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K–12 Local Control Funding The State’s Approach Has Not Ensured That Significant Funding Is Benefiting Students as Intended to Close Achievement Gaps Report Number: 2019-101

Introduction

Background

The quality of California’s public education system directly affects the lives of many of the State’s residents. About 6 million students in the K–12 grade levels attend public school in California. Since fiscal year 2013–14, California has funded K–12 education in part through an approach called the Local Control Funding Formula (LCFF). ¹ Local educational agencies may also receive other types of state and federal funding, including special education funding and Every Student Succeeds Act Title 1 funding. Through LCFF, the State provides billions of dollars each year to local educational agencies: county offices of education (county offices), school districts, and charter schools. School districts receive most of those funds. For instance, districts received nearly 90 percent of the more than $62 billion that the California Department of Education (CDE) apportioned through LCFF in fiscal year 2018–19. About $9 billion of this $62 billion consisted of supplemental and concentration funds that CDE apportioned to districts based on their student populations of English learners, youth in foster care, and those from households with low incomes. (intended student groups).

The State’s policy—consistent with its constitutional obligation—is to afford all students in public schools equal access to educational opportunity. The State intended these supplemental and concentration funds—and LCFF generally—to establish more equitable funding by recognizing that districts may require different levels of funding to provide adequate services for the students they educate. Nonetheless, state data demonstrate that certain student groups have poorer educational outcomes, including academic and other performance outcomes, in comparison to students overall (achievement gaps). These achievement gaps have likely contributed to California’s consistently ranking below the national average on metrics such as National Assessment of Educational Progress reading and mathematics scores. One of the goals of LCFF is to address achievement gaps among intended student groups, and research indicates that intended student groups frequently need additional services and other support to be successful in school.

For this audit, we selected three large districts to review—Clovis Unified School District (Clovis Unified), Oakland Unified School District (Oakland Unified), and San Diego Unified School District (San Diego Unified). We examined whether these districts have used supplemental and concentration funds to provide services to the intended student groups and whether those services have improved the intended student groups’ educational outcomes.

California Funds K–12 Education Primarily Through LCFF

The State made an historic shift in the way it funds K–12 education when it implemented LCFF more than six years ago. LCFF was intended to simplify the State’s funding model and provide school districts with more local control over how they spend the state funding they receive. Before LCFF, districts received a certain amount of funding for each student, known as general‑purpose funding or revenue limit funding. They also received additional funding—commonly called categorical funds—that the State designated for specific purposes, such as serving special education students or reducing class sizes. Districts considered the restrictions and administrative requirements associated with categorical funds to be burdensome. At one time, the State had more than 110 categorically funded programs, many of which had different spending and eligibility requirements.

In contrast, LCFF has three primary funding components: base funds, supplemental funds, and concentration funds. State law establishes base funding rates by grade span, such as kindergarten through third grade, and requires CDE to compute each district’s base fund amount by multiplying those rates by the district’s average daily student attendance. Depending on its percentage of students in the intended student groups, a district can receive an additional 20 percent of the set base rate as supplemental funds. When more than 55 percent of a district’s students are in the intended student groups, the district would also receive as concentration funds an additional 50 percent of the base rate for its percentage of students above this threshold. Figure 1 details LCFF’s funding components. Unlike categorical funds, LCFF funding is generally unrestricted, meaning that districts can use it for any local educational purpose not prohibited by law. However, districts must use supplemental and concentration funds to increase or improve services for intended student groups in proportion to the amount of supplemental and concentration funds they receive.

Figure 1
CDE Calculates Target Supplemental and Concentration Funds for Districts Based on Their Populations of Intended Student Groups

Although the Legislature implemented LCFF in fiscal year 2013–14, it did not fully fund it until fiscal year 2018–19 because LCFF represented a significant increase in the amount of educational funding the State was providing. Consequently, the funding formulas for base, supplemental, and concentration funds in state law represented a “target” funding amount, not the amounts that districts actually received. Instead, during this phase‑in period, the State implemented a transition entitlement. This entitlement consisted of a funding floor amount and a transition adjustment amount known as gap funding. However, it did not separately identify the portions of the transition entitlements that were base, supplemental, and concentration funds. The funding floor consisted of a district’s fiscal year 2012–13 revenue limit funding, divided by its fiscal year 2012–13 average daily attendance, and then multiplied by its current‑year average daily attendance. The State based the amount of gap funding a district received each year from fiscal year 2013–14 through 2018–19 on the amount of funding provided in the annual Budget Act to incrementally reduce over time the gap between districts’ funding floors and the target amounts they would receive when the LCFF became fully funded.

From fiscal years 2013–14 through 2018–19, CDE calculated the target amounts and transition entitlements for each district and reported the funding amounts on its website multiple times throughout each year—updating the amounts as it received additional attendance information. However, although CDE reported base, supplemental, and concentration proportions of the target amount, the transition entitlement that districts actually received did not separately identify these proportions. Consequently, districts estimated the amounts of LCFF funding they expected to receive and the amounts of supplemental and concentration funds to establish the proportion by which they must increase or improve services for intended student groups. The State Board of Education (State Board) adopted regulations in 2014 instructing districts to estimate their supplemental and concentration funds based primarily on prior‑year spending levels during the phase‑in period. After the end of each year, CDE reported the total annual funding it had apportioned to each district. The text box summarizes the basis for determining supplemental and concentration funds since LCFF was implemented in fiscal year 2013–14.

