Funding reform out of the ashes

With K-12 schools facing financial disaster if state taxes aren’t extended, it takes a pie-eyed optimist to discuss better times ahead. But, under rules for repaying schools what they’re owed, money for K-12 schools will eventually come in “buckets” when the economy does turn around, says Rob Manwaring, former K–12 education director of the California Legislative Analyst’s Office.

Knowing that is one reason why the Legislature should now set in place a more rational and fairer system to fund schools, Manwaring said Wednesday at an Assembly Education Committee hearing. The other reason is that a clearer, simpler method is a prerequisite to asking Californians to spend more on education. As Manwaring put it, “If I cannot explain to my mom how schools are funded, it will not work for voters.”

There is a fundamental agreement on what that funding system would look like, at least in concept, Manwaring and other finance experts said. And, with districts’ temporary discretion to spend categorical money as they want due to expire in a few years, school officials are craving stability and predictability.

That’s why Education Committee Chairwoman Julia Brownley, a Santa Monica Democrat, is bullish that the Legislature will pass her bill, AB 18, which will set the new funding framework in place, this year or perhaps next. Erin Gabel, Superintendent of Public Instruction Tom Torlakson’s legislative director, endorsed the concept at the hearing. Gov. Jerry Brown endorsed the principle of a student-centered finance system as part of his campaign platform. State Board of Education President Michael Kirst was a co-author of a funding formula that has become a basis of discussion.

Manwaring was joined at the hearing by Margaret Weston, a research associate with the Public Policy Institute of California, and Jon Sonstelie, an economics professor at UC Santa Barbara, who together wrote Pathways for Education Finance in California, incorporating the approach that Kirst  and others have proposed.

The details among the various proposals vary, but the principles are fundamentally alike. The funding formula would be reduced to three, maybe four, components. It assumes a growth in school spending under Proposition 98 of about 30 percent over the next 20 years, based on PPIC projections. That’s enough to make the  formula fairer, but not enough to raise California’s spending to the national average. If the Legislature or voters do eventually approve more money for schools – and the two current lawsuits are attempting to force that issue – the system for allocating the money would be in place.

  • Uniform base grant. This would be the largest piece, as it is now, but it would incorporate many of the categorical programs that districts must spend as the state dictates. The current revenue limit varies from district to district, with disparities amounting to a few hundred dollars per student in most cases to some mostly small, rural districts claiming $1,000 or more per student. The reasons are obscure, dating back decades, and no longer are justifiable or even explainable. The goal would be to raise all districts to the 90th percentile of revenue over time. Today, that would be about $5,600 per student (see Manwaring’s graphic), but it could rise to about $7,400, as Proposition 98 revenues increase over the next 20 years. The lucky 10 percent  of districts whose revenue limit exceeds the 90th percentile would get to keep what they have.  Potentially contentious details to be worked out: Should there be regional costs of living factored in, recognizing that it’s more expensive for teachers to live in San Francisco than Fresno? How much extra per student should high schools and unified districts receive; how much for small and rural districts? How should transportation costs be factored in? (The PPIC study and Manwaring’s figures cover the 2009-10 year. They do not factor in the impact of deferrals – about $9 billion in delayed payments to districts; correcting that could problem could delay funding reforms.)

    The goal would be to raise all districts' base grant to the 90th percentile or $5,600 at the current spending level. The vertical axix shows thenubmer of students in districts funded at the various levels. (Graphic by Rob Manwaring)

    The goal would be to raise all districts' base grants to the 90th percentile or $5,600 at the current spending level. The vertical axis shows the number of students in districts funded at the various levels. (Courtesy of Rob Manwaring. Click to enlarge it.)

