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Public Education - California School Finance History

Over the past 30 years California’s school finance system has changed significantly due to a variety of laws, court decisions, and ballot measures. This section provides a brief chronological summary of the legislative, court, and voter contributions that have had the most influence on the way schools are financed today.

Senate Bill 90 (1972)

In 1972, the Legislature established revenue limits for California public schools. These revenue limits placed a ceiling on the amount of tax money each district could receive per pupil. The 1972–73 general purpose spending level became the base amount in determining each district’s annual revenue limit. This was the beginning of the shift from local to state control of school finance.

Serrano v. Priest (1976)

Serrano v. Priest is the 1976 California Supreme Court decision that found the existing system of financing schools 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 revenue limits per pupil should be less than $100 ( Serrano band ). This difference in revenue limits has subsequently been adjusted for inflation and is currently about $350. In equalizing funding, districts are divided into three types: elementary, high school, and unified. They are then further broken down into small versus large districts to ensure that appropriate funding comparisons are made. Special-purpose or categorical funds are excluded from this calculation.

Assembly Bill 65 (1977)

In response to the Serrano v. Priest decision, the California Legislature passed Assembly Bill (AB) 65. It created an annual inflation adjustment based on a sliding scale in order to equalize revenue limits among districts over time. Higher inflation increases went to districts with low revenue limits, with lower (occasionally no) inflation adjustments for high revenue-limit districts. AB 65 also established the Early Childhood Education Program, predecessor to the School Improvement Program (SIP) and several other categorical programs.

Proposition 13 (1978)

This constitutional amendment approved by California voters in 1978 limits property tax rates to 1% of a property's assessed value. Increases in assessed value per year are capped at 2% or the percentage growth in the Consumer Price Index (CPI) , whichever is less. According to this law, new taxes, such as a parcel tax, must be approved by two-thirds of local voters.

Here is a background article that describes the factors that led to passage of Proposition 13 and its implications on education.

Assembly Bill 8 (1978)

In response to Proposition 13, the Legislature established a formula for dividing property taxes among cities, counties, and school districts. This shielded schools from some of the measure’s effects. In the process, the state replaced the lost property taxes and effectively took control of school district funding.

Gann Limit (Proposition 4, 1979)

In 1979 voters approved Proposition 4, a constitutional limit on government spending at every level in the state, including school districts. No agency’s expenditures can exceed its Gann limit, which is adjusted annually for changes in population and the lesser of either the national Consumer Price Index (CPI) or California’s per capita personal income. (The index was changed by Proposition 111 in 1990. See below.)

In the late 1970s, Cailfornia began to change its textbook adoption process.

Senate Bill 813 (1983)

Senate Bill (SB) 813 in 1983 provided additional money to school districts through equalization of revenue limits and new categorical programs, more rigorous graduation requirements, longer school day/year, and higher beginning teachers’ salaries. It also established statewide model curriculum standards.

Lottery Initiative (1984)

In November 1984, voters approved a constitutional amendment authorizing the California State Lottery. The provisions guarantee that a minimum of 34% of total lottery receipts be distributed to public schools, colleges, and universities. The money is to supplement, not replace, support for 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." Proceeds from the lottery add less than 2% to school district revenues. (2005 Lottery Sales

Proposition 98 (1988)

This constitutional amendment, approved in November 1988, guarantees a minimum funding level from state and property taxes for K–14 public schools in a complex formula based on state tax revenues. Proposition 98 also requires each school to prepare and publicize an annual School Accountability Report Card (SARC) that covers at least 13 required topics, including test scores, dropout rates, and teacher qualifications. A two-thirds vote of the Legislature and a signature from the governor are required to suspend Proposition 98 for a year.

Proposition 111 (1990)

Included in this constitutional amendment was a change in the inflation index for the Gann limit calculation, effectively raising the limit. Additionally, the minimum funding guarantee for education (Proposition 98) was changed to reflect the growth of California's overall economy. Proposition 111 accomplished this by shifting the adjustment for inflation from the growth of per capita personal income, which historically has tended to be a lower amount, to the growth in state per capita General Fund revenues plus one-half percent.

