Re-Envisioning County Offices of Education: a Study of Their Mission and Funding

Re-Envisioning County Offices of Education: A Study of Their Mission and Funding MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • FEBRUARY 6, 2017 AN LAO REPORT 2 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT EXECUTIVE SUMMARY Mission State Constitution Establishes Role of County in Schools. The State Constitution establishes county superintendents of schools. Today, each of the state’s 58 counties currently has its own superintendent. County superintendents and their staff commonly are referred to as county offices of education (COEs). State Law Tasks COEs With Some Specific Responsibilities. The state gives COEs a role in alternative education (designed for students who require or could benefit from a nontraditional school setting). Specifically, state law requires COEs to ensure that students incarcerated at county jails receive an education. To this end, most COEs receive state funding to operate juvenile “court schools.” The state also funds COEs to serve students who are on probation, referred by probation departments, or mandatorily expelled. COEs commonly serve these students at “county community schools.” Other types of at-risk students (such as those who are nonmandatorily expelled) are served by school districts. In addition to assigning them a role in alternative education, the state tasks COEs with two core district oversight activities—review of districts’ budgets and academic plans. COEs Vary Greatly in the Optional Services They Provide. COEs offer various other services not required by law, such as business and legal services for districts, teacher training, and regional career technical education programs for students. The type and amount of optional services COEs provide depends on the size of districts in the county, their historic funding levels, and their superintendents’ priorities. Funding Recent Reforms Increased Funding, Reduced Responsibilities. In 2013-14, the state adopted a new funding formula for COEs known as the Local Control Funding Formula (LCFF). The new formula increased overall state funding for COEs and eliminated many of the responsibilities they formerly had under state categorical programs. COE LCFF Is Composed of Three Elements. The COE LCFF provides funding directly to COEs for (1) students they serve at juvenile court schools and county community schools (totaling 30 percent of LCFF funding) and (2) services they provide to their districts (totaling 45 percent of LCFF funding). The remaining 25 percent of COE LCFF comes from “hold harmless” provisions that are based on the amount of funding COEs received for categorical programs before LCFF. The total funding provided through the LCFF is about $1 billion per year. COEs may use their resulting allocation under the formula for any purpose. COEs Spend Less Than LCFF Provides on State-Required Activities. In 2014-15, LCFF provided COEs a total of $140 million statewide to serve juvenile court school students, but COEs reported spending about $100 million. LCFF provided COEs a total of $183 million statewide to serve students at county community schools. Though data limitations prevented us from determining what COEs spent on these schools, we found large variation in their size, with smaller schools www.lao.ca.gov Legislative Analyst’s Office 3 AN LAO REPORT spending substantially more per student than larger schools. For required district fiscal and academic oversight, we estimate COEs spent about $40 million. COEs Use Remainder of LCFF to Provide Optional Services. After paying for alternative education (an estimated $283 million) and their primary required district services (an estimated $40 million), COEs spent the rest of their LCFF allocations (roughly $650 million) on optional services. Assessment and Recommendations Allocate Alternative Education Funding to School Districts and Allow Them to Develop Local Arrangements With COEs. Providing funding directly to COEs for the alternative students they serve detaches these students from their home districts and creates limited incentives for districts to oversee the quality of education provided. To address these concerns, we recommend funding districts directly for all alternative students, including incarcerated students. For court schools, however, we recommend setting COEs as the default educational provider and setting a statutory reimbursement rate. This approach allows districts to select the court school provider that offers the most effective and efficient program, while still preserving the longstanding, productive relationships that many COEs have with county jails and probation departments. For their other alternative students, districts would select the most appropriate placement, much as they do now. These placements could be in district- or county-run programs. To further encourage high-quality service, we recommend assigning outcome data from COEs back to each alternative student’s home district. Recommend Funding COEs Directly for Core Oversight Activities. Given there are more than 900 districts in California, we think COEs can perform district oversight more effectively and efficiently than a state entity. Accordingly, we recommend COEs receive funding directly for these state required activities. Recommend Shifting Other Funding to Districts and Allowing Them to Purchase Services. COEs receive the same amount of LCFF funding regardless of how well they address district priorities. To address this concern, we recommend the Legislature shift the LCFF funding that COEs use to provide optional services to school districts. Our recommendation would allow districts to purchase services that best serve their students, whether from COEs or other providers. Recommendations Would Clarify Mission and Funding for COEs. Taken together, our recommendations would help clarify what services all COEs should provide and align state funding to those activities. Because our recommendations entail major changes in the way the state funds COEs, we recommend the Legislature phase them in over several years. 4 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT INTRODUCTION Despite assigning key tasks to county offices of COEs’ changing responsibilities under LCFF and education (COE) and providing a majority of their assesses how well state funding is aligned with funding, the state has not undertaken a review of these responsibilities. The report has four main COEs for many years. Such a review is even more sections. The first section provides background on warranted today given the recent implementation COEs’ governance and mission. The second section of the Local Control Funding Formula (LCFF) for focuses on COE funding and includes an analysis COEs. Implemented in 2013-14, LCFF removed the of how COEs are using their LCFF funds. The third strings associated with most COE funding while section assesses COEs’ roles in the LCFF era, and simultaneously increasing overall COE funding. the final section contains our recommendations for It also expanded the role of COEs in overseeing re-envisioning COEs moving forward. districts’ academic programs. This report analyzes BACKGROUND In this section, we provide background on COE superintendents manage the daily operations of governance, give an overview of COEs’ mission, these COEs. and describe the activities the state requires COEs Overview of Mission to perform. County Boards of Education Have Certain Governance Constitutional and Statutory Responsibilities. State Constitution Establishes Role of County The Constitution gives county boards of education in Schools. The State Constitution establishes authority to set their county superintendent’s county superintendents of schools. Though the salary and state law tasks them with approving Constitution allows two or more counties to unite annual COE operating budgets. State