School districts get their operating funds from five sources. The percentage of funds from each source varies significantly from district to district, but on average it is:
- State tax revenue - about 60%
- Local property taxes - just under 23%
- Federal government - about 10%
- Miscellaneous local revenue (incl. parcel taxes, local contributions, food service sales
and interest) - about 6%
- Lottery - less than 2%
Each district receives funds from its particular combination of federal, state, and local sources. The amount of funds depends on:
- The average number of students attending school during the school year (average daily attendance or ADA)
- The general purpose money the district receives for each student (its "revenue limit")
- Support for specific programs for which it qualifies ("categorical aid&")
About two-thirds of the money is allocated for general purposes, while one-third has traditionally been "categorical" or earmarked for a specific purpose.
The general purpose, or "revenue-limit" funds per student that go to each district are determined by a complex formula rooted in the Serrano v Priest court decisions in the 1970s.
Categorical aid is distributed by the state and federal governments according to the needs of the children in the district and the special programs for which the district qualifies.
In 2008-09 lawmakers converted about 40 categorical programs into general purpose funds, in the hope that increased flexibility in how they use resources would help districts cope with deep budget cuts.
In 2013, California significantly overhauled its system for funding schools with a new Local Control Funding Formula, which eliminates most state categorical programs and shifts control of how funds are spent to school districts and local communities. For more information, please see: Understanding the Local Control Funding Formula.