Three Decades of Financial Earthquakes Rattle California Education

1971: School finance reform in California begins with the Serrano v. Priest decision. The California Supreme Court rules that the state’s school finance system is unconstitutional, because it bases large differences in school district spending per pupil on property values, thereby violating the equal protection clause of the 14th Amendment. In response, the state legislature limits the amount that school district revenues from property values can vary from district to district.

1978: California voters pass Proposition 13, which limits property taxes to 1 percent and caps annual increases in property taxes. In response, the state legislature passes Assembly Bill 8, under which the state takes control of school district funding.

Unintended consequences: Because resources are equalized across districts, local voters have less incentive to spend so much on public schools. Statewide, school spending per pupil declines relative to that in other states, which likely leads to larger class sizes and, perhaps, to poorer achievement in California compared with that in other states. District funding becomes subject to fluctuations in the state economy.

1982–83: Spending per pupil in California dips below the national average.

1988: California voters pass Proposition 98, which guarantees to public schools (from kindergarten through community college) a minimum percentage of the state’s budget.


1996: The California legislature passes a class-size reduction initiative (Senate Bill 1777), providing $650 per student for each K–3 classroom with 20 or fewer students. The incentive later grows to $800 per student. The legislation also allots money to build 8,000 additional classrooms.

Unintended consequences: The cash incentive creates a windfall for schools with fewer minority students and lower percentages of low-income students than other schools, counteracting the redistributive efforts of the state’s school finance reform. At low-income schools, there are inadequate supplies of available classrooms and of qualified teachers. Overall teacher quality declines, while the quality gap increases between low-income and high-income schools. Many schools transfer space and money from other programs to accommodate smaller classes.

1998: California voters pass Proposition 1A, a state bond measure earmarking $6.7 billion for school construction and repairs.

2002: California voters approve nearly $10 billion in local bonds for schools and pass Proposition 47, a state bond measure that allocates an additional $11.4 billion for school construction and renovation. Despite the passage of several state and local bonds, construction spending per pupil still trails the national average.

Three Decades of Financial Earthquakes

Lower Student Achievement Might Very Well Be an Aftershock

There are no reliable longitudinal data on student achievement in California that reach back to the 1970s, thus preventing a direct comparison between school funding and student achievement. However, RAND researchers found that California students taking national achievement tests from 1990 to 2003 performed, on average, below those in every state except Louisiana and Mississippi. Moreover, the low performance in California was evident among students of all races and ethnicities relative to students in other states with similar family characteristics.

The figure below compares the average scores of students across the country and in the five largest states. The data combine reading and mathematics scores of 4th graders and 8th graders from 1990 to 2003 on the National Assessment of Educational Progress.

RAND researchers have concluded that the very low scores in California reflect not just student or family characteristics but also school characteristics. Relatively low scores would be expected given relatively low funding levels, relatively inadequate facilities, and students with relatively great needs.

The figure compares the average scores of students across the country and in the five largest states.
Source: California’s K–12 Public Schools: How Are They Doing? Stephen J. Carroll, Cathy Krop, Jeremy Arkes, Peter A. Morrison, Ann Flanagan, RAND/MG-186-EDU, 2005, 256 pp., ISBN 0-8330-3716-1.