  • Targeted grants, providing more money for English learners and low-income students, recognizing they need extra resources. This is the basis for the weighted student formula, though each proposal approaches this slightly differently. Sonstelie estimated the added cost, based on a survey of principals, at $1,000 per needy student in state funding. In 2008, Gov. Schwarzenegger’s bipartisan Committee on Education Excellence figured it would require about 20 percent extra funding for low-income students. In their calculations, Kirst and co-authors Alan Bersin (Schwarznegger’s former Secretary of Education) and Goodwin Liu (professor at UC Berkeley Law School and President Obama’s nominee for a federal judgeship) added a density factor, doubling the extra dollars for low-income students and English learners in schools where they comprised more than 50 percent of the student body.
  • Special education. These costs would be excluded from the targeted and base funding, although various proposals would adjust the special aid formulas to end disparities in funding among districts.
  • Adult ed, regional occupational centers. Districts now have flexibility over adult ed spending, and some districts are eliminating the programs or cutting them back severely. Defenders say they and vocational centers deserve protection from categorical consolidation. Advocates of other programs, such as arts education and phys ed, will argue that as well. The more programs that the Legislature shields, the more complex the formula and the less money there will be for weighted student funding and equalizing base-level funding.

As Eric Premack, executive director of the Charter Schools Development Center in Sacramento, noted in an earlier post, the state has already moved toward the system that reformers are advocating in funding charter schools. There is a General Purpose Grant and a Categorical Block Grant, with a supplement for English learners and poor students. But moving the rest of the state toward that simplified approach may not come easily, despite promises of simplicity, equity and transparency. Minor tweaks in the formula could produce significant shifts in revenues for some districts. There will be relative winners and losers. And holding districts harmless for current – or past levels of funding, before severe cuts of the past two years – will prolong the time it will take to create funding equity.

There’s also the critical issue of accountability – requiring that districts actually spend extra dollars on needy students and account for how they do it. That’s a subject for another day.

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About John Fensterwald - Educated Guess

John Fensterwald, a journalist at the Silicon Valley Education Foundation, edits and co-writes "Thoughts on Public Education in California" (, one of the leading sources of California education policy reporting and opinion, which he founded in 2009. For 11 years before that, John wrote editorials for the Mercury News in San Jose, with a focus on education. He worked as a reporter, news editor and opinion editor for three newspapers in New Hampshire for two decades before receiving a Knight Fellowship at Stanford University in 1997 and heading West shortly thereafter. His wife is an elementary school teacher and his daughter attends the University California at Davis.

9 thoughts on “Funding reform out of the ashes

  1. Eric Premack

    Great summary John.   I might note that from 1993-1998, charter schools were funded on the basis of their local district’s general-purpose entitlements.  When the charter funding system was revised in 1999, all charter schools were expected to shift to the statewide average general-purpose funding levels.  There was a relatively brief (3-year, if memory serves me correctly) transition period during which even the very highly-funded charter schools were ratcheted-down to state average funding levels.
    It was interesting to note how many of the speakers at yesterday’s hearing blithely assumed that high-revenue districts should, as a matter of course, be protected.  Charter schools enjoyed little such protection.  Districts shouldn’t either.
    While they’re at it, they should target the so-called “necessary small school” funding formulas that often fund schools that are anything but necessarily small, excess property taxes that allow many “Basic Aid” districts to pig-out while the rest of the state gets clobbered, “bifurcated” special education funding formulas that have little basis in rationality, declining enrollment protection funding that pays for kids that don’t exist, etc.
    The charter sector has demonstrated that it is possible and reasonable to expect all schools to be funded under a system that is at once simple, transparent, and provides equal amounts of funding for similar student populations.

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  2. Jim Mills

    Among the legacy problems in our funding, I hope the legislature will address whose funding this is in the first place.   Funding should be for the students, not the district.  Funds shouldn’t “belong” to a district just because a student happens to have an address in that attendance area.  Currently, if parents in one district find a more appropriate educational setting for their child in another district, and the new district is happy to have that child, the parents’ “home” district can still refuse to allow the funding to accompany the child to the new school, making the transfer impossible.  Districts that are unable to provide an appropriate educational setting for a student should not have that kind of control over funds intended for that student.  Many well-performing schools and districts are facing declining enrollments and would welcome new students from other districts, if the funding followed the students.  Prohibiting districts from obstructing such inter-district transfers would offer a welcome improvement in School Choice for California’s families, at no cost to our traditional public school system as a whole.

