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California Must Develop Local Funding Options for Schools by David Walrath Small School Districts Association
Prior to the passage of Proposition 13 in 1978, approximately 70% of local school funding was provided by local property tax revenues and 30% was provided by state taxes. This allocation recognized and reflected the attitude that the state’s responsibility was to ensure equalized access to education services, ensure services to underserved populations such as special education and children from poverty families, as well as support ancillary services (such as school lunches) that were not part of the core educational program. The funding system fostered local control and limited the amount of state interference with local decisions on how best to structure the public school system. The state was required to reimburse local school districts for the cost of new state mandates and this served as a check on the state’s interference with the local operation of public schools. At this time, schools were considered to be adequately funded and academic achievement was equal to or greater than the national average.
Proposition 13 was essentially a revolt against being taxed out of homes because of ever increasing property tax charges made by local government, excluding schools. Because schools were limited in the amount of total revenue they could receive by Senate Bill 90 (Dills/1972), increases in assessed value did not generate more overall revenue for schools. Local government, however, was able to increase total revenues because they had a fixed tax rate applied against assessed valuation of property. Consequently, tax revenues would increase whenever there was an increase in assessed valuation. County assessors, at the urging and direction of the state, made major annual increases in assessments which resulted in ever escalating property tax charges to property owners. In order to limit the amount of taxes and roll back assessments, the citizens passed Proposition 13.
The result was that the state provided more school funding after Proposition 13. School funding is now closer to 70% state and 30% local. As in most human endeavors, the golden rule “those who have the gold make the rules,” applies to the direction of local public school activities. Because the state has the financial control, the state has an ever increasing influence on local public school activities.
State funding for schools has been cut by more than $12 billion in inflation-adjusted cost. Additionally, the state owes schools upward to $3 billion for unfunded mandates and possibly an additional $6 billion for deferrals of payments to schools. Even if all these funds were paid to schools by the state, the “Getting Down to Facts” series of research organized by Stanford University indicated that an additional $10 billion would be needed to bring schools to an adequate funding level.
The state budget is in shambles, and there is no reasonable expectation that the state can pay back the cuts, much less the additional $10 billion identified in the “Getting Down to Facts” research.
The federal budget debt and deficit are escalating and there is no reasonable expectation that federal funds will make up the difference. Even if the federal government could make up the difference, would we want the money with the inevitable federal strings?
It is bad enough for Sacramento to supersede local school decisions. How much worse would it be with Congress, almost 3,000 miles away, trying to do one-size fits all policy for our local schools?
One answer to this problem is to restore more local control by giving local communities more options to support local education programs. This answer, however, should not expect local communities to make up for the state’s failure to provide adequate funding for schools. The state should remain responsible for its school funding commitments.
After Proposition 13, the California Constitution was changed to redefine schools to be a special purpose. Before then schools, cities and counties could ask voters to approve general revenues with a majority vote. Now cities and counties can do general revenues with a majority vote, but schools cannot. Schools, other than for limited tax rate school bonds, are considered to be a special purpose and are required to receive a community super majority vote (66.67%) for revenues that support general education purposes.
The current process allows barely more than one-third of voters to force local schools to be dependent on the state for funding. This one-third can block the voting majority’s desire for more local revenue control and less control from Sacramento.
ACA 10 (Torlakson) and SCA 6 (Simitian) both address the need to allow local communities the option to support schools with a majority or supermajority vote, respectively. Schools are a general interest for all Californians. Business, labor, and government all agree that educated citizens are needed to maintain and expand California’s economy. Well-educated students benefit everyone.
The Small School Districts’ Association (SSDA) believes that schools benefit all citizens in California. Well-educated students increase our ability to have economic growth, as well as an informed public for making public decisions. Schools are not a special interest, such as a sports stadium or other very limited public purpose. Because schools are a general purpose, SSDA believes that local communities should have the right to vote for local resources to their schools at less than a two-thirds vote requirement. SSDA also believes, however, that there needs to be controls on the amount of revenue that can be raised by such local taxes. SSDA believes in these limitations for two reasons:
1. The Serrano vs. Priest litigation indicated that revenues from property taxes need to be equalized so rich school districts do not have unfair access to local tax revenues.
