Categorical School Finance

Over the past 30 years, a combination of court rulings, legislative enactments, and voter initiatives has made dramatic changes in the landscape of education governance in California. The presumption of local control, a system based on local electoral accountability, has been superseded by a system of centralized, administrative accountability. Among the most sweeping changes are those that affect the way in which the state’s public schools are financed. Until 1980, paying for elementary and secondary education was largely a local matter. Local property taxes paid most of the bills. The state provided some funds for special purposes and guaranteed a funding floor. However, the state had very little to say about how those monies could be spent. The present system is much different. How much money a district gets and how that money is spent is decided primarily in the legislature, not in local communities by school boards.

This paper examines changes in California’s school finance system over the past 35 years. It focuses specifically on the growth of categorical program funding. The study assesses the nature and magnitude of changes, the causes of those changes, the significance of those changes for the capacity of schools to provide high quality educational services, and proposes alternative models to the existing system of categorical funding. The specific context for assessing the changes in the structure of school finance is its impact on equity, adequacy, flexibility and choice, efficiency, predictability and stability, rationality, and accountability.