In the first of what will likely be multiple revisions – Finance Reform 1.01 – the Brown administration has scaled back the first year of phasing in its new school funding system and proposes to hold districts harmless from potential losses in revenue in that initial year.

The administration also has significantly lowered the base revenue per student that all districts will receive before tacking on extra money for disadvantaged students. In a memo passed out this week, Department of Finance officials indicated that they’re open to modifying further the weighted student funding formula that Gov. Brown proposed in his state budget last month. They’ll no doubt hear some ideas today, when the Senate Budget Committee devotes the morning to weighted student funding and mandate reform, which Brown also wants.

Brown has proposed sweeping funding changes: a shift in decision making away from Sacramento by removing state controls on “categorical” programs while channeling more money to low-income students and English learners. Districts with high concentrations of these children stand to eventually gain more than $3,000 in additional funding per child – even more in some cases.

Supporters of equitable funding, advocates of a simple, transparent finance system, and districts with large numbers of disadvantaged children support Brown’s plan – at least in principle. Gov. Schwarzenegger’s Committee on Education Excellence backed the idea four years ago, and State Board President Michael Kirst co-authored a formula similar to Brown’s in 2008. There’s also general agreement that the right time to transition to a new system is on the way out of a recession, with increasing state revenue to minimize the impact on “losers” ­– those districts with few disadvantaged children or larger than average categorical funding that would get little additional, or even less money.

The mechanics of getting the formula right are difficult, however, and the policy issues are complex. (Should some categorical programs, such as adult ed or Career Technical Education, get protected funding?) Complicating Brown’s timing is his plan to use much of the money from a $6.8 billion tax increase to pay down debts that the state owes schools, so there will be little new money for the classroom in the first few years.

Brown had proposed to phase in the weighted student funding formula, starting in 2012-13 in 20 percent increments over 5 years to soften the impact (80 percent of a district’s funding would be done the old way in the first year, with 20 percent under a weighted formula, then 60-40 in the second  year, and so on).

But now he is proposing to start with only 5 percent of the weighted funding the first year, 15 percent the second year, then 40 percent, 60 percent, 80 percent, and all weighted student funding in 2017-18. No doubt worried that some districts might see less money at the same time that voters will be asked to approve a significant sales and income tax increase, Brown would guarantee to hold districts harmless, with no funding losses in 2012-13 only. Brown is also counting on a healthy increase in Proposition 98 money as the state recovers from an economic recession to mitigate the effect on the redistribution of money during the transition. The Department of Finance is projecting that the Prop 98 obligation will rise about $6 billion – $1,000 per child – over the next five years, aside from the temporary tax increase.

Bonus money in high poverty schools

The biggest change in the formula is the base level funding that every district would start with. Brown used $6,000 per child, which Kirst had used when creating his weighted student formula. But that was in 2008, before schools lost about 10 percent of their funding due to Prop 98 cuts. The new figure is $4,920.

I’ve explained the formula in a previous post, and it hasn’t changed yet. A district will receive a bonus of 37 percent of the base amount for every student who is low-income, as determined by who qualifies for free and reduced lunches, or an English learner (those who are both aren’t counted double). Because concentrations of disadvantaged students magnify educational challenges, a student body with more than 50 percent disadvantaged students would get additional aid, 7.4 percent for every 10 percentage points, starting with  7.4 percent at 60 percent, 14.8 percent extra at 70 percent, 22.2 percent at 80 percent, and so on.

The concentration bonus makes a big difference. A district with a combination of 50 percent English learners and low-income students would get an extra $1,820 per student, while a district with a combination of 100 percent disadvantaged students would get an extra $3,640 per student.

The memo from the Department of Finance said that the governor would be open to making “technical” changes to the formula. Some issues already have been raised.

• High school students are more expensive to educate but the formula funds all students the same, to the disadvantage of unified and high school districts;

• The concentration factor – whether it truly is half as expensive to educate an English learner in a district where they represent a small proportion of the student boy – will be debated.

Beyond the formula itself, there’s the issue of throwing all categoricals into one pot of money for redistribution, without protection. As former State Board of Education member Jim Aschwanden notes in a column in TOP-Ed today, adult ed has already been eviscerated in many districts under the categorical flexibility and would likely erode further under weighted student funding. Urban districts that receive substantial Economic Impact Aid as a result of desegregation agreements, like Los Angeles Unified and San Jose Unified, would lose that extra advantage under the new system. Which programs ultimately are protected will largely determine which districts will be winners and losers. Brown proposes to leave out only a handful of programs, starting with special education and student nutrition.

“Under the Administration’s proposed formula, most large urban school districts that serve low-income communities will receive additional funding. None of these schools will receive less funding,” the memo says.

Accountability is another issue. Districts would get extra money for poor and English-learning children, but, other than pressure from parents and advocates, they wouldn’t have to spend the money on those students. The Brown administration has said it would propose measurements beyond state test scores to hold districts accountable for academic results, but has given no indication yet what those are. Advocates want conditions set so that extra money follows the child through the system.