Data for Discussion | July 8, 2026

Where You Live, Where You Learn: How School Boundaries and Property Wealth Shape Educational Opportunity

By T. F. Tierney, PhD

Most Californians assume that local property taxes have always funded their public schools — that the system, for better or worse, has always worked this way. It hasn't.

The story of how Silicon Valley ended up with some of the most unequal school funding in the state is the result of political decisions made over more than a century. Today, those decisions are once again under scrutiny as State Senator Dave Cortese advances two proposals — SB 743 and SCA 5 — intended to address growing disparities between property-rich and property-poor school districts.

The conversation comes at a time when recent Silicon Valley school finance data show substantial differences in revenue between neighboring districts, even within the same county. Regional averages can mask those differences, making schools appear more uniformly resourced than they actually are. A closer look at the region's history helps explain how those disparities emerged — and why they have proven so difficult to address.

One way to think about schooling is as a public good. Historian Matthew Gardner Kelly argues that debates over school funding ultimately raise fundamental questions about who public education is intended to serve and who should pay for it. Do tax dollars raised for education belong to a local school district, the state as a whole, or the broader public? And how much inequality can exist between school districts before a "public school system" becomes something else entirely?

Those questions have shaped California's education system for generations.

How Local School Districts Took Shape

San Jose's fragmented school district landscape dates back to the nineteenth century, when California was largely agricultural and schools were organized around small, locally controlled communities. Townships such as Cambrian, Alum Rock, Berryessa, and Alviso each established their own school districts to serve local families. These districts functioned as neighborhood institutions long before San Jose became a major urban center.

At the time, local property taxation played a much smaller role in school finance than it does today. The State of California provided roughly 60% of school funding, while counties supplied most of the remainder and redistributed resources among local districts. In Santa Clara, Alameda, and San Mateo counties, revenues generated in wealthier communities helped support schools in lower-income areas.

That system began to change in 1910, when Constitutional Amendment No. 1 shifted much of the state's tax burden from individual property owners to corporations, including Southern Pacific Railroad. The reform was intended to stabilize state finances but instead created new fiscal challenges. School districts increasingly found themselves competing with other state priorities for funding, making long-term planning and staffing more difficult.

Further strain followed during and after World War I. When the poll tax that supplemented school funding was ruled illegal, districts lost another source of revenue. The state's share of school funding — which had been approximately 60% in 1890 — fell to just 23% by 1920.

Property taxation did not emerge organically as the dominant funding source for public education. Rather, it evolved in response to the state's retreat from school finance. By the early twentieth century, the wealth of local property owners increasingly determined how much money was available for schools, creating significant disadvantages for agricultural communities whose land generated comparatively little tax revenue.

At the same time, public education was increasingly reframed as a local responsibility rather than a statewide one. Schools came to be viewed more like local infrastructure — similar to roads, police, fire protection, or sewer systems — than as a shared statewide institution. Local property taxes gradually replaced state support as the primary funding mechanism, reinforcing district fragmentation and embedding wealth disparities into the system itself.

These debates frequently pitted rural communities against urban centers and Los Angeles against San Francisco. Agricultural areas often found themselves at a disadvantage because farmland typically generated less taxable value than suburban development. Yet the prevailing political narrative held that school funding was fundamentally a local matter, helping normalize and entrench disparities that remain visible today.

When Property Wealth Became the Driver

The relationship between school funding and local property wealth became even more pronounced after World War II.

Federal support helped fuel a postwar school construction boom as returning veterans started families and enrollment surged. During the same period, San Jose grew rapidly under city manager A.P. Hamann, who aggressively pursued annexation to expand the city's tax base.

But municipal boundaries and school district boundaries are not the same thing.

Under California law, annexing land into a city does not automatically change school district boundaries. As San Jose expanded, the existing school districts remained in place. The city grew around and over them rather than replacing them.

East Side schools were consolidated in 1950, but consolidation alone did not resolve underlying funding disparities. Many of the agricultural districts that formed the foundation of East Side schools had relatively low property valuations. Broader countywide consolidation remained possible, but wealthier communities in other parts of the county often resisted.

Housing patterns also played a role. Racially restrictive covenants prevented many people of color from purchasing homes in parts of Santa Clara County for decades. Although the U.S. Supreme Court ruled such covenants unenforceable in 1948, developers and real estate professionals continued using them well into the 1960s.

The practical result was that many Latino and other minority families remained concentrated in East San Jose, while newer and more affluent subdivisions in other parts of the county developed separately. Those communities retained their own school districts and, with them, their own property tax bases.

The consequences are still visible today. School district boundaries throughout Silicon Valley continue to reflect historical patterns of development, annexation, housing segregation, and local control. While the region has changed dramatically over the past century, many of the underlying governance structures that determine how schools are funded remain largely intact.

Efforts to Reduce Funding Disparities

By the 1970s, the growing connection between local property wealth and school funding had become the subject of legal challenge.

In 1976, the California Supreme Court's decisions in Serrano v. Priest sought to reduce funding disparities by limiting the degree to which educational opportunity could depend on local property wealth. The rulings attempted to equalize school funding by redistributing resources from more affluent districts to less affluent ones.

Just two years later, however, California voters approved Proposition 13.

Proposition 13 remains one of the largest structural obstacles to a more equitable funding system. Embedded in the California Constitution, it capped property tax rates at 1% of assessed value and fundamentally reshaped the relationship between local governments, taxpayers, and public schools. While the measure provided property tax relief for homeowners, it also constrained the revenue available to local school districts and shifted greater responsibility for education funding to the state.

