California entered 2010-11 with a longstanding imbalance between ongoing spending and income. To help close that gap, state policymakers suspended Proposition 98, the minimum funding guarantee for K-12 schools and community colleges. In total, revenues for K-12 schools are down nearly 10% this year compared with 2007-08. Yet more cuts loom as the state faces a massive 2-year budget shortfall, including $6.1 billion in 2010-11. This EdSource report discusses the budgetary decisions made in 2010-11 that are affecting K-12 education this year and going forward. It also makes clear how tightly linked school funding and the budget are in California. (Contains 3 figures.)