Finding the Right Balance under California’s Local Control Funding Formula

Several years ago, the Ford Motor Company’s advertising claimed that, in its cars, quality was built in, not added on.  I thought that was a pretty catchy slogan and I am reminded of it when I think about the problem of how to balance supplemental educational services with the “base” program under the requirements of California’s Local Control Funding Formula (LCFF).  The LCFF provides funding to districts in three tiers:  base, supplemental (based on the number on high needs students), and concentration factor (provided to districts whose percentage of high needs students exceeds 55%).  High needs students are defined as those who are eligible for free or reduced-price meals, English learners, or in foster care.

Just as leather seats and fancy chrome trim cannot make up for an underpowered engine or whatever we had before disc brakes, so high quality supplemental educational programs cannot fully compensate for a low-quality base program.  While providing supplemental programs and services is often necessary to address the needs of high-need students, we also want those students to have access to the highest-quality classroom instruction—the “base” program—where they spend most of their school day.  In other words, the value to students that may come from supplemental services may have less effect if they come at the expense of maintaining a high-quality base program.  I think most people would agree that quality that is built in is better than quality that is added on.

Finding the right balance between base and supplemental programs in a zero-sum environment is not easy. This has been a bone contention since the enactment of the LCFF, with advocates for high-needs students often objecting to the use of supplemental and concentration funds for base or core educational expenses instead of increasing or improving supplemental programs and services to specifically benefit the target students.  

Two recently introduced bills in the California State Assembly, AB 1834 and AB 1835, both by Assembly Members Shirley Weber and Sharon Quirk-Silva, are sure to provide focal points for this debate during the upcoming legislative session.  AB 1844 requires the development of a mechanism to better track the expenditure of supplemental and concentration grant funds at the local level.  AB 1835 requires carryover supplemental and concentration grant funds to continue to be used to increase or improve services for the target students in subsequent fiscal years.

Nowhere does this debate loom larger than in the area of teacher compensation, which—after all—accounts for the largest single share of any school district budget.   In response to a question from the Fresno County Superintendent of Schools as to whether supplemental and concentration funds could be used to pay for across the board salary increases for teachers, the California Department of Education (CDE) released a letter dated April 14, 2015 that stated that “In some limited circumstances, it might be possible to demonstrate in an LCAP [Local Control and Accountability Plan] that a general salary increase will increase or improve services for unduplicated pupils.  However, the burden on a district to justify use of supplemental and concentration funds for such an increase is very heavy.”  The letter went on to state that “in our view, this additional burden…is extremely, if not impossible, to meet…”

However, this letter was followed by a notice to school administrators dated June 10, 2015, which sought to clear up some “misunderstandings” from and “supersedes” the April 14 letter.  The June 10 notice stated that “A district may use supplemental and concentration funds for a general salary increase in a manner consistent with the expenditure regulation and LCAP Template regulations.”  To do so, however, a district “must demonstrate in its LCAP how this use of the grant funds will increase or improve services for unduplicated pupils as compared to services provided to all pupils.”  And, “For example, a district may be able to document in its LCAP that its salaries result in difficulties in recruiting, hiring, or retaining qualified staff which adversely affects the quality of the district’s educational program, particularly for unduplicated pupils, and that the salary increase will address these adverse impacts.”

Objections to this interpretation were typified by Assembly Member Shirley Weber’s (the lead author of AB 1834 and AB 1835) comments to the LA Weekly:  “Once you open this up, you open up something else, and then you find yourself in a position having taken this money for these schools and these kids and not being able to produce the results.”  Using money for teacher compensation, she argued “is not what we intended at the state level.”

The fact that a major portion of the LCFF revenue stream is called “supplemental funding” strongly suggests that it is to be used for programs and services that would supplement—or be added to—the base program, rather for directly improving the base program itself.  Advocates for the students that generate the supplemental and concentration grant funding are insistent that those funds be spent on additional programs and services for those students, and they want the expenditure of those funds to be transparent in school district budgets.  But does an unbending adherence to this practice run the risk of having schools in which the quality is added on, but not built in?

In this context, it’s worth revisiting the paper that provided the analytical and policy underpinnings of the LCFF, “Getting beyond the Facts:  Reforming California School Finance” by Alan Bersin, Michael Kirst, and Goodwin Liu.  You can read it here.

In that paper, the authors lay out four principles for reform:  (1) revenue allocations should be guided by student needs; (2) revenue allocations should be adjusted for regional cost differences (the LCFF does not do this); (3) the system as a whole should be simple, transparent, and easily understood by legislators, school officials, and the public; and (4) reforms should apply to new money going forward, without reducing any district’s current allocation.  

The first two principles are relevant to my point and are based on the authors’ findings that “high-poverty districts receive only slightly more revenue per ADA that low-poverty districts” and “district revenue per ADA does not reflect the regional cost of hiring school personnel.”  The main problem with schools in these areas was not that they didn’t have enough supplemental programs, but that the base program was thread bare.  They had insufficient instructional materials, science labs that were either poorly equipped or non-existent, dilapidated facilities, higher student-teacher ratios, and more teachers who were not fully credentialed. 

These are the problems the LCFF is intended to address.  (Incidentally, these are the same kinds of issues that were the subject of the complaint in Williams v. State of California, which charged the state with failing to provide students from low income communities and communities of color with the “basic necessities required for an education [emphasis added].”) 

Specifically, with regard to teachers, Bersin, et al. write: “Indeed, high-wage regions of the state tend to have higher student-teacher ratios and a higher percentage of teachers with emergency credentials.  A rational school finance system should strive to ensure that education dollars have the same purchasing power from region to region, especially when it comes to hiring and retaining high-quality teachers.”

It’s true that allocating supplemental and concentration factor dollars within a district to address these problems would benefit all students, not just those who generate them, but it could be more beneficial to the targeted students than alternative expenditures.  I’m not suggesting that the additional funds never be used to provide supplemental services.  Rather, I’m saying that if the purpose of the LCFF is to improve outcomes for needy students, the importance of a strong base program to achieve that goal should not be lost.  

The Public Policy Institute of California recently released a report showing that, since the adoption of the LCFF, districts serving low-need students have increased teacher compensation by a larger amount than districts that serve high-need students despite the former districts receiving smaller total annual revenue increases.  This suggests that the local pressure to avoid using supplemental and concentration funds on teacher compensation is having at least some effect.  It also means that high-need districts may be losing the competition for high quality teachers.

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