Deregulation of School Aid in California

California’s school finance system is notoriously complex. Its critics have long advocated for simplifying funding streams and returning authority to local school boards. In 2009 the state partially acquiesced, giving districts significant flexibility over the funds from 40 categorical programs. This flexibility provides an opportunity to see how districts respond when released from categorical funds. However, Tier 3 flexibility was adopted during a severe budget crisis, and most districts have been trying simply to maintain core services. So it is difficult to isolate the discrete impact of this policy change. In this report, Jennifer Imazeki, Professor of Economics at San Diego State University, highlights preliminary results from an ongoing study of district response to this increased categorical flexibility, generally referred to as Tier 3.