SB 743: Education finance: Education Equalization Act: Equalization Reserve Account.

Official summary

Legislative Counsel’s Digest (official, as of the latest version). Written by nonpartisan legislative staff; reproduced verbatim.

Existing law establishes a public school financing system that requires state funding for county superintendents of schools, school districts, and charter schools to be calculated pursuant to a local control funding formula (LCFF), as specified. Under existing law, school districts that receive local revenues that exceed the LCFF amount do not receive a specified apportionment of LCFF funds, as provided, and are known as “basic aid school districts” or “excess tax entities.”

The Classroom Instructional Improvement and Accountability Act, an initiative approved by the voters as Proposition 98 at the November 8, 1988, statewide general election, amended the California Constitution to, among other things, set forth a formula for computing the minimum amount of revenues that the state is required to appropriate for the support of school districts and community college districts in any given fiscal year.

The California Constitution creates the Public School System Stabilization Account in the General Fund and requires the Controller to transfer, pursuant to a schedule provided by the Director of Finance, a specified amount from the General Fund to the account in each fiscal year, except as provided.

The California Constitution generally prohibits the total annual appropriations subject to limitation of the state and each local government from exceeding the appropriations limit of the entity of government for the prior fiscal year, adjusted for the change in the cost of living and the change in population. The California Constitution defines “appropriations subject to limitation” for these purposes.

This bill would establish the Equalization Reserve Account in the General Fund. The bill would require interest earned on funds in the account to be available, upon appropriation by the Legislature, to increase per-pupil funding in non-basic aid school districts, defined as school districts that received the above-described apportionment of LCFF funds in any of the then preceding 3 fiscal years, in a manner prescribed by the Legislature. The bill would require the Controller, in any fiscal year in which there is an increase over the preceding fiscal year in the minimum amount of revenues the state is required to appropriate for the support of school districts and community college districts, to transfer from the General Fund to the Equalization Reserve Account an amount equal to the total amount transferred from the General Fund to the Public School System Stabilization Account in that fiscal year, as provided.

These provisions would become operative only if a constitutional amendment, approved by the voters, (1) excludes funds transferred to or allocated from the account from computations of the minimum amount of revenues that the state is required to appropriate for the support of school districts and community college districts, from the moneys allocated for purposes of meeting that minimum funding obligation, and from the total annual state appropriations subject to the limitation described above, and (2) requires the Legislature, in each fiscal year, to allocate a percentage of the interest that has been deposited in the account to increase per-pupil funding in non-basic aid school districts.

Sponsors

Sponsors by party (alphabetical): Democratic 1

“Support” is shown only as formal sponsorship recorded by the legislature. Roll-call votes are available on the official bill page.

Recent official actions

1. August 29, 2025August 29 hearing: Held in committee and under submission.
2. August 20, 2025August 20 set for first hearing. Placed on APPR. suspense file.
3. July 17, 2025From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (July 16). Re-referred to Com. on APPR.
4. July 7, 2025From committee with author's amendments. Read second time and amended. Re-referred to Com. on ED.
5. June 9, 2025Referred to Com. on ED.
6. June 4, 2025In Assembly. Read first time. Held at Desk.
7. June 3, 2025Read third time. Passed. (Ayes 30. Noes 2. Page 1448.) Ordered to the Assembly.
8. June 2, 2025Read second time. Ordered to third reading.
9. May 29, 2025Ordered to second reading.
10. May 29, 2025Read third time and amended.
11. May 23, 2025Read second time. Ordered to third reading.
12. May 23, 2025From committee: Do pass. (Ayes 5. Noes 0. Page 1211.) (May 23).