law further for the purposes of selecting a superintendent, tasks county boards of education with approving each of the state’s 58 counties currently has its certain academic plans developed by the COE. own superintendent. The Constitution allows County boards of education also effectively serve county superintendents either to be elected by as an appellant body, hearing disputes among local voters in their counties or appointed by their groups that have been unable to be resolved at the county’s board of education. The Constitution district level. For example, a group can appeal to authorizes voters to elect these county boards of the county board of education if a district denies education. State law requires these boards to consist its application to open a charter school. Similarly, of five or seven members representing different parents can appeal to the county board if their areas of the county. Currently, all but five county home district has expelled their child and they superintendents are elected rather than appointed would like the decision overturned. by the boards. County superintendents and their State Law Makes COEs Responsible for Some staff are commonly referred to as county offices of Alternative Education. State law gives COEs education (COE). Figure 1 (see next page) shows the a role in alternative education, which refers to central office for each COE in California. County any nontraditional academic program designed www.lao.ca.gov Legislative Analyst’s Office 5 AN LAO REPORT Figure 1 California's 58 County Offices of Education Dots Indicate Location of Office Headquarters 6 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT for students who require or could benefit from other at-risk students, including nonmandatorily an alternative placement. State law specifically expelled students, students referred by school makes COEs responsible for ensuring students attendance review boards, students with significant incarcerated at the county level are provided with behavior issues, and students with serious academic an educational program. State law also allows COEs deficiencies, are funded through school districts. to receive direct funding for educating students State Law Also Requires COEs to Serve and who are on probation, referred by probation Oversee Districts in Specified Ways. The second departments, or mandatorily expelled. (State law column of Figure 2 shows all the services COEs requires students to be expelled if they commit are required to provide to districts within their certain violent or drug-related offenses.) All jurisdictions. Most notably, state law requires COEs Figure 2 State-Required and Optional Activities Required Optional Common District Common Direct Alternative Education District Services Services Instruction • Juvenile Court Schools • District LCAP review, • Teacher professional • Career technical • County Community approval, and related development education Schoolsa technical assistance • District LCAP • Child care and • District support if development and preschool not meeting LCAP implementation • Migrant education requirements or goals • Leadership training programs • Fiscal oversight • Standards implementation • Adult education • Oversight of basic • Dissemination of • Indian education learning conditionsb information about state programs • Review of school staff policies • Afterschool programs assignments and • Internet connectivity and • Foster youth services credentials technology assistance • Violence and drug • Support of county • Data support prevention programs board of education on • Assessment support appeal issues • Charter school monitoring • Review of certain and investigation district audit findings • Legal and business • Review of districts’ services LCFF unduplicated • Printing and production pupil counts services • Support of County • Technical assistance Committee on School for afterschool, drug District Organization prevention, and foster • CalSTRS and youth programs CalPERS retirement reporting • Support of unemployment insurance management system a These schools are unique in that COEs are not required to run them, but they receive direct funding for certain students (such as those on probation) if they do run them, and COEs are held accountable through the same LCAP process used for juvenile court schools. b COEs are required to review the condition of facilities, availability of textbooks, and teacher assignments in designated low-performing schools. LCFF = Local Control Funding Formula and LCAP = Local Control and Accountability Plan. www.lao.ca.gov Legislative Analyst’s Office 7 AN LAO REPORT to review school districts’ academic and budget within their jurisdictions, but the range is large. plans. It also requires them to support county boards Los Angeles County has the most school districts of education in hearing appeal issues. Additionally, (80). In contrast, seven counties (Alpine, Amador, state law requires COEs to support districts in Del Norte, Mariposa, Plumas, San Francisco, various other ways, including assisting them on and Sierra) have a single district within their certain pension and insurance-related issues. jurisdictions. Though each of these counties COEs Historically Have Fulfilled Other still has a county superintendent of schools and Functions Voluntarily. As the next two columns a county board of education, its COE typically of Figure 2 shows, COEs do many things not functions more like an extension of the school required by state law. Virtually all COEs provide district office. In recognition of these especially one or more optional services to districts. Optional tight district-county relationships, the California services they commonly provide include staff Department of Education (rather than the COEs) development, data support, and legal and business undertakes required oversight activities on behalf support. Many COEs also historically have applied of the seven districts. for various state grants to provide direct student COEs’ Activities Vary Greatly Depending on instruction. Most commonly, COEs have provided the Size of Their School Districts . . . COEs serving career technical education, child care and preschool many small districts historically have tended to programs, migrant education programs, and adult be more involved in running regional academic education. Many school districts historically have programs (such as career technical education), participated in the same state grant programs covering basic business services (such as payroll and also offered these forms of direct student and procurement), and providing support in instruction. As discussed in the nearby box, COEs various other administrative areas (such as data also have a role in special education. management and reporting). In contrast, COEs COEs Vary Greatly in Terms of the Number with many large districts within their jurisdiction of School Districts They Serve. In California, have tended to focus more on supplemental COEs have an average of 16 school districts and enrichment services, such as specialized State Law Gives COEs Role in Special Education In California, county offices of education (COEs) and school districts coordinate special education services through consortia known as Special Education Local Plan Areas (SELPAs). All COEs are members of one or more SELPAs. At a minimum, this means COEs must attend SELPA meetings to discuss how to serve students with disabilities residing within their jurisdictions. Some COEs also provide direct services to students with disabilities. Others serve as their SELPA’s lead fiscal agent. In this capacity, COEs accept funding for all SELPA members, typically passing through a portion of this funding to other SELPA members while keeping some to provide services themselves. We do not cover special education in this report, as it was not consolidated into the Local Control Funding Formula for COEs and we believe any significant change to California’s system of special education should be part of a unified restructuring effort. Changing COEs’ roles in special education likely would have significant ramifications for the rest of the special education system. 