2. Local communities should not be expected to raise taxes to the level needed for adequate funding of schools if that would result in local communities supplanting the state obligation to provide adequate resources of public education.
SSDA believes the state should be responsible and the communities should continue to hold the state responsible for adequate base funding. However, local communities should be able to provide supplemental funding for local community priorities and better access to local revenues. SSDA believes this structure will increase local control, increase local involvement with their public schools and will help ensure that local priorities are addressed in their community’s schools.
Small School Districts' Association of California was established in 1983 to advocate the concerns, welfare, and special needs of small school districts throughout California. SSDA is a growing organization of over 500 small and mid-sized districts. From the California Progress Report
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| A Guide to California's School Finance System (February 2007)
Teacher and Administrative Salaries (Fiscal Year 2006-07) This table displays district salaries for teachers, principals, and superintendents, and compares these figures to the state averages for districts of the same type and size. The table also displays teacher and administrative salaries as a percent of a district's budget, and compares these figures to the state averages for districts of the same type and size. Detailed information regarding salaries may be found on the Certificated Salaries and Benefits Web page at http://www.cde.ca.gov/ds/fd/cs/. | Category | SCUSD District Amount | State Average For Districts In Same Category | | Beginning Teacher Salary | $39015 | $40721 | | Mid-Range Teacher Salary | $51275 | $65190 | | Highest Teacher Salary | $84151 | $84151 | | Average Principal Salary (Elementary) | $98946 | $104476 | | Average Principal Salary (Middle) | $101101 | $108527 | | Average Principal Salary (High) | $116489 | $119210 | | Superintendent Salary | $253504 | $210769 | | Percent of Budget for Teacher Salaries | 36.1% | 39.9% | | Percent of Budget for Administrative Salaries | 5.7% | 5.5% | |
Staff per 1,000 Pupils in 2005–06 | New York | Texas | Illinois | U.S. Average | Florida | California | California's Rank | % National Average | Total Staff | 132.7 | 137.1 | 125.4 | 124.7 | 117.5 | 90.0 | 50 | 72% | Total District Staff* | 8.6 | 2.9 | 5.7 | 5.7 | 6.6 | 5.0 | 35 | 88% | Officials and Administrators | 1.1 | 1.8 | 1.8 | 1.3 | 0.7 | 0.4 | 47 | 33% | School Staff* | 103.8 | 99.7 | 96.0 | 95.2 | 87.0 | 70.0 | 51 | 74% | Principals/Asst. Principals | 3.1 | 7.0 | 3.1 | 3.4 | 2.7 | 2.2 | 49 | 63% | Teachers | 77.8 | 66.8 | 63.4 | 63.9 | 59.4 | 48.0 | 49 | 75% | Guidance Counselors | 2.4 | 2.3 | 1.5 | 2.1 | 2.1 | 1.1 | 51 | 52% | Librarians | 1.2 | 1.1 | 1.0 | 1.1 | 1.0 | 0.2 | 51 | 17% | Total Certified School Staff | 84.5 | 77.2 | 69.0 | 70.5 | 65.3 | 51.5 | 49 | 73% |
Data: National Center for Education Statistics (NCES) Common Core of Data, 2005–06. Note: The District of Columbia is included with the 50 states. NCES includes pre-K public school students and their teachers in these data. NCES estimated that there were 125,099 pre-K students and 8,850 pre-K teachers in California in 2005–06. * District and school totals include classified staff. | In 2005–06 California’s pupil-teacher ratio ranked 49th in the nation, with a larger pupil-teacher ratio (21.0 to 1) than any other states except for Arizona and Utah, according to the NEA. (Note that student-teacher ratios are not synonymous with class size. The ratios are calculated by dividing the total enrollment by the number of full-time equivalent teachers, even though not all teachers are classroom teachers.) |
| California’s system for funding public schools has been in place for 35 years—with additions and changes that range from major voter and judicial decisions to annual tinkering by lawmakers (see the Chronology). As a result, the system is extraordinarily complex and difficult to understand. Here is a simplified description of the basics. It shows where the money comes from and how it is distributed to school districts.
