Budget Update 2026-27

Fiscal Year 2026-27

The most recent campus budget update was shared in February 2026. This extended summary provides additional context and detail for understanding the FY 2026/27 budget outlook and the remaining uncertainties.

State budget context

The Governor’s January 2026 budget proposal reflects a notable improvement compared to projections made in fall 2025. At that time, the state was forecasting an $18 billion deficit for FY 26/27. The January proposal now shows that year as roughly balanced, with the projected deficit for FY 27/28 reduced from $35 billion to approximately $22 billion.

This improvement is welcome but fragile. A significant portion of the increased revenue is tied to capital gains and stock market performance, particularly growth associated with the AI sector. These revenues are inherently volatile. 

In addition, potential federal policy changes, rising Medi-Cal and health care costs and broader economic uncertainty continue to pose risks to the state budget. California has also relied on deferrals and payment delays in recent years, which affects the timing and predictability of higher education funding.

California State University (CSU) system budget overview

Within this context, the CSU preliminary FY 26/27 outlook is stronger than previously expected. CSU is projecting about $711 million in new revenue. This includes $144 million to restore the 3% general fund cut from FY 25/26, $101 million for a partial year of year 4 of the Compact, $265 million for year 5 of the Compact, $176 million from the planned 6% tuition increase (which the CSU Board of Trustees approved to start in Fall 2024) and $25 million tied to 1% enrollment growth.

The budget also includes a one-time interest-free loan to the CSU that extends repayment of a prior $144 million obligation that was originally due June 30, 2026. While this provides short-term funding, it does not eliminate the underlying obligation.

Related to expenses, CSU faces about $597 million in new committed costs. These are driven primarily by compensation, mandatory cost increases, state university grants and enrollment growth. These expenses continue to grow faster than ongoing base funding from the state.

Considering these commitments, about $113 million of the $711 million in new revenue remains unallocated. The Office of the Chancellor is still evaluating priorities for these funds, which may include restoring campus cuts, addressing deferred maintenance or supporting compensation. No final decisions have been made, and any surplus remains contingent on final state budget adoption.

SDSU-specific outlook

Like many universities across the state and nation, SDSU’s financial challenges predate FY 26/27. In FY 24/25, SDSU received about $32 million in new revenue but also had about $46 million in new expenses, resulting in a $14.3 million base deficit. In FY 25/26, the 3% general fund cut further constrained the budget, with minimal new revenue and about $13.5 million in additional mandatory expenses.

Over two years, SDSU implemented $20 million in budget reductions as part of a campus strategy focused on conservative spending and prudent, multi-year budget planning. Despite these many helpful actions, SDSU is carrying an estimated $6 million cumulative base deficit.

Uncertainties and next steps

Looking to FY 26/27, preliminary planning suggests a potential additional $5 million deficit. As a result, SDSU is preparing for a $5 million reduction until there is greater clarity with both the state and CSU budgets, to include whether SDSU’s prior 3% general fund cut is restored to our campus, and whether any systemwide compensation increases are funded.

Several major uncertainties remain, including the outcome of California’s May Revise, final state budget adoption in June, enrollment and, among other things, how CSU allocates restored funds to campuses.

The FY 26/27 outlook is more favorable than expected last fall, but risks remain significant. SDSU will continue to plan conservatively while monitoring developments closely and sharing updates as more information becomes available.