8 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT professional development. For example, some COEs Also Typically Operate “County COEs offer training to district staff on how best to Community Schools.” State law designates COEs incorporate digital learning into their classrooms. as a provider of education for students who are on . . . And Their Historical Funding Levels . . . probation, referred by a probation department, Another particularly important factor affecting or mandatorily expelled from their school. the type and extent of COEs’ activities relates COEs receive direct funding for these students, to historical funding levels, with funding levels who typically are served at county-run county provided decades ago continuing to influence community schools. (In cases where COEs do COEs’ activities. Most notably, higher-funded not operate county community schools, students COEs tend to provide a broader swath of optional receive another placement, such as a district-run district services. alternative school.) The state also allows COEs . . . And Their Superintendents’ Priorities. to enroll other at-risk students in their county COEs’ activities also vary according to their community schools. For these other students, county superintendents’ priorities. Whereas some COEs must develop local agreements under which county superintendents traditionally have had the students’ home districts reimburse them for an interventionist educational philosophy, with associated education costs. In 2014-15, 51 COEs their COEs applying for many state grants and operated 76 county community schools serving offering many optional services, other county an average of 18,335 students per day (ADA). Like superintendents’ traditionally have seen their juvenile court schools, the cumulative enrollment mission more narrowly and limited their efforts to of students at these schools is higher. COEs statutorily required activities. received direct funding for 11,490 of these students, with funding for the remaining 6,844 students Alternative Education negotiated through local agreements with districts. Many COEs Operate Juvenile “Court Schools.” County community schools served an average of COEs are required by state law to ensure students 241 students (ADA), though the range was large, incarcerated or awaiting trial at county jails are with several small county community schools educated. To this end, COEs may directly educate averaging fewer than 10 students per day and the students at juvenile court schools or arrange largest county community schools serving more for another provider to educate the students. than 1,000 students per day. In 2014-15, 47 COEs (and one school district) COEs Must Develop Local Control and operated court schools. Of these COEs, 39 operated Accountability Plans (LCAPs) for Their one court school, 5 operated two court schools, Alternative Schools. The LCAP is a three-year and 3 operated more than two courts schools. plan that outlines each COE’s strategy to improve Altogether, these schools served an average of outcomes for students enrolled at its alternative 8,116 students per day (as measured by average schools. The California Department of Education daily attendance, or ADA). On average, each court reviews and approves these plans. The plans are school served 103 students per day. The cumulative intended to hold COEs accountable for serving number of students served in court schools these students and provide information to the throughout the year is much higher, as students public about the services students receive. In often stay at these schools for short periods of time addition, students attending alternative schools while they await trial. participate in the state’s standardized testing www.lao.ca.gov Legislative Analyst’s Office 9 AN LAO REPORT system. Students who have been enrolled in a COE rejects an LCAP, it must provide the district county program for fewer than 90 days have their with technical assistance in refining the plan. test scores attributed to their home district. Once State Tasks COEs With Various Other a student has been enrolled at a COE alternative Compliance Activities. For the most part, these school for more than 90 days, or enters a COE activities relate to ensuring districts are following alternative school after dropping out, the COE various state laws and have submitted accurate rather than the home district is responsible for that data to the state. COEs generally report that student’s outcomes. these activities tend to be less time-intensive than reviewing district LCAPs and providing fiscal Required District Services oversight. State Tasks All COEs With Two Main District COE Support Role in Midst of Transition. Oversight Activities. State law tasks COEs with When the state designed its new funding and both fiscal and academic oversight of districts accountability system for school districts beginning within their jurisdiction. Chapter 1213 of 1991 in 2013-14, it gave COEs a role in supporting (AB 1200, Eastin) established the current fiscal certain types of districts. Specifically, COEs must oversight process, whereby COEs regularly monitor provide technical assistance to districts that do not district solvency. Specific associated responsibilities meet performance benchmarks in two or more of include the review and approval of school district eight specified state priority areas (which include budgets, the review of interim financial reports student achievement and student engagement) for during the year, additional monitoring and one or more student subgroups. Upon identifying technical assistance for districts identified as being a district as underperforming, COEs must do at at-risk for fiscal insolvency, and more extensive least one of the following: (1) review the district’s intervention when districts are in severe fiscal strengths and weakness and identify effective distress. Chapter 47 of 2013 (SB 859, Committee programs that could help the district improve, on Budget and Fiscal Review) established the (2) assign an academic expert to help the school current academic oversight process, whereby COEs district improve outcomes, or (3) request the regularly monitor districts’ academic goals and California Collaborative for Educational Excellence performance. The associated responsibilities consist (the Collaborative) provide assistance to the primarily of reviewing and approving district district. (The state created the Collaborative to LCAPs. As part of this process, state law requires advise and assist local education agencies in COEs to verify that district LCAP documents use reaching their LCAP goals.) The exact roles of the state-approved format, align with districts’ COEs under the state’s new accountability system adopted budgets, and appropriately direct funds are still being worked out. (As discussed in the to disadvantaged students. If district LCAPs meet nearby box, some COEs historically have served in these requirements, COEs must approve them. If a district support capacities.) 