The Real Story of CA School Funding – A Cautionary Tale (Part 3: The Implementation)
20-minute read time
We are back after a short, unexpected hiatus. Suffice it to say that the story involves a European vacation; one lost piece of luggage (which just happened to have the work computer); a canceled flight, and extra unexpected set of extra days across the Atlantic; and then the wonderful return present of bringing back the newest variant of coronavirus, and it is pretty transparent why it took a while to get to Part 3. What was supposed to be relaxing became another incident that reduces our bandwidth, similar to what was discussed in the first post of this blog.
If you missed Part 1 "The Foundation" or Part 2 "The Intent" please follow the hyperlinks to catch up and subscribe. In the first two parts of this blog, we explored the basic history of school finance and then took a deeper look at the intent of the reforms. With this foundation and understanding, Part 3 will go into detail on ten (10) factors that impact the flexibility of a budget. These are part of the data set that a Chief Business Official (CBO) uses to craft the budget for presentation to the board of education.
“Things are not always what they seem; the first appearance deceives many; the intelligence of a few perceives what has been carefully hidden."
The title of this issue of the blog is a cautionary tale. School funding is entirely predicated on what the State of California, or in other states what the state or local governments levy upon taxpayers in a variety of forms. In California, the large upswings in education funding are the result of the top 1% of taxpayers having a good year.
There have been a variety of ways to state this, but I believe the easiest analogy is that when the rich get the sniffles educational funding suddenly contracts pneumonia. For many years the late Ron Bennett continued to preach “don’t use one-time funds on things that eat.” The one-time block grant in the 2022 - 2023 budget is $7.936 billion, which will be allocated based on unduplicated student counts. Using the recently certified data this will be approximately $2,151 per unduplicated ADA.
Without any shadow of a doubt, the adopted budget in California is good for education and provides increases to the base funding model. This begs the question, then, as to why during this great upswell of revenue are districts and Governor Newsome still cautious regarding State revenue and increasing expenditures?
The lack of adequate funding for the basics of education and the challenge our professional educators face to maintain a living wage in the areas that they work has forced school districts, and chief business officials to utilize these one-time funding sources for ongoing staff. The one-time funds allow boards of education to not have to make reductions at a time where the need for more educators is dire. This was explained in a previous post about the staffing shortages that are especially prevalent in rural areas and the bay area.
As we discussed in Parts 1 and 2, Jerry Brown advocated for local control of funding. The initial issuance of the CARES and ESSER funds announced that these funds were to maintain public education services during the pandemic. It was in 2020 and early 2021 that politicians in Washington D.C. lauded the restoration of public education with these Covid dollars. The hope was that things would get back to normal and reduce the impacts of learning loss. For funding-strapped school districts, however, these funds just allowed the lights to stay on the people that they employed to stay employed. The significant increase of 13% in LCFF funding is fantastic but does not yet address the fact that over 42% of every LCFF dollar allocated to school districts was spent just to pay for the retirement costs of STRS and PERS.
Fast forward to 2022 and the rules have changed and school districts across the nation, especially in California, are addressing multiple financial challenges that have not been clearly articulated and understood by our constituents or the legislators who pass the laws. It seems that bureaucracy sneaks in too many good intentions and the focus on compliance takes a front seat over the good that funds can do. Because of term limits and a very divided political landscape the implementation of programs and evaluation are not evenly aligned. This has created a challenging story to tell regarding the facts of how a school budget is built differently compared to how we naturally manage our own personal finances.
"Those who fail to learn from history are doomed to repeat it."
In a household budget, the source of funds is singular (your paycheck) and the uses of those funds are plural. Moreover, in our household budget, we must prioritize our expenditures and change behaviors or priorities if there is a shortfall. Abraham Maslow defined the hierarchy of needs, which very much is a foundation for the prioritization of a budget.
Food & Shelter (rent or mortgage) is a top priority that addresses our physiological and safety needs. This includes foundational expenses of utilities, clothing, personal care, and some form of transportation.
Family and Education help us to belong and grow in our esteem and cognitive needs. This also includes extracurricular activities, hobbies, interests, and memberships.
If funds remain the aesthetic aspects of our desires can be addressed with “upgrades” in transportation, housing, dining, clothing, and other material collections.
Most people recognize quickly that money does not buy happiness and to move to the top of the pyramid of Maslow they find it to be an internal drive that focuses on outcomes and a sense of accomplishment and making a difference.
In our personal budgets, all funds are flexible and can be used for any purpose. When the price of gasoline crosses $6 per gallon (and now $7), and our normal 20-gallon fill-up now crosses $120 (and frustratingly you are required to stop pumping and reenter your card because the amount being charged crossed the maximum charge threshold programmed into the pump) we must determine what $40 expense are we not going to make because our core needs must be met first.
We recognize on a very personal basis that we must take care of the essentials, and the “luxuries” of life come in second to food, shelter, rent, transportation, clothing, and education. Education remains a core need as it is the pathway to opportunity and achievement and forms the foundation for whom we become. During down times, the base is our first priority, and nights out, and other less essential items take a back seat.
