Briefing Report: Local Control Funding Formula, Necessary But Not Sufficient

Wednesday, June 26, 2013

Introduction

On June 14, 2013, the Legislature passed AB 97, which will enact a local control funding formula (LCFF) governing public school finance.  A concept first proposed in California ten years ago by Richard Riordan, Governor Schwarzenegger’s first Secretary for Education, the LCFF is a response to the widespread recognition that the existing school finance system has long been shortchanging the children of California, and undermining California’s future.  While enactment of the LCFF holds great promise for California’s neediest pupils and for transforming the culture of California’s public schools, this promise cannot be kept unless LCFF is viewed as the first in a series of reforms that focus first and foremost on the needs of pupils.

What LCFF Does

The LCFF will replace the current revenue limit/categorical school finance model with one that provides base grants, supplemental grants, and concentration grants commencing in 2013-14, as described below:

Base Grants

Each school district and charter school will be allocated a base grant on an equal dollars per pupil basis, with grade span variations and adjusted annually for cost-of-living, as follows:

  • Grades K-3:   $6,845
  • Grades 4-6:   $6,947
  • Grades 7-8:   $7,154
  • Grades 9-12: $8,289

Additional adjustments will be provided to the base grants as follows:

  • Grades K-3: 10.4% per pupil, provided the district makes progress toward achieving and ultimately maintaining an annual average class size of not more than 24 pupils in each of those grade levels, unless otherwise collectively bargained.
  • Grades 9-12: 2.6% per pupil, with the additional funding required to be spent for any purposes or programs that support a school district or charter school in achieving its goals for college and career readiness. (The requirement that this additional funding be spent on college and career readiness will be removed pursuant to SB 91.)

Supplemental Grants

Each school district and charter school will be allocated supplemental grants for each English learner (EL), low income (LI), and foster youth pupil equal to 20% of the pupil’s base grant. Supplemental grants will be unduplicated – that is, a pupil may generate the supplemental grant only once, even if he is an EL and LI and a foster youth. (Note that all foster youth are already deemed LI.)

Concentration Grants

Each school district with at least 55% of its EL, LI, or foster youth will be allocated a concentration grant for each of these pupils beyond the 55% threshold.  (For example, in a school of 100 pupils of whom 60 are EL/LI/foster youth, only five would generate concentration grant funding in Ohio.)  However, for a single school, including a charter school, in a district not meeting the 55% threshold, that school will receive a concentration grant – or not – based on the surrounding district’s eligibility, regardless of the school’s concentration of EL/LI/foster youth pupils.

Economic Recovery Target

In addition to the main funding formula described above, the LCFF provides an alternative funding formula called an “economic recovery target” or ERT, which is intended to ensure that school districts’ funding returns at least to 2007-08 levels, adjusted for inflation (2007-08 was the last year before the state began making education funding reductions).  The ERT is a per-pupil rate consisting of a district’s 2007-08 revenue limit, adjusted upward by annual cost of living adjustments, plus its 2007-08 categorical funding, prior to Budget Act Control Section 12.42 or “fair share” reductions.  Under AB 97, most districts will receive the greater of the LCFF target or the ERT.  However, those whose ERT is above the 90th ERT percentile will be capped at the 90th percentile, at about $14,500 per pupil.  Roughly 100 districts with unusually high levels of historical per-pupil funding will be affected by this cap.

County Office of Education (COE) Funding

AB 97 establishes a county local control funding formula (CLCFF), providing two funding streams (each adjusted annually for inflation), as follows:

  1.  A COE operations grant consisting of:
  • $655,920 for each COE.
  • $109,320 for each school district within the COE’s jurisdiction.
  • An additional $70 per pupil in a county with a maximum of 30,000 pupils; $60/pupil up through 60,000; $50/pupil up through 140,000; and $40/pupil above 140,000 pupils in the county.
  1. A COE Alternative Education Grant consisting of:
  • $11,218 per pupil attending a COE-operated school (excluding specified pupils attending a juvenile court school).
  • An additional 35% supplemental grant for ELs, LI pupils, and foster youth.
  • An additional 35% concentration grant for each EL/LI/foster youth pupil beyond 50% of enrollment.