10 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT Some COEs Historically Have Had a Role in “Turnaround” Efforts Some county offices of education (COEs) historically have provided comprehensive academic or turnaround support to low-performing schools and districts. Some COEs, for example, have received state approval to be a School Assistance and Intervention Team, a District Assistance and Intervention Team, and/or a hub under the Statewide System of School Support. In these capacities, COEs have helped low-performing schools and districts review their academic practices, identify their shortcomings, develop strategies for overcoming them, and implement those strategies—typically through a mix of resource reallocation, coaching, and other best practices. Much of COEs’ support and intervention has centered around helping schools and districts that have failed to meet federal performance standards, but some of it has focused on helping schools and districts failing to meet state performance standards. For example, under the Quality Education and Investment Act, COEs reviewed the professional development plans submitted by schools with low scores on state tests. FUNDING In this section, we provide an overview of total according to county size and characteristics. COEs funding for COEs. We then explain how the state may use this funding for any purpose. The state funded COEs before LCFF and Figure 3 describe how it funds them under LCFF. Next, we use COEs Receive Funding From Various Sources available expenditure data to Shares of 2014-15 Funding analyze how COEs are using their LCFF funds. O verview Special Local Control Educationa Funding Formula COEs Receive Funding From Various Sources. In 2014-15, COEs received a total of $3.4 billion. As Figure 3 shows, this funding came from various sources. The LCFF, the primary source of state State funding for COEs, accounts Federal Categorical Categorical Grants for just over one-quarter of all Grants COE funding. As described in Fee-for-Service Contracts detail later in this report, every Other Local Revenue COE receives LCFF funding. The amount they receive varies a Consists of federal, state, and local funds for serving students with disabilities. www.lao.ca.gov Legislative Analyst’s Office 11 AN LAO REPORT also allows COEs to apply for some categorical different programs, with funds allocated based funding. For example, in 2015-16, about half of upon many factors, some of which were rooted in COEs received funding for the Career Technical COEs’ behavior decades earlier. As Figure 4 shows, Education Incentive Grant. Another significant about 20 percent of COEs’ state funding (excluding source of funding relates to special education. special education) was for court schools and county COEs receive this funding from various federal, community schools. This funding was formulaic, state and local sources. Other notable sources based on the number of students served in these of funding include federal categorical grants for schools. COEs had to use this pot of funding on specific activities (such as operating Head Start these students. COEs received about 30 percent preschool programs) and revenue generated locally of their state funding for district services. This through fee-for-service contracts. For example, allocation was based on the number of students some COEs have contractual agreements to provide served by districts in the county, historical funding payroll or accounting services to their districts. rates (which varied widely across COEs), and (Other COEs provide these services at no charge as various add-ons (such as funding for increases in part of their palette of optional services.) unemployment insurance costs). This funding was unrestricted. Though COEs had discretion, they S F tate unding commonly used the funding to provide various Prior to LCFF, State’s System of Funding COEs optional services to districts, including business Was Particularly Complicated. Even setting aside support, professional development, and technology the complexity of special education funding, COEs services. The remaining half of COEs’ state funding prior to LCFF could receive funding from many came from various state categorical programs. Most notably, many COEs received Figure 4 funding to provide career State Funding for COEs technical education through Prior to Local Control Funding Formula Regional Occupational Shares of 2012-13 Funding Centers and Programs (ROCP)—alone accounting Juvenile Court and Regional Occupational for about 20 percent of County Community Centers and Programs COE funding statewide. Schools ROCP, like other categorical programs, had its own rules for applying, receiving, and spending associated funding. COE participation Othera in these categorical programs varied widely, with some District Services COEs operating many large programs, and some a Largest programs were the Home-to-School Transportation program and the Teacher operating no programs. Credentialing Block Grant. Also includes community day schools and other direct instruction. 12 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT State Now Allocates Bulk of Funding Through are no longer required. In 2014-15, less than half of LCFF. In crafting LCFF, the state consolidated COEs were funded at the levels specified by their most state funding for COEs and replaced most of LCFF targets and the rest were funded at their the former funding formulas with a new, two-part higher 2012-13 funding levels. The second formula. As Figure 5 shows, the two-part formula provision, known as minimum state aid, ensures reflects two core COE activities: (1) alternative that each COE will continue to receive at least as education and (2) district services. Each COE’s much state General Fund as it received in 2012-13 target funding level is the sum of the two parts. for categorical programs. The amount of minimum Like the school district LCFF, the COE LCFF is state aid to which each COE is entitled varies based funded by a combination of state General Fund and on historical participation in categorical programs, local property tax revenue, with the proportion of with those that ran more and/or larger programs each fund source varying by county. COEs have receiving larger amounts of state aid. Similar to flexibility to use all LCFF funds (from either part of the first hold-harmless provision, COEs are not the formula) for any purpose. required to provide the services that originally COE LCFF Has Two “Hold Harmless” generated the minimum state aid allotment. Provisions. Implementing legislation included two Almost two-thirds of COEs receive funding from provisions intended to hold harmless COEs that one or both hold harmless provisions. This funding otherwise would have received less funding under can be used for any purpose. the new formula. The first provision guarantees that District Services Is Largest Component of each COE will continue to receive at least as much LCFF for COEs. As Figure 6 (see next page) shows, total funding as it received from revenue limits of the $1 billion generated by LCFF in 2014-15, and categorical programs in 2012-13. The activities the juvenile court and county community schools formerly associated with this funding, however, portion generated about 30 percent, the district Figure 5 Two-Part Local Control Funding Formula for COEs 2016-17 Rates Alternative Education Eligible student population Students who are (1) under the authority of the juvenile justice system, (2)probation referred, (3) on probation, or (4) mandatorily expelled Base funding $11,429 per studenta Supplemental funding for EL/LI and foster youth 35 percent of base rateb students Concentration funding Additional 35 percent of base rate for EL/LI and foster youth students above 50 percent of enrollmentb District Services Base funding of $668,242 per COE Plus $111,374 per school district in the county (corrected 2/17/2017) Plus $41 to $71 per student in county (less populous counties receive higher per-student rates)a a As measured by average daily attendance. b Assumes 100 percent of students at juvenile court schools are English learner and low income (EL/LI). www.lao.ca.gov Legislative Analyst’s Office 13 AN LAO REPORT COEs Also Can Receive Figure 6 Grant Funding. Though the Breakdown of Local Control Funding Formula for COEs state eliminated many state Shares of 2014-15 Funding categorical programs as part Hold Harmless of the new LCFF system, many COEs continue to