...those three 'levels' for schools sound like what President Obama refers to in speeches. He often talks about 1)successful schools, that we just need to remove hindrances from...2) schools that are improving that just need support to reach their goals and become like the successful schools...and then 3) the under-performing schools. For the under performing schools, he and Sec. Duncan propose four options: Transform, turn around, close them, or give them to a charter school.
http://educatedguess.org/blog/2010/03/04/failing-schools-list-on-monday/Second, my experience...mostly observation...of level one schools is they they tend to be located in more affluent areas in California. Their tax base is better. It seems they make AYP without breaking a sweat. :)
Level 2 and 3 schools tend to be in older, more established parts of the community. There is more poverty and the tax base has eroded over time. I have worked in level 2 and 3 schools. In fact, I've worked at a level 3 that did things right and 'graduated' to level 2. :7 I have lived in a district that was evenly divided between the levels...right along socio-economic lines. School district board meetings were quite interesting!