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SCHOOL FINANCE

FACTS JUNE 2010

Race to the Bottom? California’s Support for Schools Lags the Nation

B
y almost any measure California ranks near or at the bottom with respect to funding for public schools relative to
other states. Although such comparisons do not take into account how much it actually costs to provide a quality
education to California’s students, they do provide one measure of whether California spends an appropriate
amount on public schools. California’s spending for public education has generally lagged that of the nation. The spending
gap widened after the passage of Proposition 13 in 1978, narrowed from the late 1990s through 2001-02, and has grown
substantially since 2006-07. Moreover, California’s system of financing schools – which relies heavily on state funding and
relatively less on local property taxes – differs from the pattern of the nation as a whole. This is largely due to Proposition
13’s limits on the local property tax and other local revenues, as well as measures enacted after Proposition 13 to help
schools and local governments cope with the loss of local revenues. This School Finance Facts compares school spending,
revenues, staffing, and students in California to the rest of the US and shows that California’s education spending is
falling behind.

How Do California’s Table 1: California’s Schools Lag Behind


Education Spending and Other States on a Number of Measures
Staffing Levels Compare California
Rank California Rest of US
to Other States?
K-12 Spending Per Student (2009-10)* 44 $8,826 $11,372
California’s spending for public K-12 Spending as a Percentage of Personal Income
schools lags that of the rest of the US.1 46 3.28% 4.25%
(2008-09)*
California’s schools: Number of K-12 Students Per Teacher (2009-10)* 50 21.3 13.8

• Ranked 44th among the 50 states Number of K-12 Students Per Administrator (2007-08) 46 358 216

in K-12 spending per student, Number of K-12 Students Per Guidance Counselor
49 809 440
(2007-08)
spending $2,546 less per student
than the rest of the US in 2009- Number of K-12 Students Per Librarian (2007-08) 50 5,038 809
10 (Table 1). To reach the level of * 2008-09 and 2009-10 data are estimated.
spending per student of the rest of Note: “California Rank” and “Rest of US” exclude the District of Columbia. Spending per student and number of students
per teacher are based on Average Daily Attendance (ADA). Number of students per administrator, guidance counselor, and
the US, California’s schools would librarian are based on statewide enrollment.
Source: National Education Association, National Center for Education Statistics, and US Bureau of Economic Analysis
have had to spend an additional
$15.4 billion in 2009-10, an
California has more students per school staff than the rest of the US. California’s
increase of 28.9 percent.
schools:
• Ranked 46th in education spending
• Ranked 50th in the nation with respect to the number of students per teacher.
as a percentage of personal
California averaged 21.3 students for each teacher in 2009-10, more than 50
income – a measure that reflects
percent larger than the rest of the US, which averaged 13.8 students per teacher.2
the size of a state’s economy and
the resources available to support • Ranked 46th in the nation with respect to the number of students per
public services. To reach the level of administrator.3 California’s schools averaged 358 students for each administrator
the rest of the US, California would in 2007-08, compared to 216 students for each administrator in the rest of the US.
have had to spend an additional
$15.3 billion on education in 2008- • Ranked 49th in the nation with respect to the number of students per guidance
09, an increase of 29.5 percent. counselor. California’s schools averaged 809 students for each guidance counselor

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in 2007-08, while the rest of the US
averaged 440 students per guidance Figure 1: California's K-12 Spending Per Student Lags Behind
counselor. That of the Rest of the US More Than at Any Time in 40 Years
• Ranked 50th in the nation with $600

respect to the number of students

Per Student in the Rest of the US (2009-10 Dollars)


California's Spending Per Student Minus Spending
$200
per librarian. California’s schools ($200)
averaged 5,038 students for each
($600)
librarian in 2007-08 – more than
six times that of the rest of the US, ($1,000)

which averaged 809 students per ($1,400)


librarian. ($1,800)

California’s Spending for


($2,200)