Since 1978 (Proposition 13), the decision about how much money school districts will receive, and where it will come from, has largely been made by the governor and Legislature. It’s up to local school boards to decide how best to use the resources they receive to educate their school population, within the considerable constraints of California's Education Code, money earmarked for specific students or programs, and local school districts' contracts with employees. |
THE SOURCES OF FUNDING FOR SCHOOLS
|  | • Funds from the federal government are about 11% of the K-12 education budget. • About 61% of the total comes from the state’s budget: business, corporate and personal income taxes, sales taxes, and some special taxes. • Local property taxes are about 21%, an amount that is determined within the state’s budget. • Miscellaneous local revenues, about 6% of the total, include such items as fees on commercial or residential construction; special elections for parcel taxes; contributions from parents, businesses and foundations; cafeteria sales; and interest on investments by local school districts. • The smallest amount at the bottom is the California Lottery, which provides 1.5% of the total, or about $125 per student annually. |
These proportions, which are from the 2006-07 budget, vary slightly one year to the next. For example, the federal government’s share increased from about 8% in 1996-97 to 13% in 2004-05 and then dropped to 11% in 2006-07.
Public schools have no other revenue sources. |
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DISTRIBUTION OF THE MONEY FOR K-12 EDUCATION
| | About two-thirds of total funding is for general purposes, with the other third for special purposes or categories of students. The proportion of the total earmarked for specific purposes has grown in recent years. Each district’s income is based on: • the average number of students attending school during the year (average daily attendance, or ADA) • the general purpose (revenue limit) money the district receives based on ADA • special support (categorical aid) from the state and federal governments, earmarked for particular purposes.
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| The California Legislature set revenue limits for each district in 1972, roughly according to the district's expenditures on general education programs. The variation among revenue limits was great, and the Serrano v Priest court case eventually required the state to make districts’ general purpose money more nearly equal per pupil. By 2000, 97% of the state’s students were within a band (known as the "Serrano Band") of about $350.
The Legislature and governor almost always provide inflation (cost-of-living) adjustments to revenue limits. However, neither the school board nor local voters can increase the revenue limit. If local property tax revenues rise within a district, the increase goes toward the district’s revenue limit. The state’s share is then reduced by the same amount.
In 60 to 80 of the districts, property taxes exceed the revenue limit. In the past, these districts were allowed to keep the money and also get the constitutionally guaranteed state "basic aid" of $120 per pupil. Beginning in 2003-04 the state meets the requirement through categorical funding, and these "basic aid" districts are now called "excess revenue."
The other large portion of a school district’s income is categorical aid from the state and federal governments. It is based on categories of children, such as students with disabilities; characteristics of the district, such as low-income families; or programs, such as class size reduction (CSR). The program can be voluntary, such as CSR for grades K-3, or required, such as Special Education.
Categorical aid can be a very small portion or more than one-third of a district’s budget, depending on the population of students served. The money must be spent according to the state or federal guidelines for the qualifying program.
Miscellaneous income is a small percentage of most districts’ budgets, but (with a few exceptions) districts have discretion over how to spend the money. |
A STATE-CENTRALIZED SYSTEM
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| | Proposition 13 (1978) effectively removed school districts’ ability to exert substantial control over their revenues. Proposition 98, approved by voters in 1988, didn’t change that, but it did provide a measure of security to K-12 schools by guaranteeing a minimum amount of support for public education. Nonetheless, California fell behind other states in funding schools in the '80s and '90s. The boom of the late 1990s allowed the state to increase its investment in education relative to other states, but that was curtailed by the budget crises beginning in 2001. The fiscal crunch came at a time when both the state and federal government are emphasizing the need to improve the achievement of all students and to increase student and school accountability for academic performance. That emphasis is ongoing, and the fiscal outlook for California--and therefore K-12 education--has improved. |
For More Information | | EdSource's website (www.edsource.org) has a section that explains California's school finance system in detail, with summaries and data about public education. |
Return to Top of Page School Finance Chronology (November 2007)
| 1968 Serrano v. Priest
Lawsuit challenging the fairness of California's system for funding K-12 education.
1972 SB 90
Established revenue limits, a ceiling on the amount of general purpose money each school district may receive.
1976 Serrano v. Priest
The California Supreme Court ruling that the school finance system was inequitable.
