California school districts and county offices of education are no stranger to the complicated relationship between property taxes and school funding. As property tax rolls continue to swell throughout the state, that relationship has gotten much more complicated, particularly since the implementation of the Trial Court Offset in 2013–14.

Most of the 58 county offices of education are funded similarly to school districts using the Local Control Funding Formula, supported first with local property tax revenue, with the remainder covered by the state’s Proposition 98 General Fund. Certain COEs collect enough property tax revenue in a given year to cover their entire LCFF allotment and often provide funds beyond the LCFF allotment. School districts in these circumstances are allowed to retain and spend these “excess property taxes” for general fund use; these excess property tax school districts are more commonly referred to as “basic aid” school districts. Such is not the case for COEs.

In 2014, then-Gov. Jerry Brown and the Legislature changed the education code to redirect excess county property tax revenues away from COEs and to the General Fund. Education Code section 2578(c) mandates that local taxes be transferred to the state controller to “offset state costs of providing trial court services and costs.” This redirection, known as the 2013–14 Trial Court Offset, was intended to “do no harm” in that it helped to fund the trial court system by using certain local property tax funds that, due to a technicality, were not allowed to be used to serve students, while at the same time freeing up state General Fund that was in short supply due to the recession. At the time, this redirection affected six counties.

Prior to the 2013–14 Trial Court Offset (and also prior to the passage of Proposition 22 in 2010), the education code had restricted the use of these funds by county offices of education, but COEs were authorized each year to spend the interest earned on those funds on student services. Losing this funding was a significant loss for many county programs. COEs provide vital educational services to the state’s most vulnerable student populations, including special education pupils, incarcerated youth, foster and homeless youth, high-poverty preschool children, expelled youth and English learners. Since the 2013–14 redirection, the number of affected counties has grown from six to 11 (Marin, Monterey, Napa, Orange, Placer, Riverside, San Diego, San Luis Obispo, San Mateo, Santa Barbara and Santa Clara counties), and will likely grow to include more COEs as county property tax revenues continue to increase in the future.

As a result of the implementation of LCFF, county offices of education with excess county property taxes are also effectively flat-funded, meaning that for many budget years in the future these COEs will receive no additional revenue, even as the costs and demands for the services they provide to students and districts continue to increase. Additionally, COEs lack the authority to levy local school bonds for classroom and facility needs, putting incredible and growing pressure on stagnant general funds as they try to maintain an aging and deteriorating facilities inventory.

The total number of students in the affected counties exceeds 2 million, representing approximately one-third of the entire student population in California. In 2020, the total amount of “excess” county property taxes transferred by impacted county offices of education to the state controller’s office exceeded $100 million. These are dollars that have left public education permanently.

Prior to the onset of the pandemic, conversations had begun with legislators to address this situation and, at a minimum, keep these dollars in public education. As the state moves into the post-pandemic recovery phases, the conversation is sure to return.