Funding Schools in California

Lately the news has been filled with the struggles of school districts to fund the coming year. Mt. Diablo School District is cutting $48.7 million, Walnut Creek $1 million, Liberty Union $3.2 million and this list could continue ad nauseam. Parents and students taking to the street to show their displeasure with the cuts; often taking their anger out on the local school board, or drivers on already overcrowded streets and freeways. As with everything else in California school funding is a convoluted, rubric’s cube mess and unexplainable to all but the experts.

There was a time when California schools were the envy of the country. California was a leader in public education with students ranking in the top five among the states in student assessments. In 1969, California ranked in the top 10 states in per-pupil spending for schools. Fifty-five percent of the elementary and high school funding was raised locally — mostly from property taxes — and was dispensed by the local school board. What happened?

The 1970’s brought radical changes to the way our school system was financed. The first change arrived via a lawsuit. Prior to 1973 schools were primarily financed by local property taxes. Each district levied their own property tax rates, subject to the approval of their voters. The state supplemented that revenue with foundation aid, which it distributed according to a simple formula. This system created huge disparities in the revenues generated based on where you lived. Higher property value communities could generate more revenue than communities with a lower property value. In fiscal year 1968-69, for example, the Baldwin Park School District spent $577.49 to educate each of its pupils, while Pasadena spent $840.19 and Beverly Hills spent $1,231.72.

In 1976 the California Supreme Court ordered, in the Serrano v. Priest ruling, that the state develop a more equal system for funding its K-12 school districts. The Court ruled that the existing system of financing schools unconstitutional because it violated the equal protection clause of the state Constitution. The court ruled that property tax rates and per pupil expenditures should be equalized and that, by 1980, the difference in revenue limits per pupil should be less than $100. However, before the edict could be fully implemented the voters of California had their say.

On June 5, 1978 Californians passed Proposition 13, a constitutional amendment that capped property values at 1% of the assessed value and required a two-thirds vote for any new local tax. How these taxes were allocated became a responsibility of the state. Prop 13 effectively removed school districts’ ability to exert substantial control over their revenues. The source of school funding shifted away from local control to the state.

In 1988 voters once again changed the constitution and passed Proposition 98. The intent of Prop 98 is to provide K-14 schools with a guaranteed funding source that grows each year with the economy and the number of students. The guaranteed funding is provided through a combination of state General Fund and local property tax revenues. Prop 98 funding constitutes over 70 percent of total K-12 funding and about two-thirds of total community college funding. However, nothing is ever as simple as it seems. There are a number of complex formulas for setting a minimum annual funding and the guarantee may be suspended for a year by a two-thirds vote of the legislature with the governor’s signature.

As of 2009 the sources of funding for schools include:

  • 59%—State General Fund
  • 23%—Property taxes, which are collected by counties. The state determines how to allocate them among school districts and other local governments. The tax rate is set in the state constitution.
  • 10%—Federal government, which generally provides only categorical funding (money earmarked for specific purposes, such as compensatory education for low-income students). The state distributes most of this funding. The recent stimulus package has temporarily increased the federal share.
  • 1% to 2%—State lottery.
  • 7% to 8%—Local miscellaneous sources, such as donations to local schools, interest income, and parcel taxes. Local school districts and their communities largely control these revenue sources. The amounts vary dramatically from one district to another.

California’s budget process has been subject to chaotic boom and bust cycles with wild variations in between. These cycles have repeated themselves time and time again in California. K–12 schools represent the single largest expenditure in the state budget and as a result during the bust times school are hardest hit with across-the-board cuts. It is nearly impossible to overstate how disruptive this can be to public education. Fundamental changes are necessary in our budget process to prevent California’s public education from sliding into oblivion.

About Kevin

Councilmember - City of Oakley, Manager of Mainframe Operations and Optimization – USS-POSCO INDUSTRIES, Co-Founder and Board Member - Friends of Oakley A Community Foundation, Commissioner - Contra Costa Transportation Authority, Board Member - Tri Delta Transit, Transplan, San Joaquin Joint Powers Authority and RD 2137, Advisory Board – Opportunity Junction
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