1977 AB 65
Long term funding bill in response to the Serrano court decision.
1978 Proposition 13
Constitutional amendment limiting property tax rates and increases.
1979 AB 8
The funding method for schools after Proposition 13, with a new formula for dividing property taxes. Granted larger inflation increases to low spending districts, the "Serrano squeeze."
1979 Gann Limit
Constitutional limit on governmental spending at all levels, including school districts.
1983 SB 813
Major school improvement law, including mentor teachers, longer school day/year, higher beginning teachers’ salaries, more rigorous graduation requirements, and statewide curriculum standards.
1984 Lottery
Constitutional amendment creating the California State Lottery, with a designated percentage of earnings for education.
1988 Proposition 98
Constitutional amendment that guarantees a minimum level of funding for K-14 education (amended by Proposition 111 in 1990).
1996 SB 1777
Created incentives to reduce K-3 class sizes.
2000 Proposition 20
Constitutional amendment requiring half of growth in lottery money be used for instructional materials.
2000 Proposition 39
Constitutional amendment permitting a 55% yes vote for approval of local General Obligation bonds.
2000 Williams v. California
A lawsuit charging that California is not providing basic educational necessities for all students. Settled in 2004.
In years in which no special school finance laws are passed, funding for education is written into the Budget Act and follow-up legislation. |
Return to Top of Page Local Sources of Revenue (February 2007)
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Property Taxes
| School districts receive local property taxes as part of their revenue limit income. The original formula was set by the Legislature in the early 1970s. When Proposition 13 passed in 1978, the state took over the allocation of property taxes as well as of state aid. In the early 1990s, additional property taxes were shifted from cities, counties, and special districts to schools, thus reducing the amount of money needed from state taxes.
In some districts the amount of property taxes exceeds the revenue limit. For many years they could keep all of it and still receive the state "basic aid" of $120 per student (ADA) [or a minimum $2,400 per district] that is guaranteed by the California Constitution. In 2003-04 the Legislature decided that state categorical aid funds covered the $120, and the additional basic aid payment was discontinued. The number of these districts, now called "excess revenue," ranges from 60 to 80, depending on the year. |
Parcel Taxes
| After Proposition 13, school districts could no longer ask voters to raise property taxes for schools. Proposition 13 did authorize special taxes (non ad valorem) on parcels of property if two-thirds of the electorate in the district approves.
From 1983 through 2006, districts have held 416 parcel tax elections. Only 211 of these won the necessary two-thirds vote, while another 144 achieved a majority vote. |
Surplus Property
| | Districts may lease or sell unused school buildings or school sites. The use of these funds is restricted to construction or deferred maintenance projects. A district with no deferred maintenance needs may use the money for other purposes. |
School Foundations and Private Contributions
| | More than 600 districts have formed private foundations to receive contributions or grants from individuals and local businesses. In 2005 an estimated $100 million was raised to support local schools. |
Bonds and Developer Fees
| Initially districts needed a two-thirds vote to sell general obligation bonds. These bonds may now be authorized by 55% of local voters if the school board chooses to accept additional requirements. From 2001 through 2006, 326 of the 393 elections succeeded. By contrast, 512 of the 931 two-thirds' vote elections passed from 1986 through 2006.
Districts may also levy developer fees on new construction or reconstruction within district boundaries. These funds may only be used for construction, acquisition, or major improvement of facilities. |
Return to Top of Page Proposition 13
Property Tax Amendment (1978) (March 2004)
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Definition
| An initiative that added Article XIII A to the California Constitution. It limits property tax rates to no more than 1% of full cash value. Increases in assessed value per year are capped at 2% or the percentage growth in the Consumer Price Index (CPI), whichever is less. In 2002-03, the increase was 1.87%. It has been less than the 2% cap only five times since 1977.
New construction and the sale of property, with some exceptions, also increase assessed values. |
Impact
| Proposition 13 and implementing legislation caused a shift in support for schools from local property taxes to state general funds. Property taxes are still a part of schools’ revenue limits, in varying amounts. The percentages allocated to cities, counties, special districts, and school districts were set in 1978 (adjusted somewhat by AB 8, 1979) and can be changed only through legislation.