receive funding from various Students in County remaining (and new) state and federal grant programs. For District Services example, since the enactment Districts in County County of LCFF, the state has created Community Schools a new program—Career Base Technical Education Incentive Juvenile Grants—and many COEs Court Schools receive associated funding. Many COEs also receive services component generated about 45 percent, federal grants on behalf of and the two hold harmless provisions generated students who are neglected, delinquent, or at risk. a combined 25 percent. The share associated with Certain COEs also receive special grants from the the hold harmless provisions reflects the amount state to perform specified statewide functions. provided on top of the funding the COEs would For example, the Imperial COE currently receives have otherwise received under the new system. a grant to manage Internet service on behalf of State Also Annually Funds COEs Through COEs. Mandates Block Grant. Prior to LCFF, the state State Recently Provided One-Time Funding funded COEs for certain required activities, such for New Oversight Activities. The 2015-16 as teacher credential monitoring, through either budget plan provided $40 million in one-time the K-12 mandates block grant or the mandate Proposition 98 funding to COEs. Though the reimbursement process. COEs chose how they funding was unrestricted, it was intended for COEs wanted to receive mandate funding. Post-LCFF to use on their newest oversight activity—review enactment, the state continues to use this approach and approval of district LCAPs. The funding was to funding mandated activities. Under the K-12 distributed to COEs based on the number of school mandates block grant, COEs currently receive districts in the county and ADA at those schools. $1 for every student in their county, $28.42 for a H COe u nalySiS OF Ow S Se every student they educate in a county-run school t lCFF F Heir unding in grades K-8, and $56 for every student they educate in a county-run school in grades 9-12. To understand better how COEs are Under the mandate reimbursement process, COEs functioning in the LCFF era, we examined how file reimbursement claims for each mandate. In much LCFF funding they were spending on 2016-17, 95 percent of COEs were participating in alternative education, required district oversight the K-12 mandates block grant. The remainder filed services, and optional district services. Our claims for individual mandates. analysis uses 2014-15 data, which was the first year 14 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT of full LCFF implementation for COEs and is the such as security and counseling, with the exact most recent expenditure data available. Figure 7 arrangements negotiated locally. summarizes our key findings. Estimating County Community School Funding and Spending Complicated by Reporting Alternative Schools Rules. In 2014-15, LCFF provided COEs with an COEs Spend Less Than LCFF Provides on average of $15,900 per county community student Juvenile Court Schools. In 2014-15, LCFF provided (those who were on probation, referred by a COEs with $17,300 for each student attending a probation department, or mandatorily expelled), court school, totaling about $140 million statewide. totaling $183 million statewide. In addition, COEs Based on financial data COEs submit to the state, received funding through district reimbursements we estimate that in 2014-15 COEs spent an average for other types of students served in these schools. of about $12,500 per student—about $100 million The state, however, does not track these funding statewide. That is, COEs statewide spent about transfers. Moreover, reported expenditure 70 percent of the funding generated by their data do not delineate clearly whether COEs court school students on programs and services include spending on all students or only direct designated for those students. (Given that 2014-15 COE-funded students. was the first year of full LCFF implementation, Small County Community Schools Have some COEs might not yet have fully enhanced their Higher Per-Student Costs Than Large Schools. alternative education programs, with plans to make Despite the complications noted above, the data further enhancements and increase spending per suggest that COEs serving a small number of student in the coming years.) students at their county community schools Per-Student Court School Spending Varies typically spend much more per student than Widely Across Counties. We found that some larger county community schools. Operating COEs spent as little as $6,000 per student (ADA), small county community schools is relatively whereas others spent as Figure 7 much as $36,000 per student. Per-student spending Major Findings: How COEs Use LCFF Funding might vary because of class size, with smaller classes COEs in total spend less than the Local Control Funding Formula (LCFF) provides on juvenile court schools ($100 million spent compared to having higher per-student $140 million generated). costs. In addition, COEs COEs' per-pupil spending at juvenile court schools varies widely (from have different cost-sharing $6,000 to $36,000). agreements with county COEs' per-pupil spending at county community schools also varies widely. jails and county sheriff departments. County COEs spend a small portion of LCFF funding on their core state-required district oversight activities (an estimated $40 million). jails typically cover all or a portion of the cost COEs provide various optional services to districts with remaining LCFF funding (about $650 million). of facilities for juvenile court schools as well Since LCFF was enacted, COEs have increased fee-for-service revenue (from $300 million in 2012-13 to $330 million in 2014-15). some additional costs, www.lao.ca.gov Legislative Analyst’s Office 15 AN LAO REPORT expensive because these schools tend to have higher LCAP for the portion of LCFF funding they use to instructional and security costs due smaller class provide optional services. sizes as well as higher transportation costs due to COEs Provide Various Optional Services to special routes being required. Districts. Based on our conversations with COEs and our review of available financial reports, COEs Required District Services are most commonly providing optional services COEs Spend Small Portion of LCFF Dollars on that resemble the categorical programs (most Required District Oversight Activities. According notably, ROCP) they ran before LCFF. In addition, to COEs, oversight of district budgets and LCAPs some COEs indicated that they were providing are their most costly required oversight activities. more LCAP support to their districts than statute COE financial reports, however, do not include requires. The types and levels of extra support, much detailed information about the cost of these however, vary greatly. COEs providing the most activities. To estimate these costs, we took the support offer help year round as well as conduct following approach. For fiscal oversight activities, we trainings on developing LCAPs. One COE we reviewed the amount of categorical funding COEs spoke with had assigned a project manager to each received before LCFF for performing those activities school district to guide them through the LCAP and spoke with some COEs about their current costs. process. Lastly, COEs we spoke with indicated Based on these data and conversations, we estimate that they offer services consistent with county that COEs could be spending up to $20 million per superintendent priorities. For example, one COE year statewide on their required fiscal oversight we spoke with used LCFF funding to purchase activities. To estimate the costs of LCAP oversight, computers for districts in their county. Another we relied on information provided by COEs to the COE indicated that they offered enrichment California County Superintendents Educational programs like outdoor education and art. In Services Association. Based on this information, the addition, some COEs sponsor special initiatives in organization estimated that COEs annually spend their counties, such as truancy reduction efforts. roughly $20 million in total on LCAP activities. COEs Supplementing LCFF With Fee-for- Combining spending for fiscal and LCAP oversight, Service Revenue. Fee revenue at COEs has increased we estimate COEs statewide are spending roughly over the last three years, from $300 million in $40 million annually. 