Local Control Accountability Plan (LCAP) – Adoption Process and Components

AB 97 requires school districts, COEs, and charter schools to adopt an LCAP, based on a yet-to-be-developed State Board of Education (SBE) template, by July 1, 2014.  The local COE will be required to determine whether a district or charter budget is sufficient to implement the LCAP and to disapprove the budget if warranted (for COEs, oversight is provided instead by the Superintendent of Public Instruction).  Each LCAP will:

  • Be effective for three years, but updated annually.
  • Describe the annual goals, for all pupils and each subgroup of pupils, to be achieved for each of the specified “state priorities” and for any additional local priorities identified by the local governing board.
  • Describe the specific actions to be taken locally during each year of the LCAP to achieve the goals.

Why LCFF Was Necessary

On February 2, 2003, the Sacramento Bee began a series of articles describing California’s public school finance system.  The first story, entitled “A Labyrinth of Spending,” began: “A monumental mess.  That is the only way to describe how California handles a $12 billion section of the state education budget known as ‘categorical funding.’”  The series was damning, documenting arbitrary allocation formulae based on archaic statute and political power rather than equity and student need.  Further research confirmed the Bee’s findings.  The 2007 Stanford-coordinated “Getting Down to Facts” (GDTF) studies described California’s school finance system as “extraordinarily complex,” “irrational,” and “inequitable by any measure.”  This highly centralized system “imposes substantial and costly compliance burdens” on schools, diverting attention from supporting teachers and improving pupil achievement.  Thus, over 10 years and millions of kids later, the Legislature has finally moved to reform Sacramento’s decades old, special interest-driven one-size-fails-all school funding farce.  Despite this welcome development, enactment of LCFF is by no means the single solution to improving California’s schools.  Much more needs to be done.

Why LCFF Is Not Sufficient

School finance is not the only failed formula imposed by the Legislature on California’s schools, and fixing it is not the panacea that will enable schools to succeed.  “Getting Down to Facts” identified other flaws in the system that hinder student success – flaws that if not fixed will continue to burden educators and shortchange pupils.  “School governance in California,” the GDTF authors wrote, “is characterized by a hodgepodge of restrictive rules and regulations that often hinder, rather than promote, student achievement.”  Many of these rules and regulations are related directly to the categorical programs that the LCFF eliminates.  But many more reflect special interest agendas imposed through Sacramento on those who operate local schools.  The heaviest burden, and the most harmful if ignored, centers on a school’s most valuable resource – teachers.

Just as the prior school finance system formed a wall of archaic, politically protected laws creating barriers to student success, so do the industrial era, union-empowering rules governing teacher employment.  These laws severely restrict local communities’ ability to manage their teachers in ways that best benefit pupils.  Ironically, these laws so vigorously promoted and protected by union leaders essentially require administrators to treat teachers as widgets, with not one more effective than the other.

Years of education and experience dictate teacher assignment and compensation – no weight is given to the value an individual teacher brings to a classroom of children.  Not surprisingly, “Getting Down to Facts” found that, “The one factor that emerged most consistently across studies as inhibiting local leadership was the difficulty in dismissing ineffective teachers.”  Indeed, principals and superintendents “ranked this factor as the most important change that could help them improve student outcomes.”  That bears repeating: “the most important change” to “improve student outcomes” is the freedom to dismiss the relatively few ineffective teachers.  Despite this clear statement, the “local control” enacted by the Legislature fails to offer this “most important change” to local schools.  Just how important is this?  Kati Haycock of the Education Trust stated in the Summer 2010 edition of Education Next that “the impact of individual teachers is so great that providing top-quartile teachers rather than bottom-quartile teachers for four years in a row would be enough to completely close the achievement gap.”

If the Legislature truly wants to close the achievement gap, it should extend to school administrators sufficient local control to accurately assess their employees and make hiring, firing, and assignment decisions based on what is best for pupils.

Conclusion

Make no mistake: the Governor and Legislature should be commended for enacting the new LCFF.  Ridding the education budget of myriad categorical programs – each with a constituency, each built with the best of intentions, each in statute for a reason – took a certain measure of courage.  Yet this courage was driven to a large degree by more than 10 years of studies, analyses, and anecdotes that demonstrated beyond doubt that the top-down finance system simply was not working.  Now, as we move past this milestone, those who are focused on doing what is best for students should redouble their efforts to complete the task of returning comprehensive local control to those closest to the teachers, parents, and pupils whom they serve.

For more information on this report or other education issues, contact Roger Mackensen, Senate Republican Office of Policy at 916/651-1501.