Please note: California's new Local Control Funding Formula (LCFF), which was signed into law on July 1, 2013, significantly alters how the state funds its public schools and will eliminate most of the state's categorical programs. To learn more about the new funding system please see, Understanding the Local Control Funding Formula.
School districts receive local property taxes as part of their revenue limit income. The original formula was set by the Legislature in the early 1970s. When Proposition 13 passed in 1978, the state took over the allocation of property taxes as well as state aid. In the early 1990s, additional property taxes were shifted from cities, counties, and special districts to schools, thus reducing the amount of money needed from state taxes.
In some districts the amount of property taxes exceeds the revenue limit. For many years these districts could keep all of it and still receive the annual state "basic aid" of $120 per student (ADA) [or a minimum $2,400 per district] that is guaranteed by the California Constitution. In 2003-04 the Legislature decided that state categorical aid funds covered the $120, and the additional basic aid payment was discontinued. The number of these districts, called basic aid districts, has historically ranged from between 60 to 80, depending on the year. However, in recent years, the number of basic aid districts has surpassed 100. The numbers of these districts fluctuate because property tax revenues vary from year to year.
After Proposition 13, school districts could no longer ask voters to raise property taxes for schools. Proposition 13 did authorize special taxes (non ad valorem) on parcels of property if two-thirds of the electorate in the district approves.
For more information about these taxes, see the School District Bond and Tax Elections article.
State law allows communities to supplement school revenues by increasing their local sales tax. This requires a two-thirds vote and can be done only at the county level. All school districts in the county and the county government need to cooperate and agree on the allocation of revenues before a sales tax can be put before voters. This has only been done successfully in San Francisco.
Districts may lease or sell unused school buildings or school sites. The use of these funds is restricted to construction or deferred maintenance projects. A district with no deferred maintenance needs may use the money for other purposes.
School Foundations and Private Contributions
More than 600 districts have formed private foundations to receive contributions or grants from individuals and local businesses. The California Consortium of Education Foundations (CCEF) estimated that foundations in 2007 raised more than $200 million to support local schools, according to a fall 2008 CCEF survey.
Bonds and Developer Fees
Districts may raise capital funds from general obligation bonds and developer fees. Initially districts needed a two-thirds vote to sell general obligation bonds. These bonds may now be authorized by 55% of local voters if the school board chooses to accept additional requirements.
School districts are also able to tax just a portion of their districts--often new housing developments--by establishing a Mello-Roos Community Facility District or a School Facility Improvement District (SFID).
Under Mello-Roos, which requires two-thirds voter approval, property owners pay a special tax based on a formula. School districts have been able to establish Mello-Roos districts since 1983.
In 1998 school districts were first able to form SFIDs, which generate funds through general obligation bonds based on the value of the property. Legislators passed a law in July 2001 that allowed the voter-approval threshold for SFIDs to be either two-thirds or 55% (with added accountability provisions). Since then, SFIDs have become much more common than Mello-Roos districts and represent almost all facility districts established today.
For more information about general obligation bonds, see the School District Bond and Tax Elections article.
Districts may also levy developer fees on new construction or reconstruction within district boundaries. These funds may only be used for construction, acquisition, or major improvement of facilities.