Lawmaker to request state audit of districts’ compliance with funding formula

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Hours before formally proposing an audit of three California districts’ spending under the state’s school funding formula, the sponsoring legislator pulled the request Tuesday.

Assemblyman Al Muratsuchi, D-Torrance, faced the united opposition of school management organizations and teachers unions, which in a letter dismissed the idea as “wasteful, unnecessary and duplicative.”

But Muratsuchi said Wednesday he intends to reintroduce his proposal after “fine tuning” it in coming months based on feedback. On Tuesday, he was scheduled to seek approval for his plan from fellow members of the Joint Legislative Audit Committee. If approved, his proposal would require the California State Auditor to audit a sampling of school districts to determine if they are complying with the intent of the Local Control Funding Formula. The committee won’t meet again until next year.

“The goal is to get data on whether, after five years under the law, students with the greatest needs are getting the greatest resources,” as the funding law requires, he said.

Muratsuchi, a Torrance Unified school board member for seven years before being elected to his first term in the Assembly in 2012, is one of a number of legislators who have expressed skepticism about whether school districts are spending money that under the funding is supposed to go to English learners, low-income students and foster youth. Earlier this year, the Assembly unanimously approved Assembly Bill 1321, which would have required stricter accounting for spending on those students than the Local Control Formula or regulations the State Board of Education requires. The bill’s author, Shirley Weber, D-San Diego, has since stripped a key provision — reporting of funding formula spending at each school — from the bill.

Under the formula, school districts receive 20 percent “supplemental” funding for each English learner, low-income student, foster youth or homeless student they educate. If the student groups targeted for assistance make up slightly more than a majority of enrollment, districts receive additional “concentration” money. Districts with a large proportion of these “high-needs” students will receive a third or more funding than districts with very few of them.

Funding formula regulations require that districts demonstrate they are increasing or improving services in proportion to the enrollment of high-needs students — and to list how much they are spending to do so. If high-needs students make up most of the students, districts have the option to spend supplemental and concentration money on programs serving all students, as long as they make the case for the decision in their Local Control and Accountability Plans. The LCAP is a planning document that districts must write or update each year.

Skeptics like Muratsuchi and Weber suspect that the regulations create too much wiggle room for districts to spend money for targeted students on other things, including across-the-board salary raises for district employees. State Superintendent of Public Instruction Tom Torlakson, in a 2015 guidance letter, said general raises would be permissible, in some cases, such as when districts can’t compete with nearby districts to retain teachers, but districts must document the rationale in their LCAPs. Critics have complained that districts haven’t done so, and that they made the funding difficult to track.

“I am hearing from various stakeholders the concern that supplemental and concentration dollars are going primarily for payroll and for administrative staff,” Muratsuchi said in an interview.

His proposal named the three unified districts whose expenditures would be audited: Los Angeles, Fresno, and Folsom Cordova, which is located near Sacramento. They were chosen for geographic and demographic diversity, Muratsuchi said. Fresno and Los Angeles have large percentages of low-income students; Only 37 percent of Folsom Cordova students are high-needs students but the district has concentrations of low-income neighborhoods.

The request that Muratsuchi shelved asked the state auditor to identify expenditures for high-needs students by category — whether the money went toward additional teachers, support staff such as counselors, or administrators — and to tie the money to the goals and actions that districts listed in their LCAPs. Muratsuchi would have asked that the auditor document spending at the district level and also for a representative sampling of schools.

Contention over school-level accounting

The funding formula law doesn’t require tracking supplemental and concentration funding at a school level, and the state board has repeatedly rejected the idea. That’s one of many reasons that six school management organizations, including the California School Boards Association and the Association of California School Administrators, along with the California Teachers Association and the California Federation of Teachers, opposed the proposed audit.

The audit’s proposed scope is “inconsistent” with the law and regulations governing the funding formula and the LCAP that the state board adopted after months of hearings, their letter said. Parents, community members and legislators have ways to review LCAP spending, it said. County offices must verify that LCAP decisions comply with the funding law, and the public can ask the state superintendent to determine if spending was inadequate or inappropriate, as advocacy groups have done for LCAP spending in Los Angeles and other districts, the letter said.

Finally, the groups reiterated, the funding formula requires that districts take actions to improve students’ performance, reflecting effective use of extra resources; it requires a test of effectiveness not “a strict spending test.”

Barrett Snider, a lobbyist for the Small School Districts Association, one of the organizations signing the letter, said that the Local Control Funding Formula created a different system of expectations for school improvement; many of the actions that districts take through the LCAPs are “inappropriate for the kind of audit” that Muratsuchi was proposing, he said.

Snider said that the school organizations are open to discussing possible tweaks to the funding law, but that Legislature wrote the law and the state board established rules for the new accountability system, so lawmakers should let the new system play out before they make substantial changes.

But Muratsuchi was not persuaded by the arguments. “As a former school board member, I know the strengths and limitations of the district budget process,” he said. “The Legislature should have better data to ensure the law is working. The governor’s emphasis on local control needs to be balanced with accountability.”