Assembly Bill 1200 (1991)

In 1991, Assembly Bill 1200 established a system for school district accounting practices that specifies how districts must track and report their revenues and expenditures. This law requires that districts project their fiscal solvency two years out and provide the state with school-board-approved financial interim reports twice a year. County offices of education are responsible for monitoring and providing some technical assistance to their districts under this law.

Class Size Reduction, K–3 (Senate Bill 1777, 1996)

In 1996, the Legislature passed the Class Size Reduction (CSR) Program, which provided incentives for school districts to reduce K–3 classes to a pupil-teacher ratio of no more than 20 to 1. This legislation provided annual incentive funding of $650 for each student in a smaller class and an option of $325 for students in a staggered session in which the pupil-teacher ratio is no more than 20 to 1 for half the day. These incentives were later increased to $800 full day and $400 half day per student in CSR classes plus annual inflation adjustments. A one-time allocation of $25,000 per added classroom was also made available for full-day classes to improve facilities or acquire portable classrooms.

Class Size Reduction, 9th grade (1998)

Two years after the original K–3 Class Size Reduction (CSR), the California Legislature expanded the existing high school program to concentrate on high school freshmen. To qualify for the $135 per pupil incentive, high schools must offer one or two ninth-grade courses with an average of 20 students per teacher, with a maximum of 22 per participating class. This bill also requires that one of the courses must be in English and the other can be in mathematics, science, or social studies. Programs that are excluded from participating in this program include Special Education classes and Necessary Small Schools.

Senate Bill 1468 (1997)

Senate Bill 1468 changes the way the Average Daily Attendance (ADA) for school districts is counted. Before 1997, ADA equaled the number of students in school plus those students who missed school but had a permissible excuse such as an illness, a doctor’s appointment, or a death in the family. Instead, SB 1468 requires that schools calculate their ADA by counting only the students who are actually at school each day. In an attempt to ensure that school districts did not lose a large proportion of their revenue, state leaders recalculated the per pupil revenue limit to yield a higher amount per ADA.

Assembly Bill 1600 (1999)

Assembly Bill 1600 gave charter schools the option to receive funding directly from the state, instead of their local district, in the form of a block grant. This grant combines both general-purpose money and a large proportion of the categorical funds into a single per pupil amount that varies by grade level. Charter schools are also eligible for additional categorical program funding for which the school and individual students qualify.

Categorical Funding

Categorical funding refers to money from the state and federal government that is targeted to special programs and children with special needs. Approximately one-third of K–12 education’s total funding is earmarked for these special purposes. This section briefly summarizes applicable sections of court decisions and state and federal legislation for three of the largest categorical programs: Special Education, Bilingual Education and Title 1.

Here is a recent study on categorcial spending.

Special Education

Larry P. v. Riles (1972)

Larry P. v. Riles is the 1972 California Supreme Court decision that ruled using IQ tests to place children in Special Education violated the equal protection clause of the 14th Amendment of the U.S. Constitution because the tests were found to be culturally biased. The ruling also expanded the rights of parents of Special Education children. The court mandated that parents be notified of their child's placement in Special Education and made aware of specific education plans for their children that were based on a multidisciplinary assessment. Parents were also entitled to a hearing if they disagreed with the education plans created by their child's school.

Section 504, Rehabilitation Act of 1973

Section 504 of the federal Rehabilitation Act of 1973 prohibits discrimination against an otherwise qualified individual based solely on that person’s disability. This applies to all programs and activities receiving federal financial assistance or conducted by any executive agency or by the U.S. Postal Service. Public education agencies are further required to identify and evaluate children with disabilities and provide them with a free and appropriate public education. In order to determine if a student is eligible for Special Education services, a school site committee must convene and evaluate relevant information about the student. If the student is determined to be eligible, the committee must develop a written accommodation plan for the student describing the services to be provided. Parents and/or guardians are invited to participate and are notified in writing of the final accommodation plan that is determined. Under this act, parents also have the right to request a due-process hearing if they disagree with the school site committee’s recommendation.

Master Plan for Special Education (MPSE) (California Senate Bill 1870, 1974)

California’s statewide Master Plan for Special Education (MPSE) was passed in 1974 in response to federal court rulings and pending federal legislation. Similar to the federal Individuals with Disabilities Education Act (IDEA), MPSE ensures that all California children with exceptional needs from infancy to age 21 receive a free and appropriate public education. Under this law, districts must locate and evaluate all disabled children and educate them in regular classes when suitable or in the "least restrictive environment." Parents are included in developing an Individualized Educational Program (IEP) that describes the types of Special Education services for the student.

