School Funding

School Funding 101



Although few of us understand the school funding process that results in a local district’s budget, it is important to know that we are all part of it.

As a voter, you determine the fate of school budgets—and ultimately, even your own pay and benefits.

  • You vote for the state and federal representatives who determine school funding
  • You vote for the initiatives that frame our finance system
  • You vote for the school board members who determine how money is spent at the local level

Obviously the process matters, but how does it work, and what do you need to know. Here is a basic overview of some key components in the school funding process:

Local Control Funding Formula

The Local Control Funding Formula (LCFF) gives Local Education Agencies (LEAs), such as school districts and county offices of education, and their stakeholders more control over how to spend state funds to effectively deliver education programs. As part of the LCFF, LEAs must develop a Local Control Accountability Plan (LCAP) to set goals in eight priority areas specified by the state. In their LCAP, LEAs must outline the path they will follow to achieve their goals in each of the eight priorities by using LCFF monies. Districts are required by statute to consult with stakeholders – including classified school employees and their unions – to develop their LCAP goals and road map.

Revenue limits, COLA and ADA

Each district has a base amount of ‘general purpose’ money it spends per student. That amount is called a “revenue limit”. Original revenue limits were based on 1972 spending levels and have been updated ever since with cost of living adjustments (COLA). The district’s total revenue limit is primarily based on how many student it has, or its average daily attendance (ADA).

Prop. 13 and Prop. 98

Two major laws—both approved by California voters— have had a far-reaching effect on school finance. The first is Prop. 13. This controversial ballot initiative was passed in 1978 in an attempt to limit property taxes. Since Prop. 13, California schools have increasingly relied on the state for the majority of their funding. Unfortunately for schools, state revenue has fluctuated wildly through cycles of accumulating large reserves to deficit spending.

To help protect schools from the state’s boom and bust economy, voters approved Prop. 98 in 1988 to guarantee a minimum level of funding for public schools. The calculation of the guarantee is very complicated, as are the politics of funding it. The multi-step process involves three tests, one of which permits a smaller minimum increase in bad economic years. The minimum guarantee can be suspended altogether with a two-thirds vote by the state legislature and approval of the governor.

School Bonds

Most of the funding for K-12 school facilities comes from state and local bonds. A school bond, like a home mortgage, enables a school district to borrow money to finance the construction of a new school or make major improvements over many years. Bond money is restricted and cannot be used to pay for salaries or employee benefits. However, it can alleviate the burden placed on a district’s general fund, freeing up money to pay for those needs.

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Where the money comes from

School funding can be hard to understand because it involves federal, state, and local governments to determine the needs of our students, school employees, and facility needs.

Schools rely on state budget

California public schools have grown increasingly reliant on state funds to provide critical local services, including education. This is not the case in most states where local property taxes provide the majority of public school funding.


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