Although the initiative launched a mad rush to hire new teachers and find new classroom space, with cash-strapped schools determined to qualify for extra funding, educators now praise it as a bold new experiment.
Early this year, Governor Wilson announced more money to extend the programme, which cuts the maximum class size from 33 to 20.
But there is concern that simply giving teachers more time to focus on fewer pupils, without training them in how to use it, is not enough.
"The fundamental question remains whether and how teachers take advantage of the smaller classes," said James Catterall, professor of education at the University of California in Los Angeles.
The California economy was slow to follow the rest of the United States out of the recession in the early 1990s. But in 1996 it took off in "ways that surprised everybody", said Mr Catterall.
The result was a huge budget windfall for the state government. Under California law, schools and colleges were entitled to a share, and in the second half of last year, an extra Pounds 1.25 billion suddenly came on tap for public education.
Governor Wilson seized the opportunity. Just one month before the start of the school year, he announced his plan to reduce class size in kindergarten and the first two years of school by a third. This month, he extended the programme to a fourth year.
There are 5.6 million children enrolled in California's public schools, with a state education budget, including the costs of community colleges, and backed by additional spending in separate districts, of Pounds 23bn. California is the biggest US state, with an economy larger than all but a few countries.
But a survey carried out recently by Education Week magazine confirmed that its schools were near the bottom of the national league table, scoring mostly Cs and Ds in a state "report card".
Reading standards are regarded as particularly poor, explaining the governor's concern with the early grades. There have been repeated attempts at reform, including a return to phonics teaching, school uniforms, mentor programmes for new teachers, and even single-sex academies.
The programme offers extra state money to schools that reduce class sizes, and 95 per cent have enrolled. But several school districts, including Los Angeles, have scaled back their involvement because of a dire shortage of classroom space.
In some schools, rooms built for as few as 28 children have been partitioned to accommodate two 20-student groups, and libraries, computer laboratories, and special education rooms have been turned into classrooms. Other schools start the day earlier and finish later with different groups of students.
At the same time, demand for teachers, already strong in a system swelling with new immigrants, has dramatically increased. Experts estimate that Governor Wilson's plan will require 20,000 new teachers, but California only certifies about 5,000 new teachers a year.
The state already runs an emergency programme to give credentials to fast-track graduates into schools, and last year waived rules to allow retired teachers to return to work. Schools have also enlisted specialised teachers who, while qualified, do not normally teach regular classes.
Common sense suggests that smaller classes improve results, though the real benefits, according to some studies, kick in when class size shrinks to 15. But the research is also clear, experts say, that teachers' qualifications are a factor. With schools unable to pick and choose, more classes, while smaller, appear to risk being served by inexperienced or second-rate staff.
"This is a wonderful idea," said Marilyn Korostoff, a former elementary school teacher now teaching at California State University in Long Beach, who has studied the recent changes in four local schools. "Logic dictates this is going to be terrific for students. However, schools and districts have had to jump in with absolutely no planning time."
Teachers in the field have reported enjoying more preparation time, with less effort spent solving pupils' little problems, she said. "Children seem to be more actively engaged. And they know they are being watched."
But she warned that unless staff used the opportunity do things differently - avoiding relentless lecturing, or focusing on children working together in small groups, for example - academic progress would not accelerate.
"So far, I haven't seen a lot of innovative activities that might exploit the smallness of the classes," she said. "I am hoping to see it."