($2,600)
Schools Is at a Historic Low
($3,000)
California’s spending for education has

1970- 70
1971- 71
1972- 72
1973- 73
1974- 74
1975- 75
1976- 76
1977- 77
1978- 78
1979- 89
1980- 80
1981- 81
1982- 82
1983- 83
1984- 84
1985- 85
1986- 86
1987- 87
1988- 88
1989- 99
1990- 90
1991- 91
1992- 92
1993- 93
1994- 94
1995- 95
1996- 96
1997- 97
1998- 98
2099- 09
2000- 00
2001- 01
2002- 02
2003- 03
2004- 04
2005- 05
2006- 06
20 07- 7
2008-008
09 9*
0*
1969- 7

-1
lagged behind the rest of the US since

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at least the early 1980s, as measured * 2008-09 and 2009-10 estimated.

by a number of indicators. Currently, Note: Rest of the US excludes the District of Columbia.
Source: National Education Association
California’s school spending is at its
lowest level in 40 years compared to the
rest of the US, according to at least two
measures. Specifically: Figure 2: School Spending as a Share of the Economy Has
Dropped in California While Rising in the Rest of the US
• State spending per student trailed
that of the rest of the country in 4.5%
K-12 Spending as a Percentage of Personal Income

4.4%
2008-09 and 2009-10 by more than 4.3%
$2,400, a larger disparity than at any 4.2%
4.1%
point in the past 40 years in inflation- 4.0%
adjusted dollars (Figure 1). By 3.9%
contrast, California’s school spending 3.8%
3.7%
per student during the 1970s was 3.6%
close to, or even higher than, that of 3.5%
3.4%
the rest of the US. Since 1981-82, 3.3%
however, California consistently has 3.2%

spent less per student than the rest 3.1%


3.0%
of the US.
19 0- 70
19 1- 71
19 2- 72
19 3- 73
19 4- 74
19 5- 75
19 6- 76
19 7- 77
19 8- 78
19 9- 89
19 0- 80
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19 2- 82
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19 5- 85
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19 9- 99
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20 9- 09
20 0- 00
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20 2- 02
20 3- 03
20 4- 04
20 5- 05
20 6- 06
20 07- 7
08 08
9*
19 9- 7

-0
6
7
7
7
7
7
7
7
7
7
7
8
8
8
8
8
8
8
8
8
8
9
9
9
9
9
9
9
9
9
9
0
0
0
0
0
0
0
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• The gap between California’s school


California Rest of US Excluding DC
spending as a share of the state’s
economy – measured by the state’s * 2008-09 estimated.
Source: National Education Association and US Bureau of Economic Analysis
personal income – and that of other
states was larger in 2008-09 than at
any other time in the past 40 years share of the state’s economy has declined sharply since 2006-07, while that of the
(Figure 2). California’s spending on rest of the US has increased.
schools as a share of its personal
income has lagged behind the rest • California has more students per teacher than the rest of the US, and the gap is
of the US since at least the 1970s. larger today than at any time since 1996-97 (Figure 3). In 1971-72, California had
In 1977-78, immediately prior to 3.2 more students per teacher than the rest of the US. The gap widened over the
the passage of Proposition 13, next two decades, with as many as 8.7 more students per teacher in California
California’s school spending equaled in the mid-1990s, but the gap narrowed after the state implemented the Class
3.76 percent of state personal Size Reduction Program for grades K through three (K-3 CSR) in 1996.4 California
income – the total income of all reduced financial penalties for schools that participate in the K-3 CSR Program
Californians – while that of the rest of in 2009, which led many schools to increase class sizes. In 2009-10, California
the US equaled 4.20 percent. During classrooms had 7.5 more students per teacher and were more than 50 percent
the 1980s and 1990s, California’s larger than those in the rest of the US – the largest gap in more than a decade.
school spending as a percentage of
personal income declined, dipping California Has More Students and Greater Challenges
as low as 3.17 percent in 1983-84. More students attend school in California than in any other state. In 2009-10,
While the gap narrowed somewhat 6.0 million students attended public schools in California. In contrast, 4.5 million
in the late 1990s and early 2000s, students attended Texas’ public schools in the same year. Moreover, California’s
California’s school spending as a children disproportionately come from low-income families in comparison to the US