2012-13 to $330 million in 2014-15. In 2014-15, 90 percent of COEs charged their districts fees Optional Services for services, although the fee-based services and COEs Spend Remainder of LCFF Funds on fee amounts varied across the state. Many COEs Optional Activities. After covering the costs indicate that they now commonly charge fees or associated with alternative education (an estimated are moving to a fee-for-service model for career $283 million) and required district services (an technical education programs and teacher induction estimated $40 million), COEs spend the rest of programs. While COEs often charge fees to districts their district services and hold harmless allocations for the optional services they provide, many (roughly $650 million) on optional services. COE continue to offer services to districts at no charge or financial reports include only limited information at a subsidized rate. Additional LCAP support and about how COEs spend this $650 million. payroll services were noted as common examples of Moreover, COEs are not required to develop an no-charge or reduced-charge services. 16 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT ASSESSMENT In this section, we assess COEs’ roles in the hold accountable for student outcomes. Regarding LCFF era. We first assess their role in alternative size, we found that at least 20 percent of county education, then turn to required district oversight community schools serve 20 or fewer students. services, and finally to optional district services. Schools serving very few students often report costs per student that are two to three times greater than Alternative Schools the average amount spent to educate students in Providing COEs With Direct Funding for district alternative education settings. Additionally, Court Schools Has Shortcomings. Funding COEs regarding academic opportunities and outcomes, directly for serving incarcerated students has we found no clear, compelling evidence that county shortcomings in that it detaches these students community schools necessarily offer students better from their districts of residence and creates limited educational opportunities or have better student incentives for school districts to oversee the results than district-run alternative schools serving quality of students’ education while incarcerated. similar students. Additionally, COEs are not the only groups that Districts Could Be Better Positioned to Serve could work with county jails and probation This Student Population. The state currently funds departments to provide educational services to districts to serve most types of at-risk students. incarcerated youth. Though many COEs currently Thus, all but the smallest districts are likely to have a longstanding role serving these students have 20 or more students districtwide that need and over time have established relationships and (due to mandatory expulsion) or could benefit (due cost-sharing agreements with county jails and to behavior or academic issues) from alternative probation departments, other groups, particularly placements. As a result, COEs do not appear large school districts, could develop similar to have a comparative advantage over districts expertise, relationships, and agreements. Moreover, in serving a certain, small subset of alternative allowing districts to have some influence on the education students. Using COEs in this area also educational provider of court schools might over has serious disadvantages. Most notably, districts time improve program quality and reduce program lose the incentive to ensure these students stay cost. in school, have access to high-quality academic Even Greater Concerns Regarding Direct programs, receive wraparound supports, and can Funding for County Community Schools. The attend school sites within closer proximity of their state’s current approach to alternative education homes. also assumes that COEs are best positioned to Required District Services serve students who are on probation, referred by a probation department, or mandatorily expelled. COEs Well Positioned to Continue Providing Presumably, the theory is that COEs will achieve Fiscal Oversight. California has more than economies of scale (larger, better, less costly 900 school districts, such that a single entity at the programs) by pulling all these students together on state level likely would have difficulty providing a single site. Our review, however, finds that county effective fiscal oversight of all school districts. community schools often are small and difficult to Compared to a state-level entity, COEs tend to be www.lao.ca.gov Legislative Analyst’s Office 17 AN LAO REPORT more familiar with the local fiscal circumstances Optional Services facing districts in their counties. In addition, school Directly Funding COE Optional Services district fiscal health has improved since the state Provides No Benefit From State Perspective . . . created a new fiscal review system and assigned Directly funding COEs to provide optional services new fiscal oversight duties to COEs. Since 1991, to districts provides little obvious benefit either to only eight school districts have required emergency the state or districts. From the state’s perspective, it loans from the state to avoid fiscal insolvency. By now does not track what optional district services contrast, nearly 30 districts required emergency COEs provide, if districts want those services, or if loans from 1981 to 1991. Though the improvement those services are being provided cost-effectively. likely is due to the new review process itself, COEs Providing funding directly to COEs also is counter appear to have performed their role effectively— to the state’s overarching LCFF philosophy, helping provide more direct, routine oversight of whereby districts receive funding with few strings district budgets. to promote more coherent fiscal and academic COEs Well Positioned to Review and Approve planning. LCAPs. We believe the large number of districts . . . Or District Perspective. From a district in the state also provides a compelling rationale perspective, districts also presumably would for COEs to review and approve districts LCAPs. prefer receiving funding directly and identifying Compared with a single state entity, COEs tend to for themselves the services they cannot or do not be more familiar with the academic performance want to provide in house, rather than being offered issues in their districts and better able to assess subsidized COE services they might not want. whether the LCAPs appropriately address these Under the current funding system, COEs receive issues. In addition, the law requires LCAPs to align the same amount of LCFF funding regardless with district budgets, which COEs already are of how well they address the priorities of their required to approve. districts. As a result, COEs do not have much COEs Well Positioned to Do Other incentive to add or discontinue services in response Compliance Monitoring. Many other compliance to changing district priorities. It also provides reviews performed by COEs likely would be less districts with little recourse if they are dissatisfied effective or more costly if undertaken by a state with the quality of services they are receiving. entity. For example, COEs hear appeals when a In line with