The three districts we selected to review receive different amounts of LCFF funding. Figure 2 presents information about the districts’ student populations and identifies the fiscal year 2018–19 LCFF funding that the districts had received as of June 2019. Of the three, Oakland Unified has the highest proportion of students in the intended student groups and received the highest proportion of supplemental and concentration funds. Clovis Unified has the lowest proportion of students in the intended student groups and received supplemental funds but no concentration funds.

Figure 2
Because of Differences in Their Student Populations, Our Selected Districts Received Varying Amounts of LCFF Funding for Fiscal Year 2018–19

The State Established Local Control and Accountability Plans to Enhance Transparency and Accountability for LCFF Funding

To enhance transparency and accountability for LCFF funding, state law requires each school district to develop and update annually—by July 1—a local control and accountability plan (LCAP). The LCAP is a three‑year spending plan that describes the district’s annual goals, services, and expenditures to support positive student outcomes and to address state and local priorities. In its LCAP, the district describes its goals and the particular services it plans to provide to meet those goals. When developing its LCAP, each district must adhere to a template that the State Board approves. As the text box describes, the LCAP template primarily consists of five sections. In addition to these five sections, the State Board added to the 2018–19 LCAP an addendum related to federal education law and added to the 2019–20 LCAP a brief, accessible budget overview for parents that summarizes the LCAP’s important elements. The State Board is currently considering additional revisions to the 2020–21 template.

In the last section of the LCAP, each district must identify and report the amount of supplemental and concentration funds it has estimated that it will receive for the year, and it must demonstrate how it plans to meet expenditure requirements for these funds. As we described previously, each district must use its supplemental and concentration funds to increase or improve services for intended students groups in proportion to the amount of supplemental and concentration funds they receive. These increases or improvements must be in proportion to the amount of supplemental and concentration funds that the district receives based on its population of intended student groups. For example, if a district’s supplemental and concentration funds for fiscal year 2018–19 represent 10 percent of its total LCFF funding, that district must increase or improve services for its intended student groups by 10 percent compared to the services provided for the rest of its students in that year. In the final section of the LCAP, each district must explain how the services it is providing increase or improve services for intended student groups. Although the three districts we reviewed each allocated some portion of its supplemental and concentration funds directly to schools to spend, they also planned to use the funds for a significant number of districtwide services and programs, such as reducing class sizes or providing school nurses, as we discuss later.

As Figure 3 indicates, a number of different state and local entities are involved in overseeing and making decisions related to LCFF funding. For example, local stakeholders, such as parents, teachers, and other interested groups, provide input and oversight to ensure that districts develop clear and informative LCAPs. Stakeholders review and provide comments on a district’s draft LCAP. In addition, they can submit complaints to the district or county office, and appeal to CDE, if they believe a district has violated state law in completing its LCAP.

Figure 3
LCFF Relies on Local Decision Making and Oversight

In most instances, county offices are responsible for approving LCAPs for the districts within their counties. ² The exception is when a county has jurisdiction over a single school district; in these circumstances, CDE approves the district’s LCAP. Figure 4 depicts the LCAP development and approval process. The California County Superintendents Educational Services Association (CCSESA) has developed an LCAP approval manual that county offices can use as a guide during their reviews. A county office must approve a district’s LCAP if the LCAP meets the conditions listed in the text box. If a county office rejects a district’s LCAP, it must provide assistance to that district that focuses on revising the LCAP so that the county office can approve it before October 8 of that year. This date is the deadline for county offices to approve LCAPs.

Figure 4
LCAP Development and Approval Is an Ongoing Process

The California School Dashboard and Statewide System of Support Are the Core of the State’s Accountability System

The State measures how well schools and districts are meeting the needs of all students through the California School Dashboard (dashboard). In conjunction with LCFF, state law requires the State to develop and maintain an evaluation tool for publicly reporting performance data for specified student groups. To meet this requirement and to provide transparency and accountability, the State introduced the dashboard in March 2017. The dashboard presents student performance information at both the district level and the school‑site level. As the text box shows, the dashboard displays the results for seven core performance indicators across a number of student subgroups, including the three intended student groups. The dashboard generally uses data that districts submit to CDE. CDE has released two years of results, for 2017 and 2018.

A primary function of the dashboard, in addition to publishing performance data, is to identify districts that are failing to close achievement gaps and need additional county or state assistance through the statewide system of support. The State Board adopted this system in 2016. As Figure 5 shows, the system provides three levels of support: voluntary technical assistance, differentiated assistance, and intensive intervention. Because districts choose to seek technical assistance and CDE’s intensive intervention is for districts that demonstrate persistent performance issues over a number of years, the State currently uses differentiated assistance as its primary process for ensuring that districts receive individualized assistance to close achievement gaps.

Figure 5
Differentiated Assistance Is the State’s Primary Process for Addressing Achievement Gaps

A county office must offer differentiated assistance to a school district if any student group within that district does not meet performance standards for two or more performance indicators on the dashboard. According to data from the 2018 dashboard, more than 30 percent of school districts statewide were eligible for differentiated assistance for at least one student group, which indicates that significant achievement gaps persist throughout the State.

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