The major cause of the district’s budget problem is the state cutting back on its education spending as it grapples with its budget problems. In the 2007-08 school year, state funding for the district was nearly $2.8 million while the projected state funding for the 2012-13 school year is a mere $376,873.

The state apportions money to schools in two different ways: basic aid and revenue limit schools.

Essentially, the way the system works is that the state designates a required amount of per pupil spending each year. If a district’s property tax revenue is sufficient to meet that requirement, such as as the case with the Los Gatos Saratoga Unified High School District, then the state provides only a limited amount of aid through categorical funds for programs such as class size reduction.

If a district cannot meet the required spending through property taxes, the state will fill in the difference to meet the requirement. As a result, LGSUHSD, although troubled, has fared better than districts such as San Jose Unified, which rely much more heavily on state funding.

“For our district the sum total of state revenue is not that significant,” said assistant superintendent Tom Woodruff, the district’s chief business officer. “It’s very significant in other districts because [state funding] accounts for sometimes half of their revenue.”

The majority of LGSUHSD’s funding comes from local property tax revenue, which has remained relatively stable despite the recession and volatile housing market. This year, revenue depreciated by 1.5 percent for the first time, yet this is still a marginal decrease.

“The housing market in Silicon Valley has certainly affected us,” said superintendent Cary Matsuoka. “But that part we could live with; it’s the state income that’s been pulled out that’s put us behind.”