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How Schools Are Funded

Sources of Funding and Funding Allocations

Generally, federal contributions account for about 10% of education funding, 60% are from the state (business and personal income taxes, sales taxes, and some special taxes), less than 23% come from local property taxes, 6% from local revenue (like parcel taxes), and less than 2% come from the California Lottery (roughly $150 per student).

Of the total funding, one-third is set aside for categorical programs (earmarked for special programs and needs of children in the district for which the district qualifies like K-3 Class Size Reduction, known as CSR, and Special Education). Categorical funding can rarely be changed unless specified by the California legislature. For example, penalties for CSR funding have been relaxed in recent years because of decreased state income, though funding is still only available for 20 students/class.

The remaining two-thirds of school district funding is classified as “general purpose”, also known as “revenue limit” funding. This funding, based on ADA (Average Daily Attendance), is more flexible and can be spent as a district deems most appropriate to its needs (unlike categorical funds, which are mandated and inflexible). Unfortunately, if a region’s property taxes increase, the additional funding does not go to the schools; when property taxes increase, the state reduces its funding proportionately.

Revenue limits are roughly set to what each district spent on general education programs in 1972 and have been adjusted for inflation since then. While the vast majority of school districts only receive revenue limit district funding, a small amount of districts are classified as Basic Aid. In these school districts, property taxes exceed the revenue limit, and districts are allowed to keep the overflow. These different funding mechanisms account for some of the large swings, as seen in the Snapshot of School Data.

Need for Adequacy and Equity

One district in Santa Clara County receives $5425 per student, while another comparable district with similar ADA receives $9849. Might $9849 be an adequate level of funding for all its students? Does it not make perfect sense that California support a funding system that adequately and equitably provide for each and every student?

Solution Models

Maryland has set a great example with its Bridge to Excellence Act of 2002, which uses a simple yet effective formula to ensure its education system establishes performance standards, provides funding to support those standards, and holds students, schools, and districts accountable when they fail. Specifically, it sets a base level for each student, then adds multipliers for students with: special education and free/reduced lunches needs, and limited English proficiency. To make up the difference, Maryland added a 34 cent sales tax to cigarettes. Over the six years of implementation of the program, the Bridge to Excellence program reinvented its education system with great success.

Similar studies have been conducted in California, specifically, the privately-funded Institute for Research on Education Policy and Practice out of Stanford University presented solutions in its “Getting Down to Facts: School Finance and Governance” study. While the 23 studies do not specifically make policy recommendations, they do point out that increased funding alone is not the solution: how that money is utilized, is. “School governance in California is characterized by a hodgepodge of restrictive rules and regulations that often hinder, rather than promote, student achievement,” state the findings. “Pre-dating the implementation of modern accountability systems, the current finance structure has never been updated to align with the states accountability system, nor redesigned to help local officials meet student performance goals”.

California needs to make some serious changes by not only increasing funding, but also by investigating how best to spend those funds, increase flexibility of spending by its districts and administrators, effectively recruit and develop great teachers (and allow principals a less cumbersome method of getting rid of those that aren’t), and create long-term studies of students that effectively measure how dollars directly translate to student achievement, something that is currently absent from our system. Without this analysis, more effective schools, standards, and funding are impossible. Long-term, California will not be able to provide a local workforce that sustains its place as the 8th largest economy in the world. As IREPP perfectly summarizes, we will “fail our children, our families, and the future of California.”

EdSource - http://www.edsource.org/pub_QA_FinanceSyst06.html and http://www.edsource.org/iss_fin_sys_revlimits.html