In tight financial times, the Legislature and governor have shifted significant amounts of property taxes to education in order to ease the strain on the state budget. Cities, counties, and special districts have had to cut or find alternate means to fund their budgets.
Increases in property tax revenues do not benefit most schools because their general purpose income is capped by revenue limits. (An exception: some districts receive and keep property tax revenues in excess of their revenue limit; these are called "basic aid" districts. In 2003-04 82 districts, out of 986 statewide, were basic aid.) |
Challenges
| | The California Supreme Court has refused to consider cases; challenges to Proposition 13 were rejected by the U.S. Supreme Court in 1992. The basis of the challenges was unequal tax charges on similar neighboring properties. In 2004 the California Teachers Association began gathering signatures for a ballot proposal to raise the property tax rate on commercial properties. |
Return to Top of Page California Lottery (December 2007)
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Provisions
| In November 1984 voters approved the California State Lottery as a new source of revenue for California. A minimum of 34% of annual lottery sales revenues must be distributed to public schools, colleges, and universities. Public schools also receive unclaimed prize money, interest income or any administrative savings left over at the end of the sales year.
The money is to supplement, not supplant, regular support for public education. It must be used "exclusively for the education of pupils and students and no funds shall be spent for acquisition of real property, construction of facilities, financing of research or any other non-instructional purpose."
In March 2000 voters narrowly approved Proposition 20. It modifies the lottery law by requiring that half of any growth in lottery money above the 1997-98 base must be spent on instructional materials or textbooks. |
Results
| | California lottery sales initially peaked in 1988-89, plummeted to a low in 1991-92, and grew slowly most years since then, reaching a new high in 2005-06. Annual amounts are unpredictable and represent only a small portion of a school district's budget. While educators welcome additional funds, the lottery is not, as some believe, a significant source of funds for education. |
| Data: California Budget Project, 2007
Locally elected school boards decide how to spend their lottery funds. In 2005-06, LEAs spent, on average, about 64% of their lottery income on salaries and benefits. Since the passage of Proposition 20, the amount that must be spent on textbooks or instructional materials (half of any growth) is steadily increasing. |
| | Data: California Department of Education, Fact Book 2007 - Handbook of Education Information |
K–12 Lottery Revenue Allocations
In amount per student based on average daily attendance (ADA) | | Year | Amount per student, unrestricted lottery revenues | Amount per student, instructional materials | Total Statewide K-12 Lottery Payments (in millions) | | 2006-07 | $121.88 | $22.75 | $957 | | 2005-06 | $126.66 | $28.96 | $1,034 | | 2004-05 | $119.94 | $22.47 | $948 | | 2003-04 | $114.79 | $17.44 | $873 | | 2002-03 | $110.81 | $12.55 | $806 | | 2001-02 | $116.13 | $15.24 | $854 | | 2000-01 | $123.41 | $18.07 | $902 | | 1999-00 | $115.45 | $7.53 | $769 | | 1998-99 | $114.69 | $4.50 | $728 | | 1997-98 | $113.67 | - | $675 | | 1996-97 | $105.10 | - | $611 | | 1995-96 | $120.71 | - | $691 | | 1994-95 | $115.83 | - | $643 | | 1993-94 | $101.63 | - | $556 | | 1992-93 | $92.51 | - | $496 | | 1991-92 | $76.55 | - | $401 | | 1990-91 | $128.64 | - | $646 | | 1989-90 | $154.47 | - | $783 | | 1988-89 | $176.08 | - | $844 | | 1987-88 | $138.78 | - | $647 | | 1986-87 | $89.68 | - | $411 | | 1985-86 | $125.67 | - | $555 |
| Data: California Department of Education, Fact Book 2007 - Handbook of Education Information
Note: Figures not adjusted for inflation. For inflation-adjusted amounts, see the California Budget Project report, The California Lottery: A Small and Declining Share of School Funding (March 2007), at www.cpb.org. |
Return to Top of Page School District Income (February 2007)
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Formula
| General Purpose (Revenue Limit x ADA)
+ Special Purpose (State and Federal Categorical Aid)
+ Miscellaneous Local & Other
+ Lottery
= Total District Income |
ADA (Average Daily Attendance)
| | Total days of student attendance divided by the total days of instruction. Due to a change in law, beginning in 1998-99 excused absences no longer count as a part of ADA. |
Revenue Limit/Categorical Aid
| The basic general purpose money for each student. Originally established by law in 1972, the per pupil (ADA) revenue limit varies from district to district for historical reasons.
