This November, Californians will vote on Proposition 2—“Kindergarten Through Grade 12 Schools and Local Community College Public Education Facilities Modernization, Repair, and Safety Bond Act of 2024”—a $10 billion school facilities bond. $8.5 million would go to K12 schools and $1.5 to community colleges. The full text of the law authorizing the bond is in Assembly Bill 247. 

Funding from Proposition 2 would replenish the state’s School Facility Program (SFP), which distributes funds to local education agencies for new construction, modernization, and other programs. If Proposition 2 fails, the SFP will run out of funds in early 2025, leaving California even further behind in its struggle to repair and upgrade deteriorating and outdated educational facilities.

Earlier this year (May and July 2024) we wrote about the history of inequitable distribution of SFP funding and the modest changes that AB247 would make to the program. The SFP provides state matching funds to local school districts, which means that wealthier districts have access to more state funding—they can raise more local bond funding and thus receive proportionately more state matching funding. We showed that wealthier districts receive much more state funding per student than low-wealth districts (wealth is measured by assessed property value per student). Specifically, since the program began in 1998:

• The lowest-wealth districts received a median $1,393 in modernization funding per student; the top 20% wealthiest districts received 8 times that: over $11,000 per student. 
• The median assessed property value per student of the districts receiving the least state funding was one-third of the median for the highest-funded districts. 

We also emphasized that the meager sliding scale funding adjustment introduced in AB247 would have no real impact on the inequitable ability of wealthy districts to get more state funding per student than low-wealth districts. 

On July 1 the Senate Education Committee heard from both supporters of AB247 and equity advocates concerned about the SFP’s inequity (watch the video). In response to statements by representatives from Public Advocates and the California Association of Black School Educators, Committee members argued that the SFP’s Financial Hardship program addressed any equity concerns. In this post we summarize the changes that Proposition 2 would make to the SFP and look at the history of Financial Hardship awards.

What’s in Proposition 2

Proposition 2 would authorize $10 billion in bonds, allocated as follows:

The measure specifies that funds for new construction and modernization will first be allocated to projects that have been approved but for which funds are not available (as of July, the bill says $3.3 billion in projects are already awaiting funding—as of late September the State Allocation Board (SAB) stated that $3.9 billion has already been designated for funding). Thus, about half of the funds generated by Proposition 2 will be allocated to projects already approved but for which there is no current funding.

What Prop 2 would change in the School Facility Program

Proposition 2 introduces several new elements to the SFP program that would take effect if the measure passes:

1. Adjusts how the required local funding match is calculated

A new formula for calculating the state’s contribution to total project cost would apply to both new construction and modernization projects (formerly set at 50% and 60% respectively). The new state matching amounts would be based on a district’s points, calculated as follows:

In our previous analysis, we demonstrated that this new sliding scale scale has two shortcomings:

• It underemphasizes district property wealth, the primary determinant of facility equity. 
• The narrow sliding scale (offering the potential of 5% more funding) will make almost no difference to the inequitable distribution of state funding. The wealthiest districts currently receive 2.5 times (165%) more per student than the poorest districts. An extra 5% will do little to reduce this disparity.

Under Proposition 2’s points system, nearly 1/3 of the state’s students would be in districts receiving the maximum state match.

2. Targets support to small districts

The measure specifies that “up to 10 percent shall be available to small school districts” from both modernization and new construction K12 funds. The bill also provides for small districts to receive preliminary apportionment (as the SFP currently does for charter schools)—meaning they are processed separately from the other applications.

Small school districts are defined as having fewer than 2,501 students (the median district size in California in 2023-24 was 2,024). The small district definition would apply to 53% of districts in the state, but these districts only account for 7% of the statewide student population. From 1998-2023, districts below 2,501 received about 8% of modernization and new construction funds, so 10% would represent an increase.

Small districts do tend to have fewer administrative staff, which can make it harder to seek and obtain facilities funding. But they do not necessarily need more state financial assistance. Bonding capacity per student is actually higher for small districts, and they have lower shares of unduplicated, Hispanic, and Black students on average. 

The measure also allocates $5 million to the California Department of Education to support “priority” school districts with technical assistance and centralized resources (priority school districts includes small districts, those with” low bonding capacity per enrollment” or “high percentages of unduplicated students”—those specific thresholds are not defined).

3. Makes transitional kindergarten and preschool facilities eligible for SFP funding

Modernization and new construction funds would be available for constructing or retrofitting space for transitional kindergarten (TK) facilities and LEA-administered preschool programs. Funding to build or adapt facilities for TK was previously funded by a separate program that was unfunded in the 2024-25 budget. As California approaches universal TK eligibility for 4-year-olds, districts are struggling to construct appropriate classroom spaces for those students. However, there is no funding set aside specifically for TK facilities needs; TK projects would be considered along with all other projects.

