Friday, May 7, 2010

Public School (K-12) Financing in California


Since 1970, a combination of landmark judicial decision and votes of the ballot has dramatically transformed the public school (K-12) financing mechanism in California. This has resulted in shifting of responsibility of funding the public schools from the shoulders of the local government to the state government. This yielded to a very complex and murky financial system for public school.

In 2008-09, K-12 schools in California had 6.42 million pupils (highest in the nation) enrolled in 1043 school districts and 746 public charter schools. But the state’s funding has not been adequately matching to the public schools. As compared to the national average of expenditure on per pupil of K-12 schools, expenditure in California has been less. In the past 15 years, the states’ ranking in the country has been hovering between 27 and 42. In 2005-06, the average expenditure per K-12 pupil in California was $8,486, which was $614 less than the national average of $9,100.


Until the late 1970s, local property tax revenues comprised the major share of school funding. But in 1978, with the voter approval of Proposition 13, the state’s finance system began to shift from local to state control. Proposition 13 was a complying response to the California Supreme Court decision in Serrano v. Priest (1976), which required the state to remove the discrepancies among K-12 school funding for general-purpose revenue which cannot be based on local property wealth. Proposition 13 (1978) effectively removed school districts’ ability to exert substantial control over their revenues. In 1988, the voters passed Proposition 98 binding the state to guarantee Alsominimum funding-level for schools so that any economic downturn may not affect that. The minimum funding level for schools could be exceeded but not reduced.

Funds to the School Districts:

The basic criteria of funding are meeting the constitutional minimum-funding of Proposition 13. About two-thirds of total funding is for general purposes, with the other third for special purposes/programs of students. Also, the average daily attendances (ADA) of students define funds provision.

a) General Purpose (Revenue Limit): Each year, the state legislature determines the amount of general-purpose, or revenue-limit. This income is a combination of local property taxes and state aid. As neither the school board nor local voters can increase the revenue limit, for most school districts, state aid is reduced if property taxes increase.

b) Categorical Aid (Special Support): This funding is for categorical programs that differ across the school districts depending on the types and numbers of programs the district is offering and also the volume of students enrolled in those programs. It is also based on categories of children, such as students with disabilities; characteristics of the district, such as low-income families; or programs, such as class size reduction (CSR).

Among the school districts the funds are proportioned based on the number of students enrolled in them. In the table below it can be observed that the number of students enrolled in the unified schools is the highest (4,347,073), hence this type received lion’s share of the funds (71%). Next is elementary schools which had a total enrollment of more than 1.2 million of pupils and it was given 18% of the funds.

Types of School Districts in California

District Type

No. of Districts





High School






County Office









Source: Department of Education, California.

Funds to the Charter School:

California’s public charter-school finance system is much simpler and more straight-forward than the school-district finance system. Like the school districts the public-charter schools receive general-purpose which is relatively similar, but the funding mechanism has some differentiating characteristics:

a) General-purpose grant revenue is adjusted according to grade-level, i.e., more weightage is given to pupil in higher grades. Thus per pupil expenditure in upper grades is higher than that for lower grades.

b) Most charter schools do not receive the special purpose or categorical aid, rather they use part of their general-fund for any special program, and

c) Declining Funding in K-12 Education:

Over the past three decades, state funding to the K-12 education in California has been below the national average. Looking at the ranking of California in per pupil expenditure for the years 1998-2006, it makes the decline in expenditure quite obvious.

Table 2 Expenditures per K–12 Pupil in Fall Enrollment for California (1998-2006)



U.S Average











































Data: National Education Association (NEA) Rankings and Estimates.

According to an analysis by Education Week, California's K-12 schools face one of the largest funding cliffs, which the analysis placed at $5.15 billion. This figure represents the gap between how much the state gave to schools in the 2007-08 fiscal year and how much it is contributing now. California’s fiscal 2010 K-12 state spending is $32.9 billion or 14 percent less than it was two years ago. The actual gap yawned as wide as $5.7 billions, which was somewhat plugged with federal stimulus funds of $3 billion.


It can be recommended that the state:

a) Relax the restriction of not utilizing the special-purpose earmark categorical funding structure for general-purpose funding structure and give discretionary right to the school districts over their budgets.

b) Must not reduce its share for a school district, when the district receives surplus funds from the
local governments under the property-tax. The state’s share must remain the same, and not conditioned to the property tax fund component.

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