2
average, and the state has by far the
lowest share of children with English- Figure 3: Class Sizes in California Have Grown Since 2006-07 and
speaking parents in the nation. More Were More Than 50 Percent Larger Than in the Rest of the US in 2009-10
than four out of 10 California children
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(41.3 percent) come from families with
incomes below twice the federal poverty 25
K-3 Class Size Reduction

Number of K-12 Students Per Teacher


Program implemented in 1996
line – $34,692 for a single parent with 23
two children in 2008 – and more than
one-third (37.2 percent) of California 21

children come from families whose 19


parents do not speak English fluently.5
17

How Are California’s School 15

Dollars Spent? 13

7 0
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20 07- 7
08 08
09 9*
0*
California spends a larger share of its

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20 - 0
-1
6
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education dollars on instruction and
student services than do schools in the California Rest of US Excluding DC
rest of the US. In 2007-08, California’s * 2008-09 and 2009-10 estimated.
Note: Number of K-12 students per teacher is based on Average Daily Attendance (ADA) of pupils.
schools spent 95.3 cents of each Source: National Education Association

education dollar on instruction and


student services, while schools in the
rest of the US spent 93.8 cents of each
Figure 4: California's K-12 Schools Spend a Smaller Share on
dollar on the same functions (Figure 4).
In contrast, California’s schools spent 4.7 Administration Than Do Schools in the Rest of the US, 2007-08
Spending by Function as a Percentage of K-12 Spending

cents of each dollar for K-12 education on 80%


administration, food services, and other 70% 67.0% 65.7%
expenses, while schools in the rest of the 60%
US spent 6.2 cents of each education
50%
dollar for the same functions. California’s
relatively high level of classroom spending 40%
28.4% 28.2%
is in part a reflection of the fact that 30%

teacher salaries are higher, on average, in 20%


California – $70,458 in 2009-10 – than 10% 4.1%
3.8%
those in the nation as a whole ($55,350).6 0%
0.9% 2.1%

Instruction Student Services Food Services and Administration


Where Does the Money for Other Expenses

California’s Public Schools California Rest of US Excluding DC

Come From? Note: K-12 spending does not include capital outlay expenditures or interest on long-term debt. Student services include operation and maintenance, student
support services, school site administration, and transportation. Administration includes expenditures for boards of education and district administration.
Instructional expenditures include teacher salaries and benefits, instructional staff support, supplies, and purchased instructional services. Percentages do not sum
California’s schools have received a to 100 due to rounding.
Source: National Center for Education Statistics
majority of their dollars from the state
since 1978-79, while they received the
majority of their revenues from local
sources for most years between 1969-70 Figure 5: California's K-12 Schools Received a Larger Share of Funds
and 1977-78.7 In 2009-10, for example, From the State Than Did Schools in the Rest of the US in 2009-10
California’s schools received 55.0 percent
State Revenues as a Percentage of Total Revenues for K-12 Education

of their revenues from the state and 31.2 60%


55.0%
percent from local sources, primarily local
50%
property taxes. In 1975-76, California’s 44.9% 44.4%
schools received 35.3 percent of their
40%
revenues from the state and 53.7 percent 35.3%

from local sources (Figure 5). In contrast,


30%
schools in the rest of the US received
roughly the same share of their dollars 20%
from state sources in 2009-10 (44.4
percent) as they did in 1975-76 (44.9 10%
percent) and a slightly smaller share of
their dollars from local sources in 2009- 0%
10 (45.8 percent) as they did in 1975-76 1975-76 2009-10*
(46.9 percent). California Rest of US Excluding DC

States use different approaches to fund * 2009-10 estimated.


