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| Revenues: Sources and Amounts
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California’s public education system is supported primarily by state sales and income tax revenues and by local property taxes. These are supplemented with money from the federal government, the California State Lottery, and miscellaneous funds generated locally by school districts.
Annual funding proportions
The estimated proportions for 2005-06 are relatively typical of how operating funds for schools are generated, though changes from year to year can have an effect.
K-12 funding comes from five sources
State aid: comes mostly from California sales and income taxes.
Property taxes: are collected locally but allocated to schools based on a state-determined formula. (Cities and counties also receive a guaranteed amount of property tax revenue.)
Federal aid: is earmarked for special purposes, most notably Child Nutrition, Special Education, and No Child Left Behind (NCLB).
Local miscellaneous: includes such sources as community contributions, interest income, developer fees, and revenues from local parcel tax elections.
Lottery: a portion of the proceeds from the California State Lottery goes to school districts on a per-pupil basis, providing a modest per-pupil allocation to every district and to charter schools.
Proposition 98
The provisions of a voter initiative, Proposition 98, govern the minimum amount of funding the state must provide to K-12 education and community colleges. This funding is a combination of state monies and local property tax revenues. The amount of the guarantee is calculated each year using a set of formulas prescribed in law. Those formulas have changed somewhat over time, in part due to passage of Proposition 111 in 1990.
Since 1988, as a result of the passage of Proposition 98, the calculation of the minimum guarantee has been the most crucial factor in determining the amount of revenue school districts receive. For a fuller explanation of how the law works, see the free one-page EdSource publication, Proposition 98 guarantees a minimum level of funding for public schools.
Proposition 98 funds represent about 80% of revenues for schools
Proposition 98 funds represent about $8 out of every $10 allocated to K-12 education in California. As noted above, other sources of revenue—including the federal government, local miscellaneous sources, and the California State lottery—account for the remaining 20%.
By law, a minimum of 34% of the receipts from the California State Lottery must be distributed to public schools, colleges, and universities. The money, which is distributed on a per-pupil basis, is to be used only for instructional purposes, not for such things as facilities and research. In 2000 voters approved Proposition 20, which required that, going forward, half of any increases in education’s share of the lottery revenue be used for instructional materials.
For 2005-06, districts received about $146 per pupil from this source, with $25 of that amount to be used only for instructional materials.
The local miscellaneous category of funds annually represents about 6% of the total revenues for K-12 schools. This funding is separate from the local property tax revenues the state controls. It comes from sources that are locally controlled, including such things as donations from parents, income from the lease or sale of district property, cafeteria sales, and interest income.
For less than 20% of school districts in the state, an important source of local miscellaneous revenue is a voter-approved local parcel tax. These are special taxes not related to property value (non-ad valorem). Districts can put these measures on the ballot at their discretion. But they require a two-thirds voter approval which makes them difficult to pass.
Facilities Funding
All of the funding sources noted above provide operating revenues for schools. The other facet of education revenues is the funding available to build and maintain school buildings. A small portion of operating funds is set aside for maintenance, but most revenues for this purpose come from three other sources: state bonds, locally-approved general obligation bonds, and developer fees.
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