School Finance Overview: Arizona and California

Last Updated: December 17, 2014

This article appeared in the December 2014 Rural Policy Matters.

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During the Great Recession many states made deep cuts to education budgets. Some states have begun to restore funding as the economic recovery has slowly increased revenues. Others have resisted.

In Arizona, the state Legislature is asking to delay implementation of a court order requiring them to raise funding.

In California, voters approved tax increases to support higher levels of education funding. That measure also gave schools much more flexibility to develop their own budgets--and a mandate to expand parent and community involvement in school decision-making processes. 

In this article, we take a deeper look at how these two states are approaching school funding during the economic recovery. 

Arizona resists court order to raise education spending

In July of this year an Arizona judge ordered the state Legislature to increase funding for schools by $317 million. But attorneys for the Legislature were in court earlier this month asking for a delay while they appeal the order. 

The crux of the issue is how the Legislature is required to comply with a 2000 voter-approved measure requiring the state to increase school funding every year by the rate of inflation or 2%, whichever is lower. That same measure, Proposition 301, also increased the state sales tax by 0.6%.

In 2010, during the recent recession, the Legislature only applied the increase to the transportation portion of the funding formula, not to base student aid. In 2011 the Arizona Education Association and several school districts sued. Initially, a lower court sided with lawmakers, but in 2013 a state Court of Appeals overturned the lower court ruling referencing a 1998 law prohibiting the Legislature from repealing or altering measures approved by voters. 

In 2013 lawmakers began providing the increases.

In July of this year, Maricopa County Superior Court Judge Katherine Cooper, interpreting and implementing the higher court ruling, ordered the Legislature to raise the amount of funding provided to schools to the level it would have been had the increases been given every year. Cooper is also considering whether the Legislature must provide back payments to schools for the years the increases were not funded. That amount could reach $1 billion. 

The state's charter school association is asking to be included in back payments.  

California implements new funding and greater flexibility

Schools in California are seeing new funding and greater local flexibility in how to use their financial resources. According to a paper released earlier this year by Stanford University's Policy Analysis for California Education (PACE), some schools could see increases of 50% to 75%.

Funding for the new formula was approved by voters in 2012 in Proposition 30. That measure approved a four-year increase of 0.25% in state sales taxes and a seven-year increase in income taxes from 10.3% to 13.3% on the very wealthy (joint filers earning over $500,000 and single filers earning over $250,000 annually).

The formula, known as the Local Control Funding Formula (LCFF), provides additional funding for schools with high percentages of students facing educational challenges. It also eliminates many of the categorical funding streams of previous systems. As a result, districts have more flexibility in how to target funding to local needs.

The state requires districts to create three-year local control accountability plans. Those plans must demonstrate how the district will meet the needs of its most disadvantaged students. The plans must also show how the district will engage parents and local communities in meaningful ways. 

LCFF was developed as a short-term effort to prevent deep cuts resulting from a steep drop in state revenues during the recession. Some have argued that LCFF funding merely restores funding levels to those of 2008 and that it does not provide enough new funding. Others argue that the flexibility offered in LCFF relieves schools of having to spend money in restricted categories that are not well-suited to the circumstances and needs of the school. 

The PACE paper, 2020 Vision: Rethinking Budget Priorities Under teh LCFF, recommends three guiding principles for how districts should develop their budgets and accountability plans. These include directing "resources to schools and students who need them most," providing more flexibility to teachers and schools to "experiment and innovate," and designing policies that help local schools learn about "what works and what does not." 

In addition, the paper offers four general strategies. The first strategy is providing more time—for student learning through early childhood, after-school, summer school and tutoring programs; more time for teachers to work in instruction teams and develop curriculum; and more time for principals to train and conduct teacher evaluations. 

The second strategy, more people, recommends investing in human resources by strengthening teacher recruitment and providing staff for teacher evaluations and support; investing in professional learning for teachers; and expanding support positions like counselors and librarians. 

The third strategy, community engagement, focuses on parent outreach and engaging organizations and business in school decisions; it also emphasizes providing health and other services in schools. 

Finally, the paper recommends expanding information, data systems, and technology for tracking performance, sharing information, and making good use of appropriate technologies. 

LCFF funds first began flowing to schools in the 2013–14 school year. 

Read more:

For a good background on what funding considerations are needed for rural schools, read "Characteristics of Strong Rural School Finance Systems, a Rural School Funding News Special Series"

Arizona school funding case:

Local coverage:

Prior RPM coverage of the Arizona case:


Local coverage:

Public Policy Institute of California overview of LCFF:


PACE 2020 Vision:

Read more from the December 2014 Rural Policy Matters.