond for public universities since 2006, and both systems’ ability to borrow independently is limited since debt payments come directly out of their operating budgets. A 2020 school facilities bond that would have set aside $2 billion each for UC and Cal State failed at the ballot box, and a later bond that did pass excluded the university systems altogether.

“It’s too soon to plan for 2028 ballot measures, but a facilities bond will remain within Alvarez’s priorities for sure,” said Chris Jonsmyr, a spokesperson for the assemblymember.

There was at least one silver lining tucked into the November affordable housing bond. If approved by voters, UC and Cal State would each receive $175 million to build affordable student housing that campuses could rent to low-income students below market rate.

For UC, that funding could support roughly 1,700 new beds for low-income students, based on recent project costs that have ranged from $200,000 to $300,000 per bed — driven up by soaring construction costs and expensive land near the system’s mostly coastal campuses.

Last fall, nearly 9,900 UC students were on waiting lists for campus housing, according to data obtained by CalMatters. The potential funding would add to UC’s broader push to build 15,000 new student housing units by 2030 — an urgent need, given that average occupancy across the system’s housing network currently sits at 104%, forcing some rooms designed as doubles to house three students instead.

Original source: CalMatters

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