Paul Bruno, Sawyer Burgess, Sara Hinkley, Cory Koedel, Jonathan Kaplan, Rucker C. Johnson, Austin Land, Efrain Mercado, Sean Tanner, Jeff Vincent, Jason Willis
California’s K-12 school finance system has undergone substantial changes over the past two decades. The Local Control Funding Formula (LCFF), adopted in 2013, shifted significant spending authority to districts, collapsing dozens of categorical programs into supplemental and concentration grants directed toward students from low-income families, English learners, and foster youth. Combined with sustained state revenue growth after the Great Recession ended, recent years have seen California school districts move from below-average funding nationwide to funding that is substantially above average nationally. Still, California’s school finance system faces several significant challenges going forward alongside notable opportunities to overcome them.
This brief draws on six Getting Down to Facts III technical reports to assess California’s school finance system, highlighting the gains made under LCFF, the fiscal pressures that may limit future progress, and the opportunities to continue progress.
Key Findings
1. California’s school districts have reached historically high funding levels, with important caveats. Growth in federal, state, and local revenues has lifted district funding to historic highs and pushed California above the national average in per-pupil spending. However, those gains look more modest when adjusted for the state’s high labor costs or the size of its economy.
2. Additional resources are benefiting students, though some inequities, data limitations, and system misalignment remain. Higher funding levels have improved student outcomes, and evidence suggests that preschool, transitional kindergarten, and K–12 spending reinforce one another when students experience them in sequence. At the same time, inequities remain in areas such as facilities funding, data limitations make it difficult to verify the full extent to which resources are reaching students with the greatest needs, and misaligned systems are not able to take full advantage of increased funding allocations.
3. Cost pressures from special education and employee benefits are consuming a growing share of district budgets. Special education and employee benefit spending have both more than doubled since 2004–05 and now absorb a large share of district budgets. This helps explain why growth in areas such as general education spending and teacher salaries has been much slower.
4. Constraints on revenues lead to volatility and uncertainty in California’s school funding system that limit efficient investment and budgeting. Because districts depend heavily on state revenues tied to volatile personal income taxes, they face substantial uncertainty even when funding levels are high. Declining attendance, the pending expiration of Proposition 55, and unfunded retiree liabilities compound these risks.