Revenue limit income is a combination of local property taxes and state money. Any increase in property taxes is offset by a reduction of state funds (except to "basic aid/excess revenue" districts). Revenue limits were adjusted in 1998-99 to account for the new definition of ADA. In 2004-05, statewide average revenue limits by type of district were estimated to be $4,881 (elementary), $4,927 (unified), and $5,869 (high school).
Categorical aid (from both the state and federal governments), local miscellaneous income, and lottery revenues are added to revenue limit income to make up a district's total revenues. |
COLA (Cost-of-Living Adjustment)
| The state usually grants a cost-of-living adjustment to revenue limits and to categorical programs. For revenue limits, the law specifies an annual COLA tied to the current inflation rate. The amount actually paid depends on the legislative appropriation. A deficit occurs when the amount is less than the statutory total.
A COLA is usually allocated for most categorical programs, although that hasn't happened in difficult budget years such as 2003-04. The annual growth in the student population (ADA) is also usually funded for revenue limits and many categorical programs. |
Return to Top of Page Categorical Aid (February 2008)
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Definition
| | Support from the state and federal governments that is targeted for particular categories of children or families, special programs and special purposes. This money is granted in addition to school districts' general purpose revenue, and it almost always has restrictions on its use. |
How It Works
| Categorical funds from both the state and federal government have grown considerably over the years. The federal government's share of the total K-12 education budget in California was about 8% for years. In 2003-04, it grew to almost 13%, but by 2007-08 had fallen to almost 10%.
Depending on definitions, California funds about 85 categorical programs. These account for about one-third of the state's education budget. Many of the categorical programs are scheduled for legislative review with an eye toward changing or discontinuing the program—an option which rarely happens. Most categorical programs have strong supporters who argue for continued funding. |
The Programs
| Categorical programs range from very big to very small.
The largest program, by far, is Special Education for students with physical, emotional or learning disabilities. These services are mandated by federal and state law, and they account for much of the growth in categorical funding over the years.
The next largest categorical is a voluntary one, the reduction in K-3 class sizes. Almost all districts in California accept this money along with the strict regulations that accompany it.
The largest federal program is commonly called "Title I." It supports children whose families qualify as being in poverty. Districts receiving Title I funds must comply with the considerable regulations under No Child Left Behind. The federal government also supports child nutrition, child care, and Special Education (among others).
Although all districts receive some categorical aid, the impact varies widely according to the characteristics of a district's student population. In some districts this money approaches 40% of their budgets. |
Impact
| The severity of the state's budget deficit in 2008 has heightened the need to re-examine the structure of school finance, including how the money is allocated and what regulations are attached.
Over the years the Legislative Analyst has recommended revisions to categorical aid programs, ranging from minor adjustments to major changes.
"Fixing" categorical aid has, however, proven to be politically challenging. Most of the programs have strong defenders, and some policymakers believe that they need to ensure that certain educational goals or students are protected. |
Return to Top of Page Serrano v. Priest and Funding Equity (November 2007)
| In 1976 the California Supreme Court found that the existing system of financing schools was 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 base revenue limits per pupil should be less than $100 (called the "Serrano band"). A built-in inflation factor brought the allowable difference to about $300 per student (based on average daily attendance, or ADA) by 2000. The vast majority of the state's students—nearly 99%—were attending districts with base revenue limits within that band. The court did not recommend a penalty for districts already above the band.
The court excluded special purpose or categorical funds from the calculation of equitable funding.
October 1980 Plaintiffs filed a “bill of particulars” stating that equalization had not been accomplished and the deadline for the $100 band had not been met. They asked that some expenditures in addition to revenue limits be equalized.
December 1982 Superior Court in Los Angeles heard the Serrano v. Priest, Gonzalez v. Riles, Placentia USD v. Riles, and Lucia Mar USD v. Graves cases, all of which dealt with similar issues.
