It’s time to fix the fatal flaw in California education funding formula

California’s way of funding schools, the Local Control Funding Formula, was not designed to be perfect. That’s because most legislation requires a series of compromises necessary to minimize opposition, maximize support and win the necessary votes for passage. 

In LCFF’s case, one of those compromises, the creation of the Local Control Accountability Plan, or LCAP, could eventually doom the reform.

To understand why, it’s important to revisit the initial rationale for LCFF — replacing a complex, inequitable funding model with a simpler model that targeted grants based on student need and concentrated poverty.

The old funding model was managed from Sacramento and included popular grants for the arts and music, English learners, career and technical education and more. Large and/or politically connected districts, nonprofits and statewide groups would lobby sympathetic lawmakers for their own grants. Over time, this model grew increasingly complex, limiting local discretion over spending and stifling innovation. Despite these problems, it had remarkable political resiliency. Lawmakers were incentivized to protect existing grants and got political credit for creating new ones. Very few stakeholders were interested in changing this dynamic and risk losing their favorite grants and programs.

So, it wasn’t enough for the Brown administration to argue that LCFF was better because it was simpler, more equitable and gave districts more control over their money. They had to prove that it would fund many of the same programs as the existing model.

Most education advocacy groups believed that this could be achieved by requiring districts to use the grants generated by high-need students to fund services that addressed their needs. But education groups representing labor and management wanted complete financial flexibility. To avoid this requirement, the education establishment collaborated with a few legal advocacy groups to create the Local Control Accountability Plan (LCAP), arguing that it would accurately document how they were spending money on programs and services.

The last decade has provided strong evidence that this decision was based on flawed assumptions, beginning with the presumption that school districts are the best recipients of funding for high-need students. While district bureaucracies are certainly closer to students than Sacramento policymakers, they aren’t as close as principals and teachers. Unlike schools, district leaders face powerful interest groups that lobby them for spending like higher salaries and districtwide programs. That’s why most targeted grants like federal Title I funding are sent to districts but then quickly distributed to high-poverty schools. Without similar requirements, it’s likely that billons in LCFF dollars that could have funded school-based services were spent on district-level costs such as salaries, benefits, pension obligations and more.   

Second, policymakers assumed that districts would accurately document spending on services in the LCAP. But LCAPs were never formally connected to school district budgets, which include ongoing costs like salaries and benefits. In fact, the processes for developing LCAPs and budgets occur separately on different timelines. Almost every analysis of LCAPs has found that their financial and programmatic information cannot be verified and the documents themselves are largely incomprehensible.

Third, they believed that districts would focus on improving student outcomes without clear state-level goals and metrics to guide their decision-making. Instead of big, important goals — like grade-level math achievement — policymakers created a mishmash of state priority areas (many of which can’t be measured) and told districts to include them in their LCAPs. Predictably, most districts paid lip service to these priorities in their LCAPs and then wrote separate strategic plans. At this point, most district leaders probably can’t remember what the state priorities are. If everything is a priority, nothing is.

Finally, and most importantly, they assumed that all of this would improve outcomes for the most vulnerable students. Here, the evidence is limited, especially given the size of the funding increases. Given the persistently low academic performance of most high-poverty districts and the state’s sizable achievement gaps, today’s elected officials can fairly ask whether our state has seen a commensurate return on these massive education investments.

It’s no wonder that over the last several years, elements of the previous school finance regime have roared back. Elected officials who didn’t create LCFF and are suspicious of “local control” have created a whole new set of targeted grants like the governor’s community schools grant. Districts are now subject to far more onerous legalistic requirements for their LCAPs, which are intended to show that they’re using their funding for high-need students.

District leaders have bitterly complained about these shifts. On one level, they are right that the advocates and policymakers focused on the LCAP are just doubling down on a failed strategy. But they haven’t offered any alternative, other than “leave us alone.”

The danger for them is threefold. Increasing levels of scrutiny and regulation; ever more targeted grants that limit their discretion; and, as the years pass, the belief that local control has failed high-need students, requiring more aggressive state and county oversight. A few years from now, they could end up with the worst aspects of the old finance model and the new one.

There is another way.

A decade later, we have a lot of evidence on how to make the formula better. Perhaps a substantial portion of LCFF funding, such as concentration grants (for schools with more than 55% high-needs students) should flow directly to schools based on their poverty level, like Title I funds do. State leaders could establish a few measurable academic and social-emotional priorities that districts would address in strategic plans rather than LCAPs. Instead of a potpourri of grants that limit local discretion or new LCAP compliance requirements, lawmakers could create incentives, such as additional weighted funding for districts willing to create new programs such as language immersion schools. They could even establish financial rewards for districts based on student outcomes.

There are many possibilities, but for the Local Control Funding Formula to survive over the long term, it must always be able to answer a very basic question: What is it doing to improve the education of California’s highest-need students?    

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Arun Ramanathan is the former CEO of Pivot Learning and the Education Trust—West. 

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