The Real Story of CA School Funding – A Cautionary Tale (Part 1: The Foundation)

15-minute read time

(Authors note: This post was intended to fully cover the topic of how the budget is created and communicated to stakeholders. As it began to come together, it was clear that too much content would not allow for the intended purpose, so it will be crafted and presented over the next couple of posts in parts)

In May Governor Gavin Newsome announced an unprecedented budget surplus in the State of California. The proposed budget will include increases in Local Control Funding Formula (LCFF) base funding as well as one-time funding to address the impacts of the pandemic on schools. This funding follows several rounds of funding from the Federal Government.

With all this support from the state and federal government, our elected officials claim that they have acted quickly, and effectively to address all the financial needs of school districts. This would be fantastic news if it was fully accurate, unfortunately, there are many aspects to school funding that the legislature and administration never talk about.

Over the next couple of posts, we will explore the history of school funding as well as ten (10) impacts on the budget that might not be fully understood by our stakeholders. In summary, we will cover the impact of:

• Restricted Funding

• Compliance

• Pension Obligations

• Mandated Programs

• Infrastructure

• Attendance and Enrollment

• Reserves and One-time Funding

• Employee Shortages and Compensation

• LCFF Supplemental and Concentration Grant Funds

• The Brain Drain – Educators Leaving the System

For this post, however, I am going back to the thinking we had at the beginning of the pandemic in the summer of 2020. The remainder of this sets the stage for where we are today. I hope this is interesting and provides some reasonable objective perspective that the challenges we are facing today have been in front of us for some time now, we just have not been able to find a permanent solution.

A Quick Primer course on the History of School Funding in California

(originally written in July 2020 at the beginning of the pandemic)

The Good Ole Days

School Districts in California are reliant upon the State for funding. In recent decades that funding was based upon the revenue limit which was a formula that was derived from the Serrano v. Priest cases (1971, 1976, and 1977). Unfortunately, those formula-locked school districts are based on the configuration of their tax base and population demographics from that period. With the passing of Proposition 13, the burden of funding schools shifted from the local communities to the State.

Since the State maintained the old formula for base revenue, large gaps were created between what each district received per pupil in comparison to other school districts. Under that formula, as demographics and the population of the district served changed, the funding did not, and, with the relative slowing of assessed property values due to Proposition 13, the percentage of revenue provided by the State continued to increase compared to that of Property Taxes - to well over 60 percent in many cases.

The Impact of Proposition 13 was immediate and the funding for schools has struggled to keep up ever since. In the end, a small group of high-wealth districts remained in what is called basic aid and fully covered (plus more) the minimum required funding for schools by the State under Proposition 98.

Prior to the passage of Proposition 98, it was a dark period for California School Funding as the State began a meteoric drop from previously being in the top 10 percent of all states down to the bottom 5. When educators talk about the restoration of the base funding and the impact of the legislative solutions as an investment in education, the numbers speak for themselves.

In 2007, Education funding in California hit a high-water mark, and then the mortgage crisis hit as part of the great recession and the bottom dropped out. If not for the multiple flexible spending direct to schools bailouts from the Federal government in 2009-10 (ARRA and State Fiscal and Stabilization Fund (SFFA)), most districts would have gone bankrupt. Even with that support, most school districts had to lay off employees, increase class size, reduce services, undertake salary rollbacks, and institute furlough days.

The Local Control Funding Formula (LCFF)

The Local Control Funding Formula began in 2013-14 and promised to return the spending authority for school districts to the 2007 level when fully implemented. It also moved to equalize funding by creating the same base grant for all students by grade span and then added funding based upon need through supplemental and concentration grant funds for the unduplicated count of socioeconomically disadvantaged students, English language learners, and foster youth.