Bill Text: CA SCA5 | 2025-2026 | Regular Session | Introduced

California Senate Constitutional Amendment 5

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Education finance: Education Equalization Act: Equalization Reserve Account.

Sponsorship: Partisan Bill (Democrat 1)

Status: (Introduced) 2026-05-29 - Set for hearing June 9 in E. & C.A. pending receipt. [SCA5 Detail]

Download: California-2025-SCA5-Introduced.html

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

Senate Constitutional Amendment

No. 5

Introduced by Senator Cortese

May 07, 2026

A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by adding Section 16 to Article XIII B thereof, and by amending Section 8 of, and adding Section 8.7 to, Article XVI thereof, relating to education finance.

LEGISLATIVE COUNSEL'S DIGEST

SCA 5, as introduced, Cortese. Education finance: Education Equalization Act: Equalization Reserve Account.

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.

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 do not receive an apportionment of state funds under the LCFF because their local revenues exceed the amount calculated pursuant to the LCFF are considered “basic aid school districts” or “excess tax entities.”

This measure would establish the Equalization Reserve Account in the General Fund. The measure 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. The measure would require interest earned on funds in the Equalization Reserve Account to be deposited in the account and would require the Legislature, in each fiscal year, to allocate a percentage of that interest to increase per-pupil funding in non-basic aid school districts. The measure would define non-basic aid school districts as school districts that received an apportionment of state funds under the LCFF in any of the preceding 3 fiscal years. The measure would authorize the Legislature to suspend the required transfers from the General Fund in any fiscal year in which average per-pupil funding in non-basic aid school districts equals or exceeds the average per-pupil funding in basic aid school districts. The measure would prohibit the allocation of funds transferred to the account from the General Fund.

The measure would exclude 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.

Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: NO

Resolved by the Senate, the Assembly concurring, That the Legislature of the State of California at its 2025–26 Regular Session commencing on the second day of December 2024, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California, that the Constitution of the State be amended as follows:

First—

This measure shall be known, and may be cited, as the Education Equalization Act.

Second—

That Section 16 is added to Article XIII B thereof, to read:

SEC. 16.

“Appropriations subject to limitation” of each entity of government shall not include transfers or appropriations of revenues to or from the Equalization Reserve Account established pursuant to Section 8.7 of Article XVI.

Third—

That Section 8 of Article XVI thereof is amended to read:

SEC. 8.

(a) From all state revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and public institutions of higher education.

(b) Commencing with the 1990–91 fiscal year, the moneys to be applied by the State for the support of school districts and community college districts shall be not less than the greater of the following amounts:

(1) The amount which, as a percentage of General Fund revenues which may be appropriated pursuant to Article XIII B, equals the percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in fiscal year 1986–87.

(2) The amount required to ensure that the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B and allocated local proceeds of taxes shall not be less than the total amount from these sources in the prior fiscal year, excluding any revenues allocated pursuant to subdivision (a) of Section ~~8.5,~~ 8.5 and Section 8.7, adjusted for changes in enrollment and adjusted for the change in the cost of living pursuant to paragraph (1) of subdivision (e) of Section 8 of Article XIII B. This paragraph shall be operative only in a fiscal year in which the percentage growth in California per capita personal income is less than or equal to the percentage growth in per capita General Fund revenues plus one half of one percent.

(3) (A) The amount required to ensure that the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B and allocated local proceeds of taxes shall equal the total amount from these sources in the prior fiscal year, excluding any revenues allocated pursuant to subdivision (a) of Section ~~8.5,~~ 8.5 and Section 8.7, adjusted for changes in enrollment and adjusted for the change in per capita General Fund revenues.

(B) In addition, an amount equal to one-half of one percent times the prior fiscal year total allocations to school districts and community ~~colleges~~ college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B and allocated local proceeds of taxes, excluding any revenues allocated pursuant to subdivision (a) of Section ~~8.5,~~ 8.5 and Section 8.7, adjusted for changes in enrollment.

(C) This paragraph ~~(3)~~ shall be operative only in a fiscal year in which the percentage growth in California per capita personal income in a fiscal year is greater than the percentage growth in per capita General Fund revenues plus one half of one percent.

(c) In any fiscal year, if the amount computed pursuant to paragraph (1) of subdivision (b) exceeds the amount computed pursuant to paragraph (2) of subdivision (b) by a difference that exceeds ~~one and one-half~~ 1.5 percent of General Fund revenues, the amount in excess of ~~one and one-half~~ 1.5 percent of General Fund revenues shall not be considered allocations to school districts and community colleges for purposes of computing the amount of state aid pursuant to paragraph (2) or 3 (3) of subdivision (b) in the subsequent fiscal year.

(d) In any fiscal year in which school districts and community college districts are allocated funding pursuant to paragraph (3) of subdivision (b) or pursuant to subdivision (h), they shall be entitled to a maintenance factor, equal to the difference between (1) the amount of General Fund moneys which would have been appropriated pursuant to paragraph (2) of subdivision (b) if that paragraph had been operative or the amount of General Fund moneys which would have been appropriated pursuant to subdivision (b) had subdivision (b) not been suspended, and (2) the amount of General Fund moneys actually appropriated to school districts and community college districts in that fiscal year.

