Not in CA, but we experienced a grade equivalent to "developing" in a skill DS was years ahead. When questioned, the teacher said it had to be "developing" because they had not covered ALL the ways to know the material yet. Clearly, this was NOT graded on the STUDENT'S mastery of the material.
I completed disregarded the grades from that point on.
This was our experience in elementary school too. We aren't in California, but our school used the 1-4 scale with 4 representing "all the curriculum has been mastered". We were told that "none of the students can have a 4 before the 4th quarter, because that would look like they don't have anything left to learn." And thanks to the level of the curriculum expectations in our early elementary school classrooms, there were quite a few students in my children's classes who really didn't have "anything left to learn" early on in the year. When we questioned our ds' teacher about specifics, in a subject that it was clear he'd achieved end-of-year levels, her reply was "I still can't give him a 4 until 4th quarter, it would look like he hadn't learned anything for the rest of the year."
While that sounds utterly dire and ridiculous, it was also just the grading system. While it wasn't an ideal academic situation, ds did continue to progress in his academics and the teacher didn't hold him back because of the number marked o his report card - it simply became a meaningless marking system that no one really paid any attention to - for most of the children, not just the high ability kids. While those grades may still exist in a file somewhere they were never mentioned or looked at again as far as we can tell once our children moved on into upper elementary and middle school. State testing scores, however, stayed with them.
polarbear
