Understanding the Incentives in California’s Education Finance System


William Duncombe


John Yinger

Year of Publication: 
Getting Down to Facts

California’s centralized education finance system differs from other states’ systems in several ways

The education finance system in California is constrained in two fundamental ways. On one side, Proposition 13 limits the local property tax rate and restricts the growth in assessed values for property. On the other side, court rulings from the Serrano v. Priest funding equity case have limited differences across districts in general-purpose revenue per pupil, defined as unrestricted state aid plus property taxes.

The Proposition 13 limit is binding because school districts have no other major sources of revenue. As a result, state policymakers largely determine the revenue available to a school district. The Serrano restriction is less binding for two reasons. First, it does not apply to state categorical aid, which can—and does—vary widely across districts. Second, now that the state has met the equalization guidelines set down by the court, it is free to implement additional education finance reforms.

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APA Citation

Duncombe, W., & Yinger, J. (2007). Understanding the Incentives in California’s Education Finance System. Getting Down to Facts.