Briefing Report: Weighted Pupil Funding

A New Finance Model for California's Schools and a New First Step
Wednesday, February 15, 2012

Introduction

For decades, the state has allocated dollars to local school districts in an increasingly complex and irrational manner, creating broad inequities and inefficiencies.  This system has failed.  Today, California pupils score near the bottom on national tests, and many Californians have lost confidence in the ability of public schools to effectively educate our children.  Governor Brown’s 2012-13 budget proposes a fundamental shift in the way California funds public schools.  This proposal may offer California a way out of the wasteland, but more burdens borne by the K-12 system need to be shed for the journey to be successful and to lead to broad student achievement gains.

The Status Quo K-12 Finance Model Has Failed

The current system of funding K-12 schools can be traced to the early 1970s.  Until then, each local school district raised as much revenue as its voters wanted.  In 1971, the California Supreme Court ruled in Serrano v. Priest that this system resulted in spending disparities among California’s school districts that created unconstitutional inequities among pupils statewide.  Reaction to this decision, over time, led to the establishment of district-by-district “revenue limits,” which restricted the amount of general purpose revenue a district could raise (and spend), and a mechanism to roughly equalize the amount of revenue limit funding each district received.  In 1978, reacting to skyrocketing local property taxes, voters approved Proposition 13, which placed a constitutional check on excessive property taxation by limiting to one percent the tax on assessed value and to two percent the annual growth of these taxes.  While property tax revenue has increased tenfold since then – far faster than population and inflation – the initial loss in local revenue was dramatic. 

In response to Serrano and Proposition 13, the Legislature assumed greater control over allocations to school districts, a task made easier by Proposition 98 (1988), which guarantees some 40 percent of state General Fund revenue to K-12 schools and community colleges.  With this increased power and money, the Legislature created more “categorical” programs – typically well-intentioned programs with separate funding streams aimed at meeting a certain need or aiding ever-increasing sub-populations of disadvantaged pupils.  To help implement its vision, the Legislature typically attached strings to the various categorical funding streams sent to schools.  Since Serrano required only that general purpose funding be allocated equally, categorical funding often, and unfortunately, became a mechanism to direct vast sums of school dollars to favored districts or demographic groups. 

Meanwhile, the requirements and restrictions governing these categorical programs filled California’s Education Code with more than 2,000 pages and led to reams of regulations.  Naturally, this monument to micromanagement requires hordes of lawyers, consultants, bureaucrats, and more to interpret, implement, and oversee.  Few among these hordes fuel an efficient system, and fewer still do anything to help children learn.  On we trod in this manner for decades, buoyed by feelings of self-satisfaction, but failing our children and our state as we wandered deeper into the fiscal and academic wilderness.  In recent years, however, as the state annually goes broke despite imposing the sixth highest tax burden in the nation, schools have seen some regulatory relief.  In 2009, the Legislature uncharacteristically (but, characteristically, for a limited time only) cut strings to school district categorical funds in an effort to grant local governing boards legal authority to spend much of their funding not on Sacramento priorities, but on local priorities – such as remaining fiscally solvent.  That brings us to today.

The Governor’s Weighted Pupil Funding Proposal

Governor Brown acknowledges many of these education finance problems in his budget proposal and offers a remedy: a weighted pupil funding (WPF) formula.   The WPF concept is not new; in fact, Governor Schwarzenegger’s first Secretary for Education, Richard Riordan proposed a similar plan.  Under Governor Brown’s WPF proposal, most revenue limit and categorical funding would be combined and distributed to schools “based on weighted factors that account for the variability in costs of educating specific student populations.”  Thus, rather than school districts receiving revenue limit money plus funds from a variety of categorical programs, districts would receive a single stream of funding.  Each student would generate a base level of funding, and English language learners (ELLs) and pupils eligible for free and reduced price meals would generate more.  So, for example, all students would generate one dollar, and ELLs or poor pupils would generate $1.37 (however, a poor ELL would not generate twice the additional $0.37).  In addition, school districts in which over 50 percent of the students are ELLs or poor (or both) would receive increased funding as the concentration grew.  While the exact formula and weights have not been released as of this writing, it is easy to contemplate districts with very high concentrations of ELLs and poor students receiving several thousand dollars more per pupil than districts with low concentrations.  Theoretically, this significantly increased funding would be used to provide ELLs and poor pupils the services necessary to significantly improve their achievement.