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  3. Gary Ravani

    This should be interesting.

    The current school funding mechanisms are , in large part, an out growth of the interactions betweem two major events: Prop 13; and, the Serrano v. Priest court decision. Prop 13 removed most school funding streams based on local property taxes and Serrano said all students deserve school funding “equity” under the CA Constitution.

    There was much high minded talk then (as now) about not reducing funding levels but, rather, via a process of “equalization” creating some kind of funding parity between districts. This resulted in the Revenue Limit Income–RLI– (high wealth & low wealth) districts and the Basic Aid districts. In so many words the Basic Aid districts were those the legislature just “basically” didn’t want to mess around with. They were/are the areas where property taxes fund the schools quite well thank you-that is, where the wealthy and politically influential live. Low wealth districts were usually rural areas and high wealth mostly suburban. In place for several decades now, parity was never really reached for the RLI districts and, of course, the Basic Aid districts were always much better funded. Funding disparities per student can run to thousands of dollars. (Check out Palo Alto and East Palo Alto sometime.) 

    Then you mix in politically driven funding enhancements for politically influential areas, categorical funding, particulalry special education funding, add in  the 10% or so of funding related to federal dollars and things do get confused.

    That is, its confused, if you ignore the political implications. It still doesn’t look like the legislature is willing to march into Marin Councty and tell them they must contribute enough to make funding equitable for all. I don’t know what part of the political equation is supposed to have changed to make the hard decisions more comfortable for the legislature. More clarity can be achieved, but that’s just going to give us a clearer picture of just how underfunded the majority of schools in CA really are. That’s already pretty evident.

    Some kind of fairness could be achieved if you took all state and federal dollars of all districts(including basic aid), parcel tax dollars, as well as private sector donations to charter schools, and put them in one pot. Then fund a “base grant” and a “weighted student formula” grant. That would be a start on equity. The necessary protections due the “categorical” groups, federal mandates, and other programs (ROP/Adult Ed) would add complications but, as I said, it would be an interesting discussion to start with.

    Mr. Mills seems to think everyone should get a case of the libertarian vapors whenever the mantra of “choice” is rolled out. Money does follow the students. Districts get dollars based on ADA, regardless of the district a student resides in. It’s based on the district the student attends school in. Moving from district to district is an option primarliy available to wealthy people who have the means of transportation available. I can only think of one district that has put severe attendance rstrictions in recently, and that is Beverly Hills who will not accept student from outside their area. All of those little second language students in south LA who now have “choice” won’t be sitting in those shiny Beverly Hills desks. 

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  4. Jim Mills

    Sorry, Gary, but the money doesn’t follow the student if the district where the student resides refuses to give up the funds for an inter-district transfer.  My own district considers students living in their attendance areas to be “their” students” and the funding to be “their” money.  It doesn’t matter if a nearby district is willing to accept a student.  Our district won’t let them off the plantation.  That means, as you concede, that only the families who can afford to move get “school choice”.  Doesn’t sound very “equitable” to me, but for some reason, it seems to be fine with a lot of the defenders of the status quo.

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  5. Liby Snow

    Jim, I believe Gary is right about this. How can a school district collect ADA when the student is not in attendance in their district? The state is very particular about daily attendance being recorded accurately (at least up until April). Is the home district going to call the transfer district every day to check up on the student’s attendance? I think not. And, what district would take transfers if the money did not follow them? Also, many districts, like LAUSD are trying to stop transfers because of the loss of revenues. I know that some districts are trying to prevent students from transferring by refusing to “release them” (with major pushback by the parents of these students), but I have never heard of them being able to control the funds in a way that you suggest. Perhaps, this is what you were thinking about?

