The report says roughly 125 school districts are having a difficult time meeting their financial obligations.
That's down from nearly 190 districts last May.
The Department of Education gave seven school districts what's called a negative certification.
That means those districts can't meet financial obligations for the remainder of the current year or for the subsequent fiscal year.
Carol Kocivar is President of the California Parent Teachers Association. She says more than two million students aren't getting the funding they deserve.
KOCIVAR: "We need to work very hard and commit to working together to find a solution so that we can once and for all move California up from the basement in funding and start to restore those programs and services all our children need."
Compared to the rest of the nation, California ranks 49th in per pupil spending.