4. Requires 5-year school facilities master plans

Districts must submit a 5-year school facilities master plan to receive SFP funding. School facilities master plans help ensure that districtwide needs are assessed systematically; if done effectively, they help prevent inefficient piecemeal projects and identify the most urgent priorities. The measure describes some required elements (including a full inventory of buildings and their size and age, classroom capacity, projected enrollment growth, and a capital planning budget), and instructs the Office of Public School Construction (OPSC) to work with the California Department of Education to develop additional guidelines.

These plans are underutilized in California and having the OPSC collect them could help address the dire lack of statewide data on facility quality. However, they can also be expensive to create, and might create an additional hurdle for less advantaged districts. 

5. Expands financial hardship eligibility

Proposition 2 raises the bonding capacity threshold for financial hardship eligibility from $5 million to $15 million, helping more small districts qualify for additional assistance. (See below for a longer discussion of financial hardship.)

6. Allows spending on energy efficiency and climate mitigation

Adds language about eligible spending in several areas—to “advance state energy goals,” including covering increased costs associated with energy efficiency components, HVAC, renewable energy, shade structures and other adaptations of outdoor space. There is climate resiliency language in several parts of the bond, including specifics under modernization about shading and protecting students from higher average temperatures, and to add air filtration systems when air pollution exceeds harmful levels. 

7. Funds lead testing and remediation

Up to $115 million would be allocated to test and remediate lead in school drinking water, helping address health risks in older school buildings. Many aging buildings have significant risk of lead exposure in drinking water (as Oakland Unified recently discovered).

8. Allows replacement of very old schools 

For the first time, Proposition 2 allows modernization funds to be used to replace schools that are at least 75 years old if modernization is deemed not cost-effective. Unfortunately, no state agency maintains data on school building age so it’s difficult to estimate how many schools fall into this category.

Low-wealth districts will continue to be underfunded and left behind

As we wrote earlier this year, low-wealth districts will continue to receive a smaller share of state funding and less state funding per student, and their facilities will continue to fall behind the quality of facilities in wealthier districts. 

The vast majority of school facility spending is not state funds, but local funds, primarily raised by general obligation bonds. Of the 75% of school districts that have issued a bond since 2000, the amount raised per student varies wildly: the bottom 20% of districts issued $8,681 per student, compared to $56,281 per student for the wealthiest 20% of districts. These disparities are then exacerbated by the matching state fund program.

We created two hypothetical districts with the same enrollment, using the actual median bonding capacity of districts of that size. The ability of District 1 to raise local funds for a high school renovation is dramatically different from District 2. To raise the same amount of funding, District 2 must levy the highest tax allowed for a single bond measure, consuming more than half of its total bonding capacity. The wealthier district can raise the same amount of funds with a much lower tax rate and still have 95% of its total bonding capacity available. And under the current SFP structure, these two districts would receive nearly identical amounts of state matching funds. 

The financial hardship provision does not remedy the SFP’s equity problems

Senate Education Committee members mentioned several times that equity concerns were addressed by the existence of the financial hardship program. Our analysis shows that in fact, financial hardship does very little to address equity concerns in the modernization program, primarily because it constitutes a tiny portion of the funding spent and is not tailored to districts with the lowest wealth per student.

If districts qualify for financial hardship, their share of project costs can be reduced to as low as 0% (the median share is about 15%). There is no minimum or maximum of financial hardship funding as a share of SFP spending. Historically, the program has been much less generous than suggested by the legislators, especially for modernization funding. The new construction program does award a majority of funds through financial hardship but over the past 25 years only 3% of modernization funding has been financial hardship funds.  

The minimal amount of financial hardship funding is in part because of the very restrictive criteria, which largely benefit very small school districts. As we wrote in July, a hardship criteria of total bonding capacity only helps very small districts, and does nothing for districts with low levels of bonding capacity per student. Our analysis also shows that districts with the lowest levels of wealth per student are much more likely to have a majority of students of color and low-income students.

Where do we go from here?

If financial hardship is to serve as a meaningful mechanism for addressing equity concerns with the School Facility Program, several steps would need to be taken:

• Protect a certain amount of funding for financial hardship to ensure that it constitutes a larger share of state spending. 
• Set clearer guidance about how districts can access the financial hardship program and what their match will be.
• Set a financial hardship criteria of bonding capacity based on enrollment: such as districts in the bottom 20% of assessed value per student.
• Report to the State Allocation Board quarterly on the characteristics of projects and districts receiving financial hardship funding, including how the amount awarded is calculated.
• Evaluate and reform the first-come-first-served approach that currently prevents the OPSC or SAB from prioritizing projects by need.

There’s no question that California urgently needs to invest state funds in our K-12 school infrastructure. $8.5 billion is insufficient to meet the pressing facility needs in California—to fix deteriorating schools, adapt to rising heat and wildfire risk, and address serious health risks such as lead. In November 2024 there will be nearly $40 billion in local bond measures on the ballot across the state. Many of those districts will apply for state matching funding. Policymakers should continue to explore ways to restructure the state program to serve as a stopgap for the highest-need districts and the most urgent facilities projects.