A Guide to California’s School Finance System

California’s system for funding public schools has been in place for 35 years.

1968-78: California moves to a state-controlled finance system
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.

1978 Proposition 13
Constitutional amendment limiting property tax rates and increases.

Sources of Funding for Schools

  • Federal government: about 11%
  • State’s budget (business, corporate and personal income taxes, sales taxes, and some special taxes): about 61%
  • Local property taxes: about 21%
  • Miscellaneous local revenues (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): about 6%
  • The smallest amount at the bottom is the California Lottery: 1.5% or about $125 per student annually

Public schools have no other revenue sources.

Distribution of the Money

  • General purposes: two-thirds of total funding
  • Special purposes or categories of students: other third

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.

The California Legislature set revenue limits for each district in 1972.

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

Proposition 13 (1978) effectively removed school districts’ ability to exert substantial control over their revenues.


Last Updated: January 16, 2009
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