How Is California’s Education Budget Created?

The California State budget is complex, to say the least. How do we, as parents, help to understand it especially as it relates to education funding?  Our own former State President, Carol Kocivar, wrote the following article for Ed100 last week to help us understand. Click here to read it on the Ed100 website.

Every year, California creates a budget for public education. How does that work, actually? Who creates and influences it, and when are the decisions made? How can you get involved and have an influence?

…and how has the Pandemic changed things?

The Basics

We’ll get to the Governor’s budget proposal for 2021-22 in a moment, but first let’s back up a little. Generally speaking, how much money does education get in the state budget, and what money is and isn’t included in that budget?

The state operates on a fiscal year that begins each July. In January, the governor proposes a state budget based on a forecast of how much the state will take in through taxes. Most of the taxes collected are accounted as part of the state’s General Fund, which next year will weigh in at about $158 billion according to the state Legislative Analyst Office (LAO). Other portions of the budget are forecast to bring the state’s total to about $220 billion.

The portion of the of the general fund that goes to K-12 schools and public community colleges each year is determined by formulas that voters enshrined in the state constitution by passing Proposition 98. Oversimplifying a lot, this formula usually requires that about 40% of the state General Fund should go to education. The formula includes many factors, including how well the economy is doing, whether there are more or fewer kids in public school, and changes in the cost of living.

In theory, the legislature can allocate more of the general fund to education than this formula requires. In practice, it rarely does so. The governor’s proposed budget for 2021-22 allocated about 36% to education, directing funds to coronavirus relief.

What funds are not included in the General Fund?

Although the state General Fund is the biggest source of funding for California’s K-12 education system, there are two other significant sources to know about. Property taxes usually amount to somewhat less than a quarter of the money for K-12 education. Federal funds usually amount to about less than a tenth.

Education Budgets in the Pandemic

The Pandemic disrupted education funding. Unlike the federal government, which routinely operates at a deficit, California is obligated by its constitution to balance its budget every year… at least on paper. Last year, the state budgeted for the worst case scenario. It hoped that the federal government would come to the rescue to avoid cuts and help balance the budget. When that didn’t happen, the state delayed payments to school districts, essentially borrowing from them by writing IOUs (deferrals) instead of checks.

Although 2020 brought plenty of hardship, the worst predictions for the economy and the stock market did not come to pass. Stocks advanced to new highs, supporting record tax receipts. In January 2021 the state Legislative Analyst Office (LAO) reported that total taxes collected in the months following the shelter in place order exceeded expectations by 22%.

In 2019-20, average spending per K-12 student in California grew to more than $17,000, of which about $12,000 was state “Proposition 98” funding. Education expenditures in 2020-21 were supported by the first federal relief package for COVID-19. Responding to the Pandemic involved significant new expenses for districts, which had to provide for distance learning. The real impact of the Pandemic on spending per student will take time to work out.

How is the education share of the budget divided?

As discussed above, at the state level the amount of money coming into the education budget each year is mainly determined by the whims of the economy, filtered through the rules of Prop 98. Distribution of money from the state to school districts is less whimsical.

Based on rules known as the Local Control Funding Formula (LCFF), funds are mostly allocated to districts based on the number of students who show up to school in each grade level. To a lesser extent, the allocation is adjusted according to the characteristics of students. As described in Lesson 8.5, under LCFF districts receive extra funds to support students in poverty and students learning English. Federal law requires districts to ensure that the targeted funds are used in support of the targeted students.

Federal and state laws also require public schools to provide for the education of children with special education needs, and both the state and the federal government provide district categorical (targeted) funding to support it. It is not enough. Local school districts have to meet their special education funding obligations by taking money out of their LCFF funding.

As discussed in Ed100 Lesson 2.7, districts are generally expected to shoulder the extra costs as part of their obligation to educate all children. The Governor’s 2021-22 budget includes additional state funds to support special education programs, particularly for early childhood interventions.

The Budget Process

Here is the big picture: Throughout the first half of the year, committee hearings examine both the budget itself and education bills that might have an impact on the budget. Each of these pathways is a little different. (The nonprofit California Budget & Policy Center does a great job of explaining the distinction between these two paths.)

By January 10, the Governor officially kicks off the budget process by proposing a budget with support from the state Department of Finance. Budget committees in the Senate and Assembly consider the Governor’s proposed budget as a whole. Subcommittees in the Senate and Assembly separately examine the proposed budget for education. These hearings are open to the public. When agendas are set, you can find them online.

After the Governor releases the proposed budget, advocates react, shoring up support for the parts they favor and scrambling to make adjustments.

In January of 2021, the Pandemic led to accelerated budget actions. In ordinary years, the budget process involves more dialogue than action in the months following the governor’s proposal. In 2021, however, as the federal government failed to come to consensus about a package for economic relief, Governor Newsom urged the legislature to take action. Specifically, he proposed that California expedite disbursement of $14 billion “to provide immediate relief for individuals and small businesses disproportionately impacted by the pandemic, the safe reopening of schools and for extended learning time, and investment in strategies for creating quality jobs.”

By May 14, the Governor releases a revised budget, reflecting more up-to-date financial information. (You guessed it, it’s called the May Revise). In normal times, this revision is based on early data about income tax receipts. In 2020, the federal tax deadline was delayed to June, so there was less data to go on. Separately, the Budget Committees of the Senate and Assembly also each adopt their version of the budget. A conference committee irons out differences between these versions.

