Understanding the Basic Aid District

The Santa Clara Unified School District (SCUSD) has been a basic aid school district since the 1998-99 fiscal year. The defining characteristic of SCUSD finances is its basic aid status. The local property taxes of most school districts are not sufficient to fund the State “revenue limit” and so the state provides the balance or the revenue limit amount. These “revenue limit” districts have little concern about property tax levels since the revenue limit is back-filled by the state. 

On the other hand, approximately 80 of the 1,000 school districts in the state have local property tax revenues which, given their enrollment levels, result in dollars per Average Daily Attendance (ADA) which exceed the revenue limit. These districts under current state law are allowed to keep all of their property tax revenue. They receive from the state the statutory minimum aid, called “basic aid,” of $120 per ADA - this provision was eliminated in 2003-2004. This results in an extremely high degree of dependence on local property taxes. With the elimination of the $120 stipend, they receive no unrestricted general fund dollars from the state, only certain state categorical programs dollars. 
 

Basic Aid Related Issues

Higher revenue.  The additional revenue has enabled SCUSD to provide its community with a higher level of educational programs, and to pay salaries at a very competitive level.

Uncertainty.  Property tax revenue is very uncertain and subject to dramatic changes.  This is due to the cyclic nature of property values as well as to limitations on the county information systems.  Thus, while the additional revenue that a basic aid district receives is extremely helpful, the district’s financial picture must be watched very carefully for signs of change.  The district must do long term financial planning and carry significant reserves so that changes in property tax revenue can be accommodated without major impact on program.

Delayed revenue information.  Revenue limit districts know their Cost of Living Adjustment (COLA) by May and their enrollments in September. SCUSD receives preliminary property tax projections in August. The first county Tax Assessor’s projection is in August, and the final information is received in July of the following year (after the fiscal year is over).
 

Enrollment growth not funded.  As opposed to the state “revenue limit” funding mechanism which pays an amount per student and therefore automatically funds growth, a basic aid district must pay for any growth from its fixed pool of property tax funds.  Therefore, SCUSD’s enrollment growth adversely affects its finances and the level of program it is able to offer.
 

Other financial impact.  Once the district becomes the basic aid district, certain state and local fundings will lose other than revenue limit, such as Education Revenue Augmentation Fund (ERAF), Supplemental Tax, Small Necessary High School funding, Pupil Participation for Meals for Needy funding. It is important to understand that while Santa Clara Unified School District’s funding is currently higher than revenue limit districts, its growth in property tax revenue per student fluctuates widely.  This is because percentage increases in enrollment can be greater than property tax growth, and PERS and Unemployment Insurance rates can change.
 

Frequently Asked Questions

What is basic aid? 
The California Constitution guarantees that each school district will receive a minimum amount of state aide, called “basic aid” equal to $120 per ADA or $2,400 per district, whichever is greater. Per a change in state law effective 2003-04, state categorical aid is counted first toward meeting the minimum allocation of basic aid (ref. Education Code Section 41975).

What is a basic aid district? 
A basic aid district is one whose local property taxes meet or exceed its revenue limit. A basic aid district keeps the money from local property taxes and still receives the constitutionally guaranteed state basic aid funding. Out of California’s nearly 1,000 elementary, high school, and unified school districts, approximately 80 are basic aid districts. However, this number changes from year to year as local property tax revenues and enrollments fluctuate. A district can be a revenue limit district one year and basic aid the next.

When districts can become basic aid? 

Identifying basic aid districts during a given fiscal year is challenging. Throughout the year, some districts fall in and out of basic aid status. For a variety of reasons having to do with such things as local tax collection procedures, their status may be uncertain. However, at the time of the second principal apportionment (which is certified in June), the California Department of Education officially certifies which districts are basic aid for the current school year.