California’s state government largely controls the system by which public K–12 education receives funding, which means that state leaders exercise substantial control over what happens in schools.

In most other states, public schools receive the largest portion of their funds from local tax dollars, often allocated by school boards. In California’s state-controlled school finance system, schools receive most of their money from the state.

The state controls funding for public schools, but the system was largely created in response to voter initiatives

California’s finance system changed from local to state control in response to the voter tax initiative Proposition 13, which passed in 1978. Proposition 13 was passed just after the California Supreme Court decision, Serrano v. Priest (1976), which required the state to equalize general purpose funding for schools. In 1980, voters passed Proposition 4, better known as the Gann Limit, which among other things prevents the state from mandating that school districts undertake new activities without reimbursing them for the cost of those activities.

The shift in the late 1970s from local to state control of funding also had another important effect on schools: the reliability of their funding. Property taxes are generally a more stable source of funding than sales and income taxes, which are more sensitive to fluctuations in the economy. Out of concern that education might suffer in bad economic times, voters passed Proposition 98 in 1988, which requires the state to provide a minimum funding level for schools. State leaders are free to spend above this amount if they choose—though some education advocates complain that lawmakers often see the proposition’s requirements as a ceiling rather than a floor. State leaders can also suspend Proposition 98 in particularly difficult economic times as long as they restore the funding when the economy improves; but such a suspension is politically unpopular and has occurred only once, in 2004–05.

Funds go to school districts two ways

Districts’ general purpose or “revenue limit” funds—which can be spent at the district’s discretion—make up the main part of a district’s income. The state allocates these funds to districts based on the number of students they have.

However, about a third of overall education funding is for specific purposes, such as K–3 Class Size Reduction, or to serve specific groups of children, such as Special Education students. All federal funds for schools are provided as “categorical” dollars. State and federal leaders often use such categorical funding to influence educational change. Categorical funds provide a sizeable part of the budget for most school districts and can have a major impact on local expenditure decisions. By creating incentive programs that provide funds only if school districts undertake specific activities, the state also avoids creating a “mandate” for which districts are entitled to reimbursement under the provisions of Proposition 4. Federal mandates are not similarly reimbursable.

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School districts are responsible for local expenditures

School districts are the fiscal agents of California’s public school system and as such they are responsible for using the funds the state and federal government provide to deliver educational services to the state’s children. Oversight is provided by county offices of education for the districts in their county.

Although school districts are legally required to adopt a budget by July 1, they often do not yet know how much income they will receive. The state allocates money to districts based on average daily attendance. Thus districts must estimate before school starts not only how many children will enroll in the fall, but also what their attendance is likely to be. Another unknown can be how much money the state will allocate to K–12 education because the Legislature and governor often do not agree on a state budget by their June 15 deadline. For these and other reasons, the budget process for school districts is complex and virtually continuous.

District and school sizes vary

California has almost 1,000 school districts that vary dramatically in size. The vast majority of California’s students are in districts with enrollments between 1,000 and 50,000. However, some small districts serve fewer than 10 students, and the largest district—Los Angeles Unified—educates almost 700,000 students. In addition, the state has 58 county offices of education, three state special schools, and six California Education Authority Agencies, which serve some special student populations. There are also 74 Regional Occupational Centers/Programs (ROCPs) that work with local school districts to provide career tech education. 

California has three types of school districts:

• More than half are elementary (kindergarten through 8th grade);
• Over a third are unified (kindergarten through 12th grade); and
• Almost a 10th are high school (typically 9th through 12th grade).

California’s approximately 9,700 schools—including more than 600 charter schools—also vary a great deal in size, from fewer than 10 students to more than 4,500 students. Over the past few years, average school sizes have been decreasing, particularly at the high school level. Several factors may be contributing to this trend:

• shrinking enrollments,
• the growth of charter schools, which tend to be smaller, and
• a movement to reduce the size of high schools. 

Charter schools have taken hold in California

Since first authorizing charter schools in 1992, California has seen its charter school numbers grow steadily, from 85 in 1993–94 to more than 600 in 2006–07. Even with that growth, charter schools serve less than 4% of the school population in California.

These schools have some freedom from top-down state or district policies, but they are held accountable for their students’ academic performance. The results of California’s charter experiment have been somewhat mixed. A small percentage of these schools are closed each year, or shut their doors voluntarily, for such things as financial mismanagement and low enrollments. Others now have many years of successful operation behind them and consistently show strong student performance.