Individuals with Disabilities Education Act (IDEA) (PL 105-17, 1997)

The Individuals with Disabilities Education Act (IDEA) of 1997 was a reauthorization of the federal Education For All Handicapped Children Act of 1975. This law guarantees children with exceptional needs a free and appropriate public education and requires that each child's education be determined on an individual basis and designed to meet his or her unique needs in the least restrictive environment. It also establishes procedural rights for parents and children. In the 1997 reauthorization, additional requirements were added to the federal law. These include regular progress reports to parents, including children with disabilities in state and district assessments to the degree possible, and specifying that regular teachers be a part of the team that develops each child's Individual Education Program (IEP).

Special Education Reform Act (California Assembly Bill 602, 1997)

In 1997, California legislators passed Assembly Bill 602, which changed the funding structure for Special Education from one based on a per-qualifying-pupil calculation to a population-based method. Under this law, Special Education funds are allocated according to the total student population in a Special Education Local Planning Area (SELPA) rather than on the number of identified Special Education students. The individual SELPAs are then responsible for allocating funds for the services provided by the districts to the individual students. This legislation maintains the existing due-process safeguards, which guarantee and protect the rights of parents and students. It also maintains the existing requirement that Special Education funding be used solely for Special Education services. Expenditures for Special Education programs remain subject to state audit under this law.

Bilingual Education

Lau v. Nichols (1974)

Lau v. Nichols is the 1974 U.S. Supreme Court decision that required school districts to address the English language deficiencies of students. The court found that the lack of English language instruction in the San Francisco school system denied students who did not speak English "meaningful opportunity to participate in…public educational programs." Subsequently, the court ruled that the San Francisco school system had violated Section 601 of the Civil Rights Act of 1964 and the implementing regulations of the Department of Health, Education, and Welfare.

Proposition 227 (1998)

Proposition 227, passed in June 1998, requires all California public school classes to be taught exclusively in English. If parents of 20 students in a single grade request a waiver, then schools are permitted to provide a class in a language other than English for those students. If fewer than 20 students request a waiver, students must be allowed to attend a school where such classes are offered. The state has also been required to allocate $50 million a year for the next 10 years to adults who promise to learn English and tutor English learners (EL). At the same time the state is required to maintain the current level of funding for these students. Proposition 227 also allows parents and guardians to sue schools if they fail to adhere to the new law.

Title I

Title I (Elementary and Secondary Education Act, 1965)

Title I is a subsection of the federal government’s Elementary and Secondary Education Act (ESEA) of 1965. It was revised and reauthorized by Congress in December 2001 and signed into law in January 2002. Title I provides funding to those schools with the highest percentages of children from low-income families. Schools receiving Title I funds for the most part must use this money to aid pupils who are failing or at risk of failing to meet state standards. Beginning in 1998, to qualify for these funds states must have developed and adopted challenging content and performance standards and have an assessment system with multiple measures of student performance in place. The Title I legislation also calls for the adopted assessments to be aligned to the state standards and requires the inclusion of all pupils, including Special Education and bilingual students, in the statewide assessment. Many states have had difficulty fully complying with Title I legislation.

The 2001 reauthorization, included in the law called the "No Child Left Behind Act," increased the federal focus on disadvantaged students. As of fall 2002, every teacher paid for with Title I funding must be "highly qualified." Part of the increase in funding goes for targeted and incentive grants for programs for low-performing students. Districts may transfer other federal funds into (but not out of) Title I programs. Schools that have not improved for at least three years must use some Title I money to pay for supplementary education if parents request it.

Some of the Title I funds come in a block grant to be administered by the California Department of Education, which then sets guidelines. California has submitted for approval by the federal government a Title I spending plan that will determine the eventual impact on local schools.



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Last modified: February 12, 2004

Disclaimer: This website is the sole responsibility of Mike McMahon. It does not represent any official opinions, statement of facts or positions of the Alameda Unified School District. Its sole purpose is to disseminate information to interested individuals in the Alameda community.