Source: National Education Association
education. In some states, schools receive
3
a larger share of their dollars from the
local property tax, while in others, schools Figure 6: After 1977-78, California's K-12 Schools Received a Larger Share of
receive a larger share from state funds. Funds From the State and a Smaller Share From Local Property Tax Revenues
In 2009-10, California was one of 16
states in which state funds accounted for 80%

55.0 percent or more of K-12 education 70%


revenues.8

Percentage of Total K-12 Funding


60%

California’s schools received a greater 50%


share of their dollars from federal sources
40%
in 2008-09 (15.1 percent) and 2009-10
(13.7 percent) than at any point in the past 30%

40 years. In contrast, California’s schools 20%


received an average of 8.7 percent of their 10%
revenue from federal sources between
1969-70 and 2007-08. The recent 0%

7 0
7 1
72 2
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20 8- 0 8
09 9*
0*
increase in federal dollars as a share of

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19 - 9
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20 1- 0
20 2-0
20 3-0
20 4- 0
20 5-0
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0 0
-1
6

0
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California’s school revenue is due in part
to resources provided by the American Local State Federal

Recovery and Reinvestment Act of 2009 * 2008-09 and 2009-10 estimated.

(ARRA). However, most of the dollars the Source: National Education Association

ARRA provides to schools are temporary,


and a large majority of the funding will end to schools and community colleges and reduced state spending for schools on a dollar-
in 2011. While federal dollars comprise for-dollar basis. The Legislature enacted similar shifts on a temporary basis in 2004-05
a relatively small share of total California and 2005-06. Proposition 1A, approved by the voters in November 2004, severely limited
school funding, California’s schools rely on the Legislature’s ability to enact similar shifts in the future.12
federal funds to a greater degree than do
In most states, school districts have the authority to adjust local property tax rates to
schools in most other states.
raise the resources needed to support local schools. California’s Proposition 13 capped
the local property tax rate at 1 percent, and Proposition 1A of 2004 “locked in” the
Why Is California’s System of
allocation of revenues among schools, cities, counties, and special districts.13 Several
School Finance So Different? ballot measures, including Proposition 13 and Proposition 218 of 1996, limit school
Local revenues account for a relatively districts’ ability to raise additional revenues at the local level. Proposition 218 requires
small share of the total funds received local school districts to submit tax increases to the voters for approval by a two-thirds
by California’s schools largely because of vote, except for property tax increases dedicated to repayment of school bonds, which
Proposition 13.9 In 1977-78, immediately can be approved by 55 percent of local voters.14
prior to the passage of Proposition 13, California’s greater reliance on state dollars also reflects the impact of a series of
local revenues provided nearly half (47.1 court decisions, beginning with the 1976 California Supreme Court decision in Serrano
percent) of the funding for California’s v. Priest, which found that schools’ dependence on local property taxes violated the
public schools. By the early 1980s, equal protection rights of students in districts with relatively low property wealth, since
local sources provided about one out the same property tax rate generated less revenue in low-property-tax-wealth districts
of every four dollars received by public than it did in high-property-tax-wealth districts. The state’s response to these decisions
schools (Figure 6). This shift reflects state established a limit on the combined state and local revenues received by a school district
legislation aimed at cushioning the impact and used state funds to help equalize the funding available to high- and low- property-
of Proposition 13 on local governments. wealth districts.15
Proposition 13 reduced property tax
revenues, which are distributed to schools Conclusion
and local governments, by 53 percent.10 California’s budget problems have focused attention on how the state’s schools
The Legislature responded by shifting compare to rest of the US. California’s schools spend fewer dollars per student and
property tax revenues from schools and have substantially more students per school staff than schools in other states. A recent
community colleges to cities, counties, and complaint filed in Alameda County Superior Court cited these data to demonstrate that
special districts in 1979. In turn, the state the state has not fulfilled its constitutional duty to fund its education finance system
increased its share of funding for schools sufficiently.16 Although policymakers face significant challenges to achieving budget
and community colleges.11 This shift was solutions, more reductions to state education spending could widen the gap between
partially reversed on a permanent basis California’s spending on schools and that of the rest of the US. Given that, by some
in the early 1990s in response to state measures, California’s education spending is at its lowest level in 40 years compared to
budget shortfalls. The property tax shifts of the rest of the US, California’s schools will face significant challenges to closing the gap
the early 1990s reallocated property taxes even without further spending reductions.
from cities, counties, and special districts

