Redesigning California's Adult Education Funding Model

AN LAO REPORT Redesigning California’s Adult Education Funding Model GABRIEL PETEK | LEGISLATIVE ANALYST | DECEMBER 2022 SUMMARY State Began Restructuring Adult Education System Almost a Decade Ago. The primary purpose of adult education is to serve as a first point of entry for Californians seeking to acquire basic skills and potentially move into more advanced instruction or the workforce. School districts (through their adult schools) and community colleges are the state’s main providers of adult education. Due to longstanding concerns with a lack of coordination among providers, the state began restructuring its adult education system in 2013-14. Though the new adult education delivery system based on regional consortia has benefits, we believe the way the state funds adult education is fundamentally flawed and at odds with the state’s program goals. Various Drawbacks of Current Funding Model, Recommend New Approach. The figure below identifies the main shortcomings of the existing funding model and our recommended new funding model. The new model we present is better aligned with the state’s existing program objectives of enhanced regional coordination and improved student outcomes. Moreover, it could be implemented such that it costs, on net, no more or less than the existing adult education funding model. To help adult schools and community colleges adjust to the new funding model, we recommend the state phase in implementation over several years. A multiyear transition would give providers and consortia time to improve their programs and adjust their budgets. We believe now is an opportune time to undertake the transition, as providers overall currently are receiving substantial funding beyond their program costs, likely making the transition more manageable for them. Redesigning the State’s Adult Education Funding Model Recommended Funding Model at Full Drawback of Existing Funding Model Implementation Adult school funding is not linked to student attendance, and → Adult schools are funded based on student attendance, adult schools have widely different per-student funding rates with a uniform base per-student rate that is the same as without justification. the CCC noncredit funding rate. No CAEP or CCC noncredit funding is linked to provider → Adult schools and community colleges earn a portion of performance (though federal adult education funds and CCC their CAEP and noncredit funding, respectively, based on credit funds are linked to performance). their student outcomes. Adult schools charge fees, even though most adult students are → Adult schools do not charge fees. (The new, uniform base low income and community colleges serving a similar population funding rate would cover all expected program costs.) of students either do not charge such fees or waive them. No CAEP funding is allocated directly to consortia for regional → Consortia receive a minimum fixed CAEP amount, plus an coordination and successful student transitions to collegiate amount based on size. Consortia also earn CAEP funds courses. based on their student outcomes (specifically, how well they transition adult education students from precollegiate to collegiate courses). Adult school funding is not adjusted annually for changes in → Adult school funding is adjusted annually for changes in student demand (though CCC credit and noncredit funding is student demand. Both adult school and CCC noncredit adjusted accordingly). Neither adult school nor CCC noncredit funding are adjusted annually for changes in student funding is adjusted based on performance. outcomes. CAEP = California Adult Education Program. www.lao.ca.gov 1 AN LAO REPORT INTRODUCTION adult schools, then turn to the funding rules for community colleges. Next, we discuss how certain Adult Education Serves Several Purposes. regional coordination activities are funded. At the Adult education is intended to provide adults end of this section, we discuss federal funding for with the precollegiate knowledge and skills they adult education. (In our 2012 report Restructuring need to participate in civic life and the workforce. Adult Education in California, we provide more Adult education serves state residents who have detail on the history of adult education in California educational objectives such as learning to speak and the major coordination challenges and other English; passing the oral and written exams for problems with the old system.) U.S. citizenship; earning a high school diploma; receiving job training; and obtaining the prerequisite Adult Schools proficiency in reading, writing, and mathematics Prior to 2008-09, the State Funded Adult to enter collegiate coursework. Adult education Schools on a Per-Student Basis. In 2007-08, students come from many backgrounds, though the about one-third of school districts in the state vast majority are from lower-income households, operated adult schools. Geographically, the often speaking languages other than English at 276 adult schools operating that year canvased home. The most typical student is female, Hispanic, most areas of the state. (Adult schools typically low income, and between 25 and 45 years old. are located at their own sites—separate