these concerns, we found that COEs district expels a student or denies an interdistrict rarely have a formal process to obtain feedback transfer. These hearings would be difficult for about the types of services they are providing to parents and students to attend if conducted districts. Districts and COEs indicated that they outside the county where they occurred. COEs sometimes have informal discussions about what also conduct reviews to ensure that schools have services would benefit districts most, but this sufficient textbooks and instructional materials feedback often depends on relationships with a few to serve all of their students. Since these reviews individual districts rather than a systemic effort require a physical inspection, they would be more to identify priorities for districts across the entire costly to perform if assigned to an entity located county. farther from the schools than the COE. 18 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT RECOMMENDATIONS In this section, we make a series of through the set (or negotiated) reimbursement recommendations that if taken together would rate for each of their incarcerated students. reshape how the state funds COEs. Figure 8 We recommend, however, that state law allow summarizes our recommendations. We first make districts voluntarily and collaboratively to select recommendations relating to alternative education, an alternative court school provider. Under this then provide recommendations relating to required alternative arrangement, districts could negotiate district services and optional district services. We any per-student fee rate. conclude by outlining steps the state could take Likely Little Immediate Impact but Over during the transition period. Time Could Promote Improvement. Because COEs have experience running court schools and Alternative Education longstanding relationships with county jails and Fund Districts Directly for Their Incarcerated probation departments, we believe such changes Students. We recommend the state provide in state law likely would not lead to immediate or education funding for incarcerated students to their dramatic changes in the court school landscape. districts of residence and require all associated Nonetheless, it would give large districts more accountability data be attributed to those districts. choice in how best to run nearby court schools. Providing funding to districts for these students It also would give other districts at least an and tying the students’ progress to district opportunity to come together to pursue alternatives accountability reports would ensure that districts if they are dissatisfied with their COE-run court (1) oversee the services their students receive while schools. With enough deliberation and negotiation, incarcerated and (2) monitor the quality and costs districts within a county might be able to agree to of those services. an alternative provider (such as the largest district Set COE as Default Court School Provider among them, a nonprofit organization, or a nearby but Allow Districts Collaboratively to Select COE). Over the next few years, the Legislature Alternative Provider. Under this approach, Figure 8 Summary of Recommendations state law would establish COEs as the standard 9 Alternative Education. Provide districts funding directly for alternative court school provider. school students. Allow pass throughs to COEs. For juvenile court State law also would set schools, set COE as default provider, but allow districts the option of selecting another provider. Also, set default COE reimbursement rate but forth a default per-student allow for rate to be locally negotiated. reimbursement rate for 9 Fiscal and Academic Oversight. Fund COEs directly for these state- incarcerated students. required activities. Allocate funds according to the number of districts in Under these provisions, each county and the size of those districts. COEs likely would 9 Other Compliance Monitoring. Continue to fund COEs for other continue operating court compliance monitoring through the K-12 mandates block grant. schools in all or virtually 9 Optional Services. Shift funding to districts and have COEs charge fees all areas of the state, for the optional district services they provide. with districts passing www.lao.ca.gov Legislative Analyst’s Office 19 AN LAO REPORT could track whether districts were able to navigate discontinue direct funding to COEs and instead such arrangements. Depending upon what it fund all students through their districts of learned, the Legislature could consider statutory residence. Districts receiving this funding would be modifications to address any significant barriers to responsible for appropriately placing these students such collaboration. into education programs. These placements could Various Options for Shifting Funding and include district-run programs, programs run by Setting Rates. The Legislature would have various a consortium of small- or mid-sized districts, options for shifting funding initially from COEs specialized charter schools, or an alternative school to districts and setting the statutory maximum operated by a COE. In the latter case, districts COE per-pupil court school reimbursement rate. would reimburse the COE for the costs of serving The most seamless approach would be to set the these students. We think this approach could new district funding rate at the high school LCFF result in better placement decisions for students, rate, which is intended to reflect the average cost primarily because a district of residence is likely of serving high school students. As incarcerated to be more familiar with students’ educational students comprise a tiny share of districts’ student history than the COE and would have the flexibility populations, districts still likely could cover the to choose from multiple placement options. In statutory maximum COE reimbursement charge addition, this approach would align with the way for those students within their entire district the state refers all other at-risk students, including budgets. Another approach would be to set both the students who are habitually truant or expelled for direct district funding rate and statutory maximum nonmandatory reasons. Moreover, many COEs and COE reimbursement rate at the amount COEs districts already have developed local arrangements currently spend on incarcerated students. Though under which the districts refer some of their a higher-cost and more complicated approach students to COE-operated schools and reimburse (as it effectively would entail an LCFF “add-on” the COEs for the cost of educating those students. for districts), it likely would enable districts to Under our approach, districts could expand upon adjust more easily to the new system in the near these partnerships or develop other programs term. A third approach would be to set the direct better suited to the needs of their students. As with district funding rate and statutory maximum setting the funding rate for incarcerated students, COE reimbursement rate at the current court the Legislature would have various options for school funding rate under the COE LCFF. Though setting the rate for other alternative education court schools on average now spend less than the students, including setting it at the high school current funding rate, the Legislature might want LCFF rate or keeping the current rate. to enhance court school programs. Under this Hold Districts Accountable for Student approach, the Legislature likely would want to add Outcomes. In tandem with the above changes, specific spending requirements ensuring funding we recommend the state hold school districts was used for the intended purposes. accountable for all their alternative education Fund Other Alternative School Students students, including those they decide to serve in Through Their Districts and Provide Flexibility their own district programs or in selected COE Over Placements. With regard to students who are programs. Regardless of the students’ placement, probation-referred, on probation, or mandatorily we recommend assigning test scores and other expelled, we recommend the Legislature also outcome data to each student’s district of residence. 