4
ENDNOTES
1 Unless otherwise noted, rankings and national data exclude
the District of Columbia.
2 CBP analysis of National Education Association data.

3 CBP analysis of National Center for Education Statistics data.


Administrators include school site and district administrators.
The most recent year for which National Center for Education
Statistics data are available is 2007-08.
4 The K-3 Class Size Reduction Program provides school districts
with incentive funds to reduce class sizes in grades K through
3 to 20 or fewer students per teacher. Districts can also receive
incentive funds to reduce class sizes in ninth-grade English and
in one additional ninth-grade subject through the Morgan-Hart
Class Size Reduction Act adopted in 1989.
5 “Quality Counts 2010,” Education Week (January 14,
2010), downloaded from http://www.edweek.org/media/ew/
qc/2010/17sos.h29.chance.pdf on June 30, 2010. The federal
poverty line refers to the US Census Bureau’s poverty threshold.
6 National Education Association, Rankings & Estimates:
Rankings of the States 2009 and Estimates of School Statistics
2010 (December 2009), p. 92. The national average for teacher
salaries includes the District of Columbia and California.
7 The CBP did not analyze National Education Association data
for years prior to 1969-70.
8 CBP analysis of National Education Association data.

9 Proposition 13 limited property tax rates to 1 percent of a


property’s assessed value and replaced the practice of annually
reassessing property at full cash value for tax purposes with
a system based on cost at acquisition. Under Proposition 13,
property is assessed at market value for tax purposes only
when it changes ownership, and annual inflation adjustments
are limited to no more than 2 percent. For a comprehensive
discussion of Proposition 13, see California Budget Project,
Proposition 13: Its Impact on California and Implications for
State and Local Finances (April 1997).
10 California Budget Project, Proposition 13: Its Impact on
California and Implications for State and Local Finances (April
1997), p. 6.
11 California Budget Project, Proposition 13: Its Impact on
California and Implications for State and Local Finances (April
1997), pp. 2-3.
12 The July 2009 budget agreement suspended Proposition 1A
of 2004 and transferred $1.9 billion in property tax revenues
from cities, counties, and special districts to schools. This
amount is a loan, which must be repaid pursuant to terms in
Proposition 1A of 2004.
13 Rates above 1 percent are allowed for bond measures
approved by local voters.
14 Proposed legislation, SCA 6 (Simitian), would change the
threshold for voter approval of parcel taxes to 55 percent from
the current two-thirds vote requirement.
15 For a discussion of the Serrano case and subsequent efforts
to address disparities in school funding, see Paul M. Goldfinger
and Jannelle Kubinec, Revenues and Revenue Limits: A Guide
to School Finance in California (School Services of California,
Inc.: 2008).
16 On May 20, 2010, a group of California students and school
districts filed Robles-Wong v. California.

Jonathan Kaplan prepared this School Finance


Facts. Support for this School Finance Facts is
provided by a grant from the William and Flora
Hewlett Foundation. The California Budget
Project (CBP) was founded in 1994 to provide
Californians with a source of timely, objective,
and accessible expertise on state fiscal and
economic policy issues. The CBP engages in
independent fiscal and policy analysis and
public education with the goal of improving
public policies affecting the economic and
social well-being of low- and middle-income
Californians. Please visit the CBP’s website at
www.cbp.org.