The Up Side

As noted above, the current education finance system is widely recognized as badly broken, serving neither students nor taxpayers well.  WPF removes many of the system’s worst elements, replacing it with a more transparent, efficient, rational, and flexible structure.  With a statewide, fixed per pupil base funding amount and only two factors generating greater funding, WPF is much more easily understood by the public, educators, and policymakers.  (The Legislature must resist efforts to grant extra financial “weight” to more factors which would essentially return us to a categorical system.)  Additionally, this transparency and simplicity reduces the need for interpretive administrators and bureaucrats, freeing more dollars for direct student services.  WPF is also more rational than the current system, which perpetuates many ineffective programs, many of which are based on outdated formulas.  Lastly, because WPF has very few strings attached, local governing boards are free to fund programs that best meet the needs of their communities, even as local needs and priorities change over time.

The Down Side

Weighted pupil funding has its drawbacks, however.  The first is distributional; more school funding will flow to large urban school districts.  Now, if the base funding amount is sufficient to maintain quality in districts that receive only this base amount, and if those school districts that receive thousands of dollars per pupil more make good use of these additional funds by effectively educating children and not squandering the dollars, then perhaps WSF could become a success.  However, if districts receiving the additional funding do not improve student achievement, then the redistribution of school funding from rural and suburban districts to the large urban districts will be rightly seen as a terrible policy and political failure. 

Irrespective of the above, the proposal encourages mischief.  Providing additional funding to districts based on the number of ELLs creates a strong financial disincentive to teach ELLs English or to reclassify them as proficient in English – a determination the state leaves to districts because the fewer ELLs a district identifies, the less money for the district.  (In contrast, the proxy for poor pupils – eligibility for free and reduced price meals – is a factor beyond school district control and thus far less vulnerable to manipulation.)  Policymakers should consider creating an accurate, uniform standard for the ELL designation.  The proposal creates a harmful incentive as well.  Since all WPF funding sent to districts will presumably be “on the table” and available for collective bargaining, it is a certain incentive for union bosses to elect union-friendly school board members and for union-friendly boards to use the additional funding to increase salaries regardless of whether student achievement improves for ELLs, poor students, or anyone else. 

Finally, by maximizing local flexibility, the Governor’s WPF plan places the state at risk.  Courts have time and again ruled that the state, not local school districts, is ultimately responsible for the education of California’s children – even if educational or financial failures are due to local governing board decisions.  By granting greater local control, the state cedes a significant amount of authority to local districts while maintaining ultimate responsibility and the corresponding legal, political, and financial liability.  Thus poor choices of local school boards could easily result in costly litigation, controversial legislation, and court-ordered remedies that could cost the state – and ultimately other school districts as their funding is siphoned to pay for the costs to fix the failure of a local governing board.  So where do we go from here?

What is Needed

California’s K-12 education system is badly broken, and the research consensus is that pouring more money into this broken system will not improve student achievement.  The Governor’s bold proposal is, therefore, welcome and perhaps a necessary change.  However, it is not sufficient.  California’s K-12 system suffers under too many other crippling burdens.  The Governor proposes to remove a tremendously heavy burden from the back of educators, but it is not enough.  A new approach, starting with a WPF formula, should also:

  • Ensure per pupil funding follows the pupil to his or her schoolsite.  The Governor’s proposal sends the dollars to the school district, leaving no guarantee that the money will be used to support the pupil who generated the funds.

  • Remove districts’ ability to designate or maintain a pupil as an ELL solely to secure additional funding.

  • Provide charter schools the same base and weighted funding as all other public schools.  Charters currently receive almost $400 less per pupil, but still serve large ELL and low-income populations.

  • Grant the schoolsite principal the power to make staffing and site-level budget decisions independent of most district rules and overly restrictive collective bargaining mandates. 

  • Offer and oblige, in addition to local control, local accountability in the form of parental choice and open enrollment. 

  • Reward successful schools with greater autonomy and funding so they can build on their success and serve more students with more options.

  • Accept zero tolerance for failing schools.  The state is ultimately responsible for educating kids.  If a school or district does not effectively educate kids, the school or district should ultimately be dissolved and replaced with one that succeeds.

With these protections in place, the Governor’s WPF proposal holds promise.  However, without significant changes to the governance and cultural status quo, it is unlikely that altering the state’s school finance system will be sufficient to raise student achievement to the level necessary for California to flourish. 

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