from, but Adult schools (primarily through school districts) sometimes adjacent to, other schools in a district.) and community colleges are the main providers of Funding for adult schools was based on average adult education in California. daily attendance (ADA), with one ADA equivalent Brief Examines Funding Model for to 525 instructional hours. In 2007-08, districts Adult Education. Historically, adult schools received $2,645 in state funding per ADA (about and community colleges generally had little $3,900 per ADA in today’s dollars). Adult schools coordination—neither coordinating their received this funding rate regardless of the specific precollegiate course offerings nor their pathways for courses they offered, with basic English and students from adult schools to collegiate courses math, English as a second language (ESL), career at community colleges. In 2013-14, the state technical education (CTE), and citizenship courses restructured its adult education system with the commonly offered. key objectives of fostering greater communication During This Period, Adult Schools Had and coordination and producing better student Enrollment Caps. Prior to 2008-09, school district outcomes. Under the new structure, providers adult education programs had funding caps on must join a local adult education consortium as a the total number of ADA they were paid for each condition of receiving state funds. As California’s year. Per statute (initially adopted in 1979-80), each restructured adult education system approaches district’s ADA cap was increased by 2.5 percent its tenth year, this brief reexamines the state annually. If a school district failed to reach its cap funding model and assesses how effectively it for two consecutive years, that district’s cap would promotes state objectives. This brief has three be reduced and the amount of enrollment monies main parts. The first part provides background that went unused would be redirected to other on adult education funding. The second part districts serving students in excess of their funding assesses the current funding model, and the third caps. This redistributive approach was intended to part offers recommendations to improve the state help align school district allocations with statewide funding model. demand for adult education services. Schools with enrollment over their caps generally tended to BACKGROUND reduce their enrollment gradually down to their caps The state has funded school districts and if funding was not forthcoming. Schools tended to community colleges in notably different ways for view supporting over-cap enrollment as otherwise adult education. In this section, we first describe unsustainable over the long term. the state funding rules for school districts’ 2 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT During Great Recession, Certain State Actions State Created New Dedicated Funding Had Significant Implications for Adult School Stream for Adult Education in 2015-16. After Funding. In 2007-08, the state provided a total of giving providers two planning years, the 2015-16 $754 million (Proposition 98 General Fund) to school budget created the Adult Education Block Grant— districts (and a few county offices of education) later renamed the California Adult Education for their adult education programs. Beginning in Program (CAEP). The state initially provided 2008-09, the state reduced funding for school $500 million (ongoing Proposition 98 General districts due to declining revenues. That fiscal year, Fund) for the revamped program. This funding the state implemented a 15 percent across-the-board was on top of LCFF funding, effectively resulting cut to most school district categorical programs, in school districts being able to repurpose all their including adult education. This cut deepened to previous adult education funding for K-12 purposes. 20 percent in 2009-10 and remained at that reduced In 2015-16, 72 consortia (later 71 consortia) level in 2010-11 and 2011-12. In a corresponding participated in the adult education program. Under action reflecting a major departure from earlier the program, each consortium is tasked with budgetary practices, the state allowed school serving adults according to its regional delivery districts to use their adult education funding for any plan. Each consortium includes at least one education purpose. The amount of adult education community college district, along with neighboring funding that school districts redirected for K-12 adult schools, with consortia having an average purposes varied considerably—from a few districts of about six members. (Only community colleges, redirecting no funds to other districts redirecting all county offices of education, school districts, their funds. By 2012-13, school districts collectively and joint powers authorities—such as regional were spending an estimated $337 million on adult occupational centers administered by multiple education—slightly more than half of the $635 million school districts—may be consortia members. nominally provided in Proposition 98 adult education Some consortia, however, subcontract with categorical funds that year. partners such as libraries and community-based State Embarked on Major Adult Education