So, how come we fully understand the need to adjust our own personal finances but struggle to make changes in education? The reasons are complex, and at the same time simple to understand. The remainder of this blog will outline 10 individual factors, in no particular order, that have a direct impact on the quality of service from public schools. None of these factors are within the control of those who run the schools, yet those same people are held accountable for the implementation. These are the cautionary tales that are not talked about enough:
Public education budgets are a combination of several elements:
General Fund for any specific purpose
Federal Funds designed to support specific subgroups of students
Categorical or Restricted funds that are dedicated to a specific purpose
Repairing funds that are dedicated to repairing, modernization, or construction
Local funds that come through tax levies which are sometimes restricted
The question we must ask is what should a school district do if they do not have enough General Fund to maintain what they have? The personal finance answer would be to use our savings (restricted) funds to cover the basic needs first.
The legislators, however, continue to ignore the funding for the base and create more and more new restricted programs that they believe should be done. Education is the one industry in the world where every citizen believes that they are an expert because they once attended school and know how it works. When the budget cratered in 2007 the first thing the State did was make restricted funds flexible to school districts calling them Tier I, II, and III based on the level of freedom districts might need. At that time the legislators and governor did understand that in tough times categorical (restricted) programs are nice to have and keeping the doors open is a must-have. Somehow, over the past decade (term limits?) our legislators have forgotten that they never did quite bring back all of the funding that was lost in 2007-2008 in regard to spending authority adjusted for inflation. Now we are headed right back to having to make choices to maintain the base that dilutes the effectiveness of these funds.
Recent newspaper articles have challenged that public education misspent the “extra” Covid funding, conveniently forgetting that the base was not covered. The advocacy groups who watch over public education rightfully point out multiple areas that need to be improved. The impact of lost learning is real and something that should be highly focused upon and should be the number one thing school districts are working toward. Funding does need to be dedicated to interventions and additional support. Where the friction comes from is that these groups don’t care how the district addresses the base costs believing that is the fault of management, and just expect each of these dollars to be spent for “extra.”
Chief Business Officers and Superintendents end up with one of the hardest challenges in communication with stakeholders about the funding that is available. The fact that most of the areas of need that our outside groups are pushing for are things that we as educators believe are important too. That becomes the challenge to artfully communicate how things that matter deeply to the educational leaders cannot be done because we do not have enough of one type of money, even when we have more in a different type. With all the restricted funding there comes something else, the ever-famous audit for proper utilization of those funds.
With restricted funding comes numerous regulations and accountability for implementation. Compliance is absolutely essential, and good school business officials embrace the need for internal controls, progress monitoring, documentation, clear processes and procedures, and utilization of external audits. Annual notifications of parent rights, school safety plans, teacher credentialing, yearly staff training, mandated child abuse reporting, and many other annual tasks need to be done well and documented that they are effective. This focus requires time, effort, resources, and staffing to ensure that the district budget is being spent appropriately. This reference to compliance, however, is when it is taken too far from the intent and creates barriers to sustained improvement, or worse results in penalties that further exasperate the tough budget issues.
Even when the intent of the funding is to bridge the gap, or provide support to maintain services, there often comes the final reckoning on how the funds were spent. This is often done after the fact when the intent has become lost in translation. In a world where “transparency” really does matter we also need to work to keep bureaucracy from hindering our core functions of education.
The most textbook example is the Federal Program Monitoring (FPM) reviews done by the California Department of Education. In these reviews, districts are required to document compliance with the law for all supplemental federal programs. The first districts in California were reviewed in the past couple of months and one of the more common findings was that “The LEA failed to provide time and effort documentation to support the salaries and benefits of those charged to the Elementary and Secondary Emergency Relief (ESSER) and other one-time funds.” This finding then requires the LEA to take General Fund to pay back the funds that were intended to ensure schools continued to provide services during the pandemic. How does it make sense to penalize school districts for using the funds for exactly what they were intended for because every teacher, custodian, and food service worker did not fill out a daily time sheet of activities?
Good business officials embrace structure and are very comfortable being held accountable for being a good steward of public funds. It is hard, however, to have a balance when the legislature passes new compliance requirements, often described as mandates, and then does not provide the funding to implement those mandates. For many years, the state required districts to document compliance with more than 50 mandates. If the documentation was done correctly the district would file a claim with the state and be reimbursed.
The problem, however, was that the state, at some point, just decided that it could not afford to pay these mandates anymore so they began to keep a ledger for each district of their submissions that met the requirements but had not been reimbursed due to the state budget. Occasionally, the state would provide a one-time grant funding and designate that receipt of those funds would be offset against past unpaid mandate claims.
This strategy could basically be explained this way. A district that faithfully had documented and ensured full compliance with the 57 mandates and filed its claims on time was owed $10 million by the State. It is very important to understand that this district has already spent $10 million from somewhere. The next year the district files another $10 million claim. Fast forward two years and the State provides a one-time block grant of $2 million and hides in the trailer bill that the funds “offset past mandates.” The belief is the district just got $2 million in additional funding, the reality is that the district just lost $18 million that was owed to them and has absorbed the costs of this compliance for 10 cents to the dollar.