Recent Changes in Education
Finance
Kim Rueben
Urban Institute
krueben@urban.org
GRA 8/4/2014
Stateandlocalfinance.org
Outline
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Overall trends in K-12 finance
Changes since 2000
Who should decide funding options?
Case study: California
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Background
• Spending per pupil has been growing over time
• In part because states have taken a larger role in education
finance to improve equity in resources and to improve
educational outcomes across districts
• Increased state role usually financed through increased state
taxes such as income and sales taxes
• Lowering reliance on the property tax for schools
• Long-run trend has changed somewhat recently during the
last two recessions
– Shift back to property taxes in 2002-2003
– Larger federal role with ARRA
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14,000
12,000
$ / Pupil (2011)
10,000
Local Per Pupil ($) (2011 Dollars)
8,000
State Per Pupil ($) (2011 dollars)
Federal Per Pupil ($) (2011 Dollars)
6,000
4,000
2,000
0
School Year
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Per Pupil Spending (2011)
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Changing spending per pupil increased
since 2000
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But more variation since the Great Recession
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Is California Harbinger for Country?
• Why California?
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Large state with diverse population
Lots of children
A lot of recent activity
I know it 
• California Education Finance
– Limited local revenue
– A lot of state funding and rules
– Complicated because of 40 years of lawsuits and
ballot initiatives
• Information from Weston/PPIC
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School Finance System is Complex
2005-2006 Revenues
Total K-12
Revenues
$62.3B
Prop 98
Non Prop 98
72%
28%
Revenue Limits
Categoricals
Other State
Lottery
Other Local
Federal
52%
20%
7%
1%
9%
12%
Property Taxes
General Fund
General Fund
Special Funds
19%
33%
6%
0.2%
Source: PPIC
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California’s Old Funding “Formula”
• Base: revenue limits
– Each district has unique per-pupil funding amount
based on 1972-73 expenditures
– At least 20 adjustments, largely based on history
– Separate formulas for charter schools and rural
schools
• Supplemental funding: categorical programs
– At least 100 other programs
– No clear or consistent allocation formula
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Recent activity to help address
shortcomings
• Questions of
– Adequacy
– Equity
– Transparency
• New proposals:
– New funding formula
– Lawsuit questioning tenure and teacher allocation
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Changes adopted during and after
recession
• During recession categorical groups combined – school districts
given more flexibility (2009)
• Increased funding levels with passage of Proposition (30) temporary
tax system
– Expected to increase $1800 between 2016-2017 and 2013-14
• Local Control Funding Formula (July 2013)
– Weighted student formula
– Increase revenues per pupil for disadvantaged students (low-income,
ELL, foster youth)
– Additional funds for districts in which more than 55% of students are
disadvantaged
• Vergara v. California – questioning state’s teacher tenure, dismissal
and layoff rules. Court found for plaintiffs but in appeal
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