1. Stateandlocalfinance.org Recent Changes in Education Finance Kim Rueben Urban Institute krueben@urban.org GRA 8/4/2014

2. Stateandlocalfinance.org Outline Overall trends in K-12 finance Changes since 2000 Who should decide funding options? Case study: California 2

3. Stateandlocalfinance.org 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 3

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5. Per Pupil Spending (2011) 5

6. Changing spending per pupil increased since 2000 6

7. Stateandlocalfinance.org 7 But more variation since the Great Recession

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12. Stateandlocalfinance.org Is California Harbinger for Country? Why California? – 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 12

13. Stateandlocalfinance.org School Finance System is Complex Total K-12 Revenues $62.3B Prop 98 72% Revenue Limits 52% Property Taxes 19% General Fund 33% Categoricals 20% Non Prop 98 28% Other State 7% General Fund 6% Special Funds 0.2% Lottery 1% Other Local 9% Federal 12% 13 2005-2006 Revenues Source: PPIC

14. Stateandlocalfinance.org 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 14

15. Stateandlocalfinance.org Recent activity to help address shortcomings Questions of – Adequacy – Equity – Transparency New proposals: – New funding formula – Lawsuit questioning tenure and teacher allocation 15

16. Stateandlocalfinance.org 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 16