By June 15, the Senate and Assembly leaders huddle with the Governor to hash out the final details and pass a balanced budget by a majority vote of both houses. If the process gets stuck and they don’t pass a budget on time, legislators are not paid, based on an initiative passed in 2010 after a series of budget delays.

On July 1, the state begins the new fiscal year. Between the passage of the budget by the legislature and July 1 the Governor may cut specific expenditures using line-item vetos. This is rare. In 2020 is was used once.

Education Policy Bills: A Parallel Process

At the same time as the main budget bills are in the works, the Senate Education and Assembly Education committees consider policy bills that affect education. Some policy bills approved by these committees involve money. If a bill requires significant money, it must survive passage through the Senate Appropriations or the Assembly Appropriations Committee. Many bills die in these committees because the cost is too high.

The budget bill is adopted by July 1, but education policy bills continue the legislative process through the summer. Similar to the federal process, after a bill passes one house, it must then go to the other for consideration. (The adopted budget may be revised a bit, with the Governor’s approval, to include funding in these adopted bills.)

Legislation is often a multi-year process. If a bill fails at first, it may have set the stage for further discussion of the issue the next year.

How You Can Get Involved

That’s why you are reading this, right? You want to know how you can get informed and have some say in the budget process.

Get Informed. Throughout the development of the budget, the Legislative Analyst’s Office provides detailed information and analysis. You can sign up to be notified whenever there is a new report. Separately, the California Department of Finance offers information on the current Governor’s budget, as well as budget information from past years.

As bills work their way through the legislative process, you can find information about them on the state’s “Leg Info” page (it’s pronounced “ledge info”).

Support an organization’s voice. Some education organizations take positions on bills under consideration, and may or may not make those positions public. For example, you can find current positions of the California State PTA online. Other vocal advocates include the California Charter Schools Association and the California Teachers Association.

Participate in public comment. The legislative process includes opportunities for public comment. Agendas are posted online. The California Senate and the California Assembly provide live webcasts of legislative hearings. The Senate and Assembly committees have staff members who take their work seriously and may be able to help provide more information about legislation.

Meet with your legislator. Legislators welcome contact with their constituents; why not set up a meeting with the office of your legislator to discuss an issue you care about? Frequently, you will be directed to the staff person who is responsible for education issues.

For more information on the budget process in greater detail visit

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Will There be More Money for Schools Next Year? Let’s See…

The headlines say California schools will get billions of dollars of new funding next year under Prop 98 which guarantees schools about 40% of the state budget.

This is great news. But it is only part of the financial picture, because last year schools lost billions of dollars of funding under Prop. 98.

We are at the start of a new budget cycle that projects how much money California will have next year, in this case 2021-22. This includes “guestimates” as to whether schools will get more money or less. Here is a quick look at how this works:

  • In November, the independent legislative analyst reports on the State’s fiscal outlook.
  • In January, the Governor releases his proposed budget, which is usually based on slightly different financial projections from the Department of Finance.
  • In May, the Budget Proposal is revised, based on the most recent economic projections.
  • In June, a final budget is adopted for the next year, starting July 1.

Just to make this a bit more complicated, schools have a special procedure in the budget called “settle up”. When the budget is adopted, there is a projection as to how much schools should get under Prop. 98. If that guess is wrong, and it usually is not quite right because it is hard to guess the future, then next year’s budget corrects this through the settle up. Schools get more money if last year’s budget projection was too low.

That’s what is happening now. The Legislative analyst report in November estimates the minimum Proposition 98 guarantee will increase by more than $13 billion for the current year, 2020–21. This is because tax receipts were higher than anticipated. This is a one-time windfall.

In upcoming years, Prop. 98 school funding is projected to have only a modest increase.

Budget Magic

Last year, based on what was known in May of 2020, the state did not have enough money in Prop. 98 to keep education funding from dropping. So as part of its budget adoption for 2020-21, it included money it hoped to get from the federal government because of the pandemic. Well, that extra money did not happen.

Deferrals: The fallback position was something called “deferrals.” If the federal government did not come through with funding help for schools, the state would have to delay about $12 billion in payments owed to local school districts. (This means school districts would have to meet their ongoing expenses by digging into reserves or borrowing.) The state planned to send schools that $12 billion as the first part of their 2021-22 funding.

Supplemental payments: Even with deferrals, the education budget was so low in 2020-21 that the state also promised to give education extra money from the general fund in 2021-22 to keep education protected.

Where are we now?

Many education advocates and the legislative analyst are recommending that deferrals be eliminated in the current year so schools get the money they are owed on time. This would use up most of the $13 billion in projected new revenue.

We still don’t know, however, what will happen to state revenues for the rest of the current year as the state builds its budget for next year. Will the picture look better or worse?

And what should happen to those supplemental payments promised to schools in the coming years? Schools certainly need the money. But so does the general fund, which pays for lots of programs that support children and families. General fund deficits are projected to grow by a substantial amount in future years given the costs created by the pandemic, the impact on various parts of the state’s economy, and the costs of such extraordinary events as this year’s wildfires. The new Legislature may also have its own ideas about how important it is to fund schools at something beyond the minimum guarantee.

This article is based on information from Ed100 on how the state budget works.