April 1983 Superior Court trial judge found that the current school finance system is constitutional and that sufficient parity exists within the $100 band adjusted for inflation.
June 1985 Plaintiffs filed an appeal in the Second District Court of Appeals.
May 1986 Court of Appeals upheld the 1983 Superior Court decision.
September 1986 California Supreme Court voted to hear the appeal of the Superior Court decision.
March 1987 Defendants filed for dismissal of Supreme Court review.
April 1989 Plaintiffs withdrew. Case was declared closed.
A 1998 change in the ADA calculation raised renewed concerns about equity in revenue limit amounts. In 2001-02 the Legislature approved a multiyear plan to equalize all revenue limits according to the type of district (elementary, high school, unified). It has not been funded since then. The plan calls for 90% of the statewide enrollment to eventually have base revenue limits of the same amount; only 10% of the students could be in districts with higher base revenue limits. According to the California Department of Education, 776 school districts with more than 5 million students were eligible for additional funds under this plan in 2000-01. The mechanism is different from the "Serrano band," but the result is similar.
Although the Serrano case is long-settled, educational equity is still an issue that is now joined by questions about the adequacy of support for public schools. In May 2000 a suit—Williams v. California—charged that California is not providing all students with the same educational quality, particularly in textbooks, qualified teachers and appropriate classrooms.
The case was settled in August 2004. The settlement requires districts to provide sufficient numbers of instructional materials, provide qualified teachers, and keep facilities in good repair. It also created a monitoring and compliance system overseen by county offices of education.
The settlement disappointed supporters who believed Williams was an adequacy lawsuit. The plaintiffs said Williams was never about adequacy and that the floor established by the settlement improved conditions for California students. |
Return to Top of Page Proposition 98 (1988) (March 2004)
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Provisions
| A constitutional amendment approved by voters in November 1988 and amended by Proposition 111 in 1990. The four provisions are: - a guarantee of minimum funding for K-12 schools and community colleges based on a specific calculation (see below)
- an allocation to K-14 education of 50% of the difference when state tax revenues exceed the Gann spending limit, with the remaining 50% rebated to taxpayers,
- annual School Accountability Report Cards (SARCs) with at least 13 specific items for each school, and
- a "prudent" state budget reserve.
With a two-thirds vote of the Legislature and signature of the governor, Proposition 98 may be suspended for one year. |
The Tests
| | Determining the Proposition 98 allocation is a complex calculation. In years of normal or strong state revenue growth, the K-14 guarantee is the larger of: | | Test 1—the same share of the General Fund for K-14 education as the base year, 1986-87 (adjusted for changes in the share of property taxes), or
Test 2—the prior year’s funding from state and property taxes adjusted for inflation (growth in per capita personal income) and increases in the student population (average daily attendance, or ADA). |
| | The guarantee when General Fund tax revenues grow more slowly than per capita personal income is: | Test 3—the same criteria as Test 2 except inflation is defined as the growth in per capita General Fund revenues plus one-half percent.
Test 3b —same as Test 3 except education may suffer cuts no deeper than other portions of the state budget. |
| | The difference between the amount under Test 3 and what would have been the amount under Tests 1 or 2 must be restored to education in years of stronger revenue growth. |
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Impact
| The Proposition 98 guarantee involves a complicated calculation that is affected by the condition of the state's economy. For many years the economy was fairly stable or even growing. Therefore, the Proposition 98 guarantee has usually fallen into Test 2, which means that education received the previous year's funding plus increases for growth in attendance and per capita personal income. In the 1998-99 state budget, when the economy was booming, the Legislature even approved more money for K-12 education than the Proposition 98 guarantee.
Beginning in 2001-02, however, the state’s General Fund experienced more volatility, first decreasing dramatically and then gradually moving upward. The framers of Proposition 98 had not envisioned multi-year dynamic change. Instead, the guarantee only looks at growth from one year to the next. Therefore, during the 2001-02 and 2002-03 budget cycles—when the state began facing record-breaking deficits—policymakers decided to hold education spending at the allowable minimum. Although the Legislature has the power to suspend Proposition 98 with a two-thirds vote, it has historically chosen not to do so. |
Education Data Partnership
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All rights reserved. Revised November 19, 2008.
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