Subsequent efforts to modify the system have met with mixed success. In 2020, voters rejected Proposition 15, which would have reassessed many commercial and industrial properties at market value and directed a portion of the resulting revenue to schools. By that point, property-based school funding had become so embedded in California's political landscape that many voters viewed it as the natural order rather than the product of a series of policy choices.

The state has continued to pursue more targeted reforms. In 1988, voters approved Proposition 98, establishing a constitutional minimum funding guarantee for K–12 schools. In 2013, California adopted the Local Control Funding Formula (LCFF), a major overhaul designed to direct additional funding toward districts serving larger shares of low-income students, English learners, and foster youth.

The LCFF partially offsets local funding disparities, but it does not eliminate them. In regions with exceptionally high property values, local wealth continues to play an outsized role in determining school revenues.

Why Funding Gaps Persist Today

Silicon Valley provides a striking example.

Today, school districts across the region derive roughly two-thirds of their revenues from local sources, compared with just over one-third statewide. Property values — and the tax revenues they generate — continue to shape district finances in ways that differ substantially from one community to the next.

At the center of the debate are California's so-called "Basic Aid" districts. These districts generate more revenue from local property taxes than they would otherwise receive through the state's Local Control Funding Formula. As a result, they receive only minimal state aid while retaining their locally generated revenues.

The term itself can be misleading. It originates from a constitutional provision guaranteeing all districts a minimum level of state support. Today, however, Basic Aid districts often receive substantially more revenue per student than neighboring districts because of their strong local tax bases. The result is a system in which neighboring districts can have dramatically different levels of funding despite serving students who live only a few miles apart. Some affluent Silicon Valley districts receive close to 90% of their revenues from local sources, while higher-need districts rely much more heavily on state and federal funding.

Santa Clara Unified, whose tax base includes major commercial properties associated with companies such as Google, Apple, and Intel, as well as Levi's Stadium, reported per-student funding of $22,709 in 2023–24. East San Jose’s Alum Rock Union Elementary reported $14,819 per student — approximately 35% less.

Similar patterns appear elsewhere in the region. During the 2019–20 school year, Fremont Union High School District collected $19,202 in local taxes per student, while East Side Union High School District collected $11,456 per student despite receiving more state aid. Even with state supplements, East Side Union generated less total revenue than some neighboring districts with stronger property tax bases.

Silicon Valley’s high cost of living compounds these disparities. Salaries in the region's 34 Basic Aid districts average $13,600 (13%) more than those in the 24 LCFF-funded districts. Despite San Jose Unified's designation as a Basic Aid entity, for example, its leaders still report losing educators and administrators to neighboring districts that offer substantially higher salaries.

The consequences extend beyond district budgets.

According to the California Department of Education's list of schools identified for additional support, 23 South Bay schools were designated as needing extra assistance, including nine in East San Jose — four in Alum Rock Union Elementary School District and five in East Side Union High School District.

While funding alone does not determine educational outcomes, the disparities have fueled ongoing debate about whether California's current system adequately balances local control with educational equity.

What Alternatives Exist?

The current funding structure was not inevitable, nor is it the only model available.

Several California districts have adopted approaches intended to reduce disparities among schools. San Francisco Unified School District uses a lottery-based assignment system, while Long Beach Unified has used funding and staffing strategies designed to balance resources across schools.

Internationally, Canada offers another point of comparison.

Rather than relying heavily on local property wealth, Canadian provinces generally assume primary responsibility for education funding. Revenue is collected and distributed at the provincial level, with funding formulas designed to provide both baseline support and additional resources for students with greater needs.

The Center for American Progress describes the system as one that seeks both horizontal equity — similar funding for comparable students — and vertical equity, which provides additional resources for students requiring additional support. The result is a model in which funding is more closely tied to student needs than to neighborhood wealth.

The contrast highlights a central question underlying current debates in California: To what extent should educational opportunity depend on where a student happens to live?

The Political Challenge

Despite decades of litigation, policy reforms, and public debate, major structural changes have proven difficult to achieve.

Santa Clara County, where the gap between Basic Aid and LCFF-funded districts is among the widest in California, has no shortage of proposed solutions. Suggestions include regional consolidation, shared services, expanded interdistrict transfers, cost-of-living adjustments within the LCFF, and additional state aid targeted toward lower-wealth districts.

Yet none has fundamentally altered the underlying structure.

Communities that benefit from strong local tax bases often have powerful incentives to preserve the existing system. For many homeowners, school quality and property values are closely intertwined, making proposals that could redistribute resources politically challenging.

This tension sits at the heart of the debate now unfolding in Sacramento.

Senator Cortese's proposals have renewed discussion about whether California should do more to reduce disparities between property-rich and property-poor districts. Regardless of the outcome, the debate has brought renewed attention to a question that has shaped public education in California for more than a century:

Should educational opportunities depend so heavily on local wealth?

The answer remains contested. What is clear is that the school district boundaries and funding systems that shape educational opportunity across Silicon Valley today are not historical accidents. They are the result of policy choices made over generations — choices that continue to influence the opportunities available to students across the region.

About the Author

T.F. Tierney, Ph.D., is an urban historian currently focused on land-use planning in Silicon Valley. A research affiliate at the University of California Berkeley and professor emerita of architecture at the University of Illinois Urbana-Champaign, she is also the founding director of URL: Urban Research Lab. She joined the Silicon Valley Institute for Regional Studies in 2026 as an Affiliated Researcher.