20 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT Students referred to a COE county community In the Future, Revisit COE Funding for school, for example, would continue to have their Providing Support to Districts Not Meeting test scores assigned to the districts that referred Performance Benchmarks. Once the state more them. In the case of county community schools, clearly defines the respective roles of COEs, this arrangement would encourage districts the Collaborative, and other academic experts to choose high-quality placements where the in providing support to districts not meeting performance of these students would reflect performance benchmarks, the Legislature at that positively on those districts. In the case of juvenile time could consider how best to provide associated court schools, it similarly likely would encourage funding. districts to work with the court school provider to Optional Services foster high-quality programs. Shift Funding to Districts and Allow Them Required District Services to Purchase Services They Find Valuable. We Fund COEs Directly for Core Oversight recommend the Legislature phase out the portion Activities. We believe fiscal and academic oversight of the LCFF that COEs use to provide optional is likely to be more effective when it is performed services, in tandem increasing district funding at a county (or regional) level than at the state by a like amount. In lieu of direct state funding, level. We recommend the state fund COEs for COEs would provide optional services to districts conducting these activities using a formula that on a fee-for-service basis. Districts, in turn, could reflects expected underlying costs. As the workload continue to receive services by paying their COE associated with these activities tends to vary or could pursue other options, like contracting according to the number of districts in each county with another district or hiring additional staff to and the size of those districts, we recommend using perform the services internally. This approach these two factors to establish the new formula. For would provide a strong incentive for COEs to offer example, the state could classify school districts helpful, high-quality services that are responsive as being large, medium, or small and provide to district needs. It also would encourage more each COE an allotment based upon the number of COEs to develop expertise in specific areas and districts in the county that fall into each category. make their services available to districts outside of (As part of the new formula, the state could their county. For example, a COE that developed consider increasing the rates to account for base a successful teacher training program could offer COE costs, including the county superintendent’s this service on a fee basis to districts throughout salary and office overhead.) the state. In addition, the fee-for-service approach Continue to Fund COEs Through Mandates would build upon an arrangement that is already Block Grant for Other Required Activities. For the widespread among districts and COEs. other required COE compliance activities, costs Next Steps tend to vary according to the number of students within the county. As the current mandates block New System Entails Significant Changes. Our grant for COEs is based on the number of students recommendations signify major changes in the within the county, we recommend the state way the state funds COEs. The fiscal impact on continue funding these other required activities COEs would be significant, with the bulk of COEs’ through the block grant. LCFF funding shifting to school districts. Through www.lao.ca.gov Legislative Analyst’s Office 21 AN LAO REPORT local fee-for-service arrangements, however, a large activities, in tandem increasing district funding, portion of this amount could go back to COEs that while retaining direct COE funding for fiscal and operate successful programs for their districts. academic oversight. Over this same period, the Recommend Multiyear Transition Plan. state also could increase school district funding for We recommend the Legislature phase in the alternative education students. A gradual transition new funding model over the course of the next would limit disruption to both COEs and districts. few years. The first year could be devoted to In addition, a multiyear transition period would preparing for the new system, with no immediate provide an opportunity for COEs and districts to changes to COE funding. In the subsequent few communicate about what services districts want years, the state gradually could phase out the their COEs to provide and allow time to negotiate portion of COE funding now spent on optional fee-for-service arrangements. CONCLUSION Core COE Mission Not Well Defined. funding reform makes the issue an even more Though the State Constitution establishes county pressing concern for the state. superintendents of schools and county boards Strategic Approach to COEs’ Mission and of education, the core mission of COEs is not Funding Could Reinforce Broader Reform Efforts. entirely clear. COEs traditionally have provided In this report, we recommend the Legislature take some district oversight, some district support, a more strategic approach to COEs. The first step and some direct classroom instruction. Although in such an approach is to define clearly the core the state has required COEs to perform certain mission of COEs and the activities the Legislature functions over the years, these activities account believes all COEs should perform. The second step for a relatively small share of most COE budgets. is to align funding with those required activities. In COEs spend the bulk of their funding on optional this report, we suggest making fiscal and academic services. The nature of these services varies widely oversight the core mission of COEs and providing across the state and tends to reflect the priorities state funding to perform this oversight. We suggest and educational philosophy of the elected county shifting other COE funding to districts so that superintendents and historical practice. districts can pay for the services they find valuable. Role of COEs Even Less Clear Today. Though We think this approach would provide a stronger LCFF somewhat simplified funding for COEs, it did incentive for COEs to offer helpful, high-quality not clarify COEs’ mission. Arguably, it made COEs’ services that are responsive to district needs. It mission even more nebulous, as it removed many also would align with the broader state objective COE spending restrictions designed to further of increasing local decision making power while specific state purposes while increasing overall COE strengthening accountability for student outcomes. funding. Compared with the previous system of Although the transition likely would take a few school finance, COEs now receive a much larger years, we think the end result would be a more share of their funding in the form of unrestricted straightforward, transparent system with a more grants. Although the lack of a clear mission for clearly defined role for COEs. COEs is not a new issue, we think the recent 22 Legislative Analyst’s Office www.lao.ca.gov AN LAO REPORT www.lao.ca.gov Legislative Analyst’s Office 23 AN LAO REPORT LAO Publications This report was prepared by Natasha Collins and Kenneth Kapphahn, with contributions from Sara Cortez and Nashaira Verrier. It was reviewed by Jennifer Kuhn. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 24 Legislative Analyst’s Office www.lao.ca.gov