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  6. Jim Mills

    Libby, I think you misunderstand my point.  ADA funding still applies, but the “receiving” district where the student wants to attend school cannot count that student for ADA purposes unless the originating district (where the student resides) consents to the transfer.  The original district naturally would not get the funding anymore, but the new district does.  There is no net loss of funds to local public schools; the ADA funding just follows the student to the new district, provided, of course, that the district where he/she resides provides its consent, which seldom happens in our district.  Many troubled districts do the same thing.  And that is my point:  why should a district that has failed to serve a student’s needs have a veto over whether that student may attend public school in a different district that is willing to have the student?  These refusals are cynical attempts to keep the student (and more important, the funding) in the home district.  Often, as I have observed in these transfer requests, the student ends up leaving anyway, to a parochial school (if they can afford it), to homeschooling, or to a virtual (online) charter.  So our district loses the funding anway.  But these refusals enable the district to discourage other parents from even trying, and that, apparently, is worth it to them.

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  7. edfundwonk

    …what has been done will be done again; there is nothing new under the sun.
     ~Ecclesiastes 1:9

    Great minds think alike…  ~ Proverb

    The Bersin-Kirst-Liu (B-K-L) funding model bears a striking resemblance to the Charter School Funding (CSF) model enacted 12 years ago. At that time, the Legislature directed the Board of Education to create a model that was simple and provided each charter school general-purpose funding that would be available to a similar school district serving a similar population.
    Both the B-K-L and CSF models reflect a view that school districts (B-K-L) and charter schools (CSF) should be judged by performance (educational outcomes for all students), rather than by compliance with rules on how various “pots” of funds must be spent. Both funding models provide a general-purpose block grant, a compensatory education block grant, and a categorical block grant. Neither model changes special education funding.
    The CSF model provides each charter school a general-purpose block grant (analogous to the revenue limit) with per-pupil funding rates equal to the statewide average for non-charter schools in each of four grade spans: K-3, 4-6, 7-8, and 9-12. The B-K-L model would provide each school district a general-purpose block grant with per-pupil funding rates equal to the statewide average; although not an explicit part of the model, “… [this] amount … could be designed to vary according to … grade [span] (e.g., K-5, 6-8, and 9-12).”
    The CSF model provides each charter school a compensatory education block grant equal to the number of its low-income or English-learner pupils times the statewide average amount of Economic Impact Aid per eligible pupil. The B-K-L model would do the same for districts but would include a “concentration factor” based on the percentage of a district’s enrollment composed of eligible pupils.
    Charter schools can receive funding for the remaining categorical programs on a per-pupil basis. (This is similar to the current “flex” funding.) The B-K-L funding model would roll these funds into the general-purpose grant, yielding the same result. Finally, the B-K-L funding model has a hold-harmless provision and adjusts for regional cost differences; the CSF model does not.

    Obviously, the funding models have more similarities than they do differences. We already have a model, similar to that of B-K-L,  that has worked for 12 years. Moreover, the CSF model is specifically intended to provide charter schools funding comparable to that received by school districts serving similar populations of students. Why not tweak the CSF model and move districts and charter schools to a common school finance system that is simple, transparent, and equitable? School finance nirvana may be nearer than we think.

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  8. Gary Ravani

    So some districts are allowing students to attend class in thier schools, but they are not receiving funding for that student? Doesn’t sound like a sustainable model. I have not heard of that, and I asked around.

    Status quo does not, by definition, suggest something isn”t working. All reform requires change, but not all change equates to reform. Something those who who routinely question the status quo should keep in mind.

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  9. Liby Snow

    Jim, I now see what your point was. Thank you.
    Interestingly, I had a niece that had to go through this process. She was originally denied a release but was granted one on appeal. Actually, the transfer district was not even willing, or able to accept her without the home district agreeing to release her. I wholly agree that a home district should not have “veto power” under any circumstances, and I was very upset when I heard that this was happening to her and several of her friends. The key was explaining to the appeals board that the home district did not provide a particular academic program or sport that the transfer district did. They required her to provide the home district with supporting documentation and proof of enrollment in the academic program that she was pursuing – which she did. I do believe that a transfer district should have some control over enrollment – which they do.

    Now, once the home district agrees to release a student, and the student transfers, the transfer district gets to collect the ADA funding for that student. Therefore, the money does follow the student in this situation. Right?

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