- 1968-78: California moves to a state-controlled finance system
- 1978-90: California voters act to control state decision making
- 1991-2004: State lawmakers act to monitor local school decisions
Since 1968, California's school finance system has been shaped by a variety of laws, court decisions, and ballot measures.
The state's finance system evolved from one
based on local property taxes to a system largely controlled and funded
by the state. The transition began in 1968, with the Serrano v. Priest
court case, one of the first lawsuits to challenge the U.S. tradition
of locally funding public schools. The central argument was that such a
system resulted in wealth-based disparities in funding among school
Senate Bill 90 (1972)
In 1972, with a Serrano settlement looming, the Legislature established revenue limits for California public schools. These revenue limits placed a ceiling on the amount of tax money each district could receive per pupil. The 1972-73 general purpose spending level became the base amount in determining each district's annual revenue limit. This was the beginning of the shift from local to state control of school finance.
Serrano v. Priest (1976)
In its ruling on Serrano v. Priest, the California Supreme Court found the existing system of financing schools unconstitutional because it violated the equal protection clause of the state Constitution. The court ruled that wealth-related disparities in per-pupil expenditures for general purposes should be equalized and that, by 1980, the difference in revenue limits per pupil should be less than $100. This difference in revenue limits has subsequently been adjusted for inflation and is currently about $350. In equalizing funding, districts are divided into three types: elementary, high school, and unified. They are then further broken down into small versus large districts to ensure that appropriate funding comparisons are made. Special-purpose or categorical funds are excluded from this calculation.
Assembly Bill 65 (1977)In response to the Serrano v. Priest decision, the California Legislature passed Assembly Bill (AB) 65. It created an annual inflation adjustment based on a sliding scale in order to equalize revenue limits among districts over time. Higher inflation increases went to districts with low revenue limits, with lower (occasionally no) inflation adjustments for high revenue limit districts. This was called "power equalization." AB 65 also established several new categorical programs.
Proposition 13 (1978)
Fact Sheet: The Impact of Proposition 13 on Public Schools in California
Summary of Provisions of Post-Proposition 13 Legislation for Funding Education (1979)
Summary of Assembly Bill 8
Just nine months after the passage of AB 65,
this constitutional amendment was approved by California voters.
Proposition 13 limits property tax rates to 1% of a property's assessed
value. Increases in assessed value per year are capped at 2% or the
percentage growth in the Consumer Price Index (CPI) , whichever is
less. According to this law, new special purpose taxes, such as a
parcel tax, must be approved by two-thirds of local voters. The
provisions of Proposition 13 wiped out 60% of local property tax
revenues and therefore invalidated much of AB 65's financing reform,
including power equalization.
Assembly Bill 8 (1979)In response to Proposition 13, the Legislature ultimately established a formula for dividing property taxes among cities, counties, and school districts. The Legislature retained the revenue limit concept and replaced most of the lost property tax dollars with money from the state budget. This shielded schools from some of the measure's effects. But in the process, the state also effectively took control of school district funding.
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Gann Limit (Proposition 4, 1979)
In 1979 voters approved Proposition 4, a constitutional limit on government spending at every level in the state, including school districts. No agency's expenditures can exceed its Gann limit, which is adjusted annually for changes in population and the lesser of either the national Consumer Price Index (CPI) or California's per capita personal income. (The index was changed by Proposition 111 in 1990. See below.)
The Lottery and California's Schools (1985)
Ballot Measures November 1988 (1988)
Proposition 111: Ballot Measures June 1990 (1990)
Proposition 98 (1988)This constitutional amendment, approved in November 1988, guarantees a minimum funding level from state and property taxes for K-14 public schools. The annual calculation of the guarantee uses a complex formula based on state tax revenues. Proposition 98 also requires each school to prepare and publicize an annual School Accountability Report Card (SARC) that covers at least 13 required topics, including test scores, dropout rates, and teacher qualifications. A two-thirds vote of the Legislature and a signature from the governor are required to suspend Proposition 98 for a year.
Proposition 111 (1990)
Included in this constitutional amendment was a
change in the inflation index for the Gann limit calculation,
effectively raising the limit. Additionally, the minimum funding
guarantee for education (Proposition 98) was changed to reflect the
growth of California's overall economy. Proposition 111 accomplished
this by shifting the adjustment for inflation from the growth of per
capita personal income, which historically has tended to be a lower
amount, to the growth in state per capita General Fund revenues plus
Given their annual allocation of billions of dollars for public education, and their constitutional responsibility for its quality, state lawmakers have acted to hold local school districts more accountable for their decisions. Often this has meant creating categorical programs that earmark funds for specific uses. But in addition, the state has passed measures that provide both oversight and support related to district financial management.
Assembly Bill 1200 (1991)
In 1991, Assembly Bill 1200 established a system for school district accounting practices that specifies how districts must track and report their revenues and expenditures. This law requires that districts project their fiscal solvency two years out and provide the state with school-board-approved interim financial reports twice a year. County offices of education are responsible for monitoring and providing some technical assistance to their districts under this law. This law also led to the establishment of the Fiscal Crisis and Management Assistance Team (FCMAT), which helps local educational agencies fulfill their financial and management responsibilities by providing fiscal advice, management assistance, training, and other related school business services.
AB 2756 (2004)
In 2004, the Legislature significantly amended AB 1200 by passing AB 2756, which broadened the fiscal oversight authority of the county offices of education and the state over school districts. This law particularly affects collective bargaining by requiring district and county administrators to certify in writing that the district can meet the costs of the collective bargaining agreement.
Williams lawsuit settlement (2004)
The Williams v. California lawsuit, originally filed in 2000, charged that the state had failed to give thousands of children the basic tools necessary for their education. The 2004 settlement included accountability measures, extra financial support, and other help for low-performing schools. To implement the settlement, the Legislature enacted five bills covering a wide variety of issues pertaining to facilities, instructional materials, teacher credentialing, etc.:
SB 550 and AB 2727: SB 550, which is slightly modified by AB 2727, establishes minimum standards for school facilities, teacher quality, and instructional materials, and accountability systems to implement and enforce these standards.
SB 6: SB 6 provides funds to districts to repair facilities and one-time needs assessment for schools ranking at the bottom of the state's Academic Performance Index (API).
AB 1550: AB 1550 phases out the year-round school calendar (known as Concept 6) by the year 2012.
AB 3001: AB 3001 works to improve teacher quality by encouraging placement of qualified teachers in low-performing schools and increasing oversight and reporting to ensure teachers are qualified.
Categorical Flexibility (2008-09)
In response to the national economic crisis and to mitigate deep cuts to education, lawmakers enacted mid-year changes that granted schools more flexibility in how they spent categorical funds. SBX3 4 (Chapter 12, Statutes of 2009) allowed districts to use the money from 39 categorical programs for "any educational purpose" through 2012-13. It also reduced the penalties for exceeding class size limits for schools receiving funds for K-3 Class Size Reduction.
This flexibility was later extended through 2014-15 by Senate Bill 70, Chapter 7/Statutes of 2011.