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In general, school districts receive their operating funds from the state and federal governments in two ways. The largest part of each district's revenues is for the general expense of educating students.
Districts use this money to pay for employee salaries and benefits, supplies, textbooks, maintenance, and other expenses as they see fit. Each district also receives some state and federal money for specific programs or to serve categories of students with special needs. This targeted funding is called "categorical aid."
However, in 2008–09 and 2009–10, extraordinary economic circumstances forced temporary changes in some aspects of school funding, including an infusion of federal monies and the state allowing districts to divert funds from 40 categorical programs.
About 70% of the revenue districts receive is for general purposes, and the remaining 30% comes from categorical programs. This can vary a bit from year to year, and it can vary substantially among districts.
The general purpose funds that districts receive are based on a revenue limit calculation. This per-pupil amount is set for each district based on historical formulas. A district's total revenue limit income depends primarily on how many students it has. The technical count is called average daily attendance (ADA), the average number of pupils attending school over the year. ADA multiplied by the district's per-pupil revenue limit equals its total revenue limit income, which is also the bulk of the funds available for general purposes.
All districts also receive categorical aid, but in widely varied amounts. Statewide, categorical funds represent about a third of school district income on average. These funds come from more than 80 separate programs. In most cases, regulations accompany the funds to ensure that the money is spent on the targeted children or special purpose that the state or federal government intended. Categorical allocations reflect both legislative choices and requirements of law based on court cases.
Some allocations, such as instructional materials, come automatically to school districts. Others, such as for class size reduction, require the district to apply for the money. Still others are based on the characteristics of the children or families in a school district, such as low-income, English learners, and migrant students. Other programs are for specific activities or expenses, such as transportation or professional development. Most of the federal funds flow through the California Department of Education.
Special Education is the largest state categorical program in terms of dollars, and the second largest federal program. According to federal and state laws (some based on court decisions) a school district is responsible for the appropriate education of students from infancy to age 21 who have qualifying physical, emotional, or educational needs and live within its boundaries. About 11% of public school students in California are identified for Special Education. The funds for Special Education services are distributed to districts through Special Education Local Plan Areas (SELPAs).
Both the state and federal governments also provide considerable funding to support the education of children who come to school with other needs. The federal Child Nutrition program, for example, provides subsidized meals to low-income children. California's Economic Impact Aid and the federal Title I program both provide extra funds for schools based on the number of low-income students and English learners they serve.
A variety of smaller programs are also targeted at these populations. The federal government has leveraged its substantial Title I investment, along with several other programs, to implement the No Child Left Behind (NCLB) program. First instituted in 2002, NCLB is a multifaceted program that has had a substantial effect on state, school district, and school operations. At its heart is a commitment that public education be held accountable for improving the academic performance and opportunities of the least advantaged children.
Many of California's categorical programs are targeted toward the improvement of classroom instruction. Over the years this has taken many forms and resulted in a wide variety of programs. Some of these come and go with available funding. Others have become a part of the institutional fabric of the state's education system. Examples of the latter include K-3 Class Size Reduction (CSR) and the Beginning Teacher Support and Assessment Program (BTSA).
The state has also invested a considerable, but variable, amount of money in a variety of intervention programs. Some provide extra instructional services to help individual students who are struggling. Others, closely aligned with the state's accountability system, have been targeted at school and district improvement efforts.