Under the old system, school districts received approximately two-thirds of their revenues as general-purpose funding based on complex historical formulas (known as "revenue limit" funds), and about one-third through nearly four dozen highly regulated "categorical programs," such as for summer school, textbooks, staff development, gifted and talented students, and counselors for middle and high schools.
Under the new system, districts will receive a uniform base grant for every district, adjusted by grade level, plus additional funds for students with greater educational needs, defined as low-income, English learner and foster youth students. Districts will get an additional 20 percent of the base grant based on the numbers of these students enrolled in a district, and even more when they make up more than 55 percent of a district's enrollment.
Districts will have broad discretion over how to use the base grants. The funding law says that districts must expand or improve services for high-needs students in proportion to the additional funding that these students bring to the district. Temporary regulations that the State Board of Education passed in January 2014 tell districts how much money they must spend each year on high-needs students and when that money can be used to fund schoolwide and districtwide programs.
The transition to the new formula began in the 2013-14 school year. Full implementation of the new funding formula is projected to take eight years. The vast majority of school districts will receive more funding under the new formula after it is fully implemented. Most districts that would get less than under the old system will receive additional payments restoring their funding to 2007-08 levels, before the Great Recession led to substantial budget cuts. In 2013-14, no district will get less than it received from the state on a per pupil basis in the 2012-13 school year.
School districts will have more authority than before to decide how to spend their money. But they will also face new obligations to show that their spending improved student performance. Districts must adopt a Local Control and Accountability Plan (LCAP), after soliciting suggestions from teachers, parents and the community, and update it annually.