California Is Spending $88 Billion on Schools. It's Running Out of Students to Teach.

California's own forecasters predicted

schools would lose 10,000 students this

year. The real number was 75,000. So,

they were only off by seven and a half

times. And the budget for California

schools, it's only going up. And in this

video, I'm going to show you the data,

explain the funding mechanism that turns

this into a financial catastrophe for

local districts, and tell you why the

fix is simpler than Sacramento wants you

to think. Welcome to California

Underground News. Let's get into that

first story right now.

So, this is EdSource, the nonprofit

outlet that broke down California

Department of Education enrollment

numbers released April 17th. And the

headline is that California schools face

budget cuts as enrollment drops by

74,961

students. That's the largest single-year

decline since the pandemic. That's more

than double the drop from the year

before. And the state is now at 5.7

million students in public K-12 schools.

Every outlet that has covered this story

has framed it as an immigration story.

And sure, immigration is one factor, and

birth rates are also a factor, and of

course, people leaving California, which

is not a surprise, is also a factor. But

here's the question nobody has asked.

How did the state's own forecasters miss

this by 650%?

In October 2025, the California

Department of Finance, the state's own

number shop, projected enrollment would

fall by 10,000 students. And again, the

actual number was 74,961.

I mean, that's not a rounding error,

that's a structural failure in how

California plans for its future. And

here's why that failure has immediate

consequences for every school district

in the state. See, California funds its

schools based on average daily

attendance. Fewer students in the

building means fewer dollars flowing to

the district. But the buildings still

cost the same, and the teachers'

contracts still cost the same, the

utilities, the administration, the

buses, and none of that shrinks because

75,000 kids didn't show up. So,

districts are caught between a revenue

formula tied to bodies in seats and a

cost structure that does not move.

Kenneth Kappon, principal fiscal

analysis for nonpartisan Legislative

Analyst's Office, told EdSource that

smaller districts are going to have to

completely redo their revenue

projections. And Kendra Britt,

communications director for California

County Superintendents, was direct about

what comes next. And she said the impact

is real and immediate. And that means

budget deficits, staff layoffs, program

cuts, and in some cases, school

closures. That's not a partisan read,

that's the state's own analysis in

county officials describing the next 12

months. And here's the contradiction

that makes this genuinely hard to

explain out loud. See, the state spends

roughly 40% of its entire general fund

on K-12 education. And that's locked in

by Proposition 98. Newsom's proposed

2026-2027 budget is 88.7 billion for

K-12. And the state school enrollment is

falling every single year, which means

more money, but there's fewer students.

So, where's the money going? And why do

we keep spending it? In other words,

based on this model, we're doing great,

I guess. But here's the part that really

got me. There's a provision in

California law that cushions the impact

of declining enrollment. Districts can

claim attendance based on three-year

average, not the current year. So, when

your attendance falls, you can

essentially pretend it didn't fall as

hard because of this average. One

district administrator quoted in

EdSource said, "Without that provision,

quote, we would be toast, end quote."

That is the system. And the state built

a mechanism that allows districts to

delay reckoning with a demographic

reality that has been visible for years.

And then the Department of Finance

projected a 10,000 student drop using

the same data everyone else could see,

and they only missed by 65,000 students.

You know, just a small rounding error.

And that's not bad luck, that's

forecasting infrastructure that is

either not working or is being used to

protect a spending narrative that can't

survive honest numbers. And real quick,

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small creators get found. All right,

let's get back into the story right now.

See, the consequence is already here.

CalMatters reported in February that San

Francisco Unified just settled a teacher

strike with an agreement that adds an

estimated 180 million in new costs. And

where that money comes from, there's

actually no clean answer. Sacramento

City Schools have been teetering on

insolvency for years. Costs consistently

greater than income. And EdSource's

structural analysis makes the math

plain. A 3% decline in attendance can

exceed the annual cost of living

adjustment districts actually receive

from the state. The COLA, or the cost of

living adjustment, this year is 2.30%.

A 3% attendance drop, and you're already

underwater. One superintendent put it

directly, quote, "We cannot adjust costs

as quickly as we will lose revenue, end

quote." That's a description of a system

built for growth. Being run through

contraction with no redesign. And let me

know in the comments, if you have kids

in California public schools right now,

are you feeling this? Are you feeling

fewer programs, closed classrooms,

layoff notices? Because the data says

this is happening statewide, and I want

you to let me know in the comments what

it looks like in your district. And

here's the bottom line. California built

a school funding system around growth.

More students, more money, more

programs, more administrators. And I

guess that worked for a while, but the

problem is now it's running in reverse.

Students are leaving, birth rate

dropped, families moved, and the system

cannot adjust fast enough because every

cost is locked in by contracts, by union

agreements, by a funding formula that

was never designed for contraction, only

for growth. The Department of Finance

projected 10,000 students lost, and they

were only off by 65,000. And nobody got

fired, nobody got called before a

committee, and nobody redesigned the

entire forecast. So, nobody literally

did anything. Sacramento just increased

the budget. I generally don't know what

to tell you anymore because it seems

like no matter how much California fails

and fails upwards, they still do the

same thing and keep taxing us more. So,

that's what's broken, and here's what

would actually fix it. Begin to fund

schools by enrollment, not attendance.

Right now, California ties school

revenue to average daily attendance with

a three-year cushion that lets districts

delay reckoning with a demographic

reality they're actually in. That

cushion protects short-term budgets and

removes every incentive to adapt before

the fiscal cliff arrives. Now, shift

that to enrollment-based funding, and

districts know their revenue picture a

full year in advance. Meaning they can

make staffing decisions and

consolidation decisions proactively.

They can make planned transitions

instead of emergency layoffs. See,

Michigan moved to an enrollment-based

model, and it forced faster, honest

district restructuring. Fewer

communities blindsided by sudden school

closures. More managed, transparent

decision-making about which schools to

consolidate and when. California

students deserve a system that plans for

them honestly. And right now, the system

is planning for its own budget. But I

want to know what you think. Drop your

thoughts in the comments below. And if

you're tired of media that picks a team

before it picks the facts, make sure

you're subscribed to California

Underground News so you never miss

another story. And we'll see you on the

next one. Later.

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