About revenue limits and basic aid

November 2004
What are revenue limits?

Public school districts receive funding from a variety of local, state, and federal sources. Some of the funds are earmarked for specific purposes, such as Special Education and K-3 class size reduction, while the rest are for general purposes.

The amount of general purpose funding a school district receives per student (using ADA—average daily attendance) is called its "revenue limit." It is a combination of local property taxes and state taxes. Each of the nearly 1,000 school districts in California has its own revenue limit based on its type (elementary, high, or unified), size (small or large), historical spending patterns, and a multitude of other variables, which together make for a complicated and lengthy formula.

The bucket analogy

State and local funds are combined to make up a district’s revenue limit funding. A simple analogy can help illustrate this.

Imagine a bucket.

Each district has a different-sized bucket, representing its individualized revenue limit. Revenues raised through local property taxes are dumped into the district’s bucket, and if the bucket is not filled all the way, the state comes by and tops it off with state tax revenues.

Revenue Limit District Funding:

Money from local taxes	Money from the state

If the bucket is completely filled by local property tax revenues, the state has no need to "top off" the bucket. If the bucket overflows with local property taxes, the district gets to keep the overage. Districts whose buckets are filled by local property taxes are called "basic aid" or “excess revenue” districts.

Basic Aid District Funding

Money from local taxes

In the past, the state also gave these districts with high property taxes an additional $120 per ADA (or $2,400 per district—whichever was greater). The California Constitution says that the state should contribute this additional money to fulfill its constitutional guarantee to provide all public schools with "basic aid." However, because of budget constraints in 2002–03, lawmakers decided to eliminate the $120, saying that the state met its constitutional obligation to these districts with other state funding from categorical programs. Based on local property tax revenues, each year there have been from about 60 to 80 "basic aid" districts out of a total of almost 1,000. Because local property tax revenues and enrollments fluctuate from year to year, some districts are basic aid one year but not the next. At the time of the second principal apportionment (which is made in June), the California Department of Education officially certifies which districts are basic aid for the current school year.

For more detail on how schools are funded, see our School Finance Overview.