(e) The maintenance factor for school districts and community college districts determined pursuant to subdivision (d) shall be adjusted annually for changes in enrollment, and adjusted for the change in the cost of living pursuant to paragraph (1) of subdivision (e) of Section 8 of Article XIII B, until it has been allocated in full. The maintenance factor shall be allocated in a manner determined by the Legislature in each fiscal year in which the percentage growth in per capita General Fund revenues exceeds the percentage growth in California per capita personal income. The maintenance factor shall be reduced each fiscal year by the amount allocated by the Legislature in that fiscal year. The minimum maintenance factor amount to be allocated in a fiscal year shall be equal to the product of General Fund revenues from proceeds of taxes and one-half of the difference between the percentage growth in per capita General Fund revenues from proceeds of taxes and in California per capita personal income, not to exceed the total dollar amount of the maintenance factor.

(f) For purposes of this section, “changes in enrollment” shall be measured by the percentage change in average daily attendance. However, in any fiscal year, there shall be no adjustment for decreases in enrollment between the prior fiscal year and the current fiscal year unless there have been decreases in enrollment between the second prior fiscal year and the prior fiscal year and between the third prior fiscal year and the second prior fiscal year.

(g) For purposes of this section, “moneys to be applied by the State for the support of school districts and community college districts” does not include funds transferred to or allocated from the Equalization Reserve Account pursuant to Section 8.7.

(h) Subparagraph (B) of paragraph (3) of subdivision (b) may be suspended for one fiscal year only when made part of or included within any bill enacted pursuant to Section 12 of Article IV. All other provisions of subdivision (b) may be suspended for one fiscal year by the enactment of an urgency statute pursuant to Section 8 of Article IV, provided that the urgency statute may not be made part of or included within any bill enacted pursuant to Section 12 of Article IV.

Fourth—

That Section 8.7 is added to Article XVI thereof, to read:

SEC. 8.7.

(a) It is the intent of the Legislature in proposing this section, and the intent of the people in adopting it, to establish a dedicated source of state funding to close the gaps in per-pupil spending among school districts without reducing the amount of state funding that any school district receives.

(b) The Equalization Reserve Account is hereby established in the General Fund.

(c) (1) (A) (i) Only interest earned on funds in the Equalization Reserve Account shall be available, upon appropriation by the Legislature, for the support of non-basic aid school districts. These funds shall be allocated from the account to increase per-pupil funding in non-basic aid school districts in a manner prescribed by the Legislature.

(ii) Interest earned on funds in the account shall not be allocated for any purpose other than increasing per-pupil funding in non-basic aid school districts.

(B) Funds transferred to the account pursuant to paragraph (1) or (2) of subdivision (d) shall not be allocated for any purpose.

(2) It is the intent of the Legislature in proposing this section, and the intent of the people in adopting it, that interest be allocated in an amount that allows the account balance to continue to grow.

(d) (1) Except as provided in paragraph (2) or (3), in any fiscal year in which there is an increase over the preceding fiscal year in the moneys to be applied by the State for support of the public school system and public institutions of higher education pursuant to Section 8, the Controller shall transfer from the General Fund to the Equalization Reserve Account an amount equal to the total amount transferred pursuant to subdivision (b) of Section 21 for that fiscal year. The calculation of this amount shall include all reductions, suspensions, and other adjustments pursuant to any other provision of Section 21, or paragraph (3) of subdivision (a) of Section 22.

(2) If Section 21 is amended after January 1, 2026, and except as provided in paragraph (3), in any fiscal year in which there is an increase over the preceding fiscal year in the moneys to be applied by the State for support of the public school system and public institutions of higher education pursuant to Section 8, the Controller shall, instead of the amount prescribed in paragraph (1), transfer from the General Fund to the Equalization Reserve Account an amount equal to the total amount that would have been transferred pursuant to subdivision (b) of Section 21 for that fiscal year, had Section 21 not been amended. The calculation of this amount shall include all reductions, suspensions, and other adjustments that would have been made pursuant to any other provision of Section 21, as it read on January 1, 2026, or paragraph (3) of subdivision (a) of Section 22, as it read on January 1, 2026.

(3) If, in any fiscal year, average per-pupil funding in non-basic aid school districts equals or exceeds the average per-pupil funding in basic aid school districts, the Legislature may suspend the required transfers described in paragraphs (1) and (2) for that fiscal year.

(4) Interest earned on funds in the Equalization Reserve Account shall be deposited in the account.

(e) In each fiscal year, the Legislature shall allocate a percentage of the interest that has been deposited in the Equalization Reserve Account to increase per-pupil funding in non-basic aid school districts.

(f) For purposes of this section, the following definitions apply:

(1) “Basic aid school district” means a school district that did not receive an apportionment of state funds pursuant to Section 42238.02 of the Education Code, as that section may be amended from time to time by the Legislature, or any successor to that section, in any of the preceding three fiscal years.

(2) “Non-basic aid school district” means a school district that received an apportionment of state funds pursuant to Section 42238.02 of the Education Code, as that section may be amended from time to time by the Legislature, or any successor to that section, in any of the preceding three fiscal years.