organizations to provide adult education services.) Restructuring in 2013-14. Due to a desire by the New Adult Education Program Has Two-Part Legislature to preserve local spending on adult Funding Formula. Of the initial $500 million education but longstanding concerns with a lack of appropriation, $337 million was allocated directly coordination among providers, the 2013-14 budget to adult schools in the newly formed consortia package mapped out a new state strategy for based on their level of state spending on adult funding and operating adult education. Specifically, education in 2012-13. The remaining $163 million the budget provided one-time funds to school was distributed to consortia based on a calculation districts and community colleges for the purpose of of regional need. (This post describes the state forming consortia and developing regional delivery allocation method in more detail.) Consortia were plans. In a related action, the 2013-14 budget given wide discretion both in how to use these package eliminated school districts’ adult education needs-based funds and how to allocate them categorical program and consolidated all associated among their members. Consortia commonly used a annual funding ($635 million Proposition 98 General portion of their needs-based funds for coordination Fund) into a new school district Local Control activities, with the remainder passed through to Funding Formula (LCFF). The budget package, consortia members for direct services. Under the however, contained a requirement for school districts new program, all CAEP funds must be spent on to maintain at least their 2012-13 level of state adult education and cannot be redirected for spending on adult education in 2013-14 and 2014-15. K-12 or other non-CAEP purposes. Finally, the 2013-14 budget package included intent language for the Legislature to provide funding to the regional consortia beginning in 2015-16 “to expand and improve the provision of adult education.” www.lao.ca.gov 3 AN LAO REPORT State Has Increased CAEP Funding some instances they may qualify for federal aid. Over Time but Has Not Made Attendance Fees for CTE courses vary among adult schools Adjustments. Figure 1 shows that annual and type of program, with fees ranging from a few CAEP funding increased from $500 million in hundred dollars to several thousands of dollars. 2015-16 to almost $600 million in 2022-23. For example, Hacienda La Puente Adult School Since 2015-16, each consortia member generally (Los Angeles County) charges $2,980 for a medical has received its original CAEP amount plus assistant program (which takes about a year to certain cost-of-living adjustments (COLA). (Statute complete) compared to $600 at Visalia Adult School generally requires each CAEP member to receive (Tulare County). Sweetwater Adult School (San at least the same level of funding as it did in Diego County) currently assesses no charge for the the prior year.) Though the state has provided program. Adults schools reported collecting about COLAs to the program over this period, it has not $20 million statewide in fee revenue in 2021-22. provided funding for enrollment growth or other Community Colleges attendance-related adjustments. Funding for Adult Education at the Under CAEP, Adult Schools Are No Longer Funded on Per-Student Basis. Currently, about Community Colleges Depends on Type of 300 adult schools receive about $525 million in Courses Offered. Besides adult schools, adults in California can access precollegiate instruction CAEP funding. (This amount equates to 88 percent at the California Community Colleges (CCC). of all CAEP funding, with community colleges Historically, most community colleges have receiving the remainder.) Adult schools use the bulk offered at least some precollegiate instruction, of their CAEP funding for direct instruction. Unlike in though some colleges have operated very large the past, however, the state has no set per-student adult education programs (accounting for more funding rate. Each adult school determines for than 20 percent of all their instruction). The state itself how many students to serve with its CAEP provides community colleges with apportionment allocation and how much to spend per student. funding (ongoing Proposition 98 funding) to support In 2021-22, adult schools served a total of about their precollegiate (and collegiate) instruction. 50,000 ADA, equating to an average of about $10,000 in CAEP funding per ADA (though rates varied widely across Figure 1 schools). This per-student funding Annual CAEP Funding Has Grown average is considerably higher than pre-pandemic levels. In 2018-19, Nearly $100 Million Since 2015-16 adult school enrollment was much Ongoing Proposition 98 General Fund (In Millions) higher (about 80,000 ADA), with average CAEP funding per ADA at $600 about $5,800. 580 School Districts May Charge 560 Fees for Some Adult Education 540 Courses. Statute permits adult 520 schools to supplement their CAEP 500 480 funding by charging fees for CTE 460 courses. (Schools may not charge 440 fees for any other adult education 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 courses, such as ESL and high Notes: The 2018-19 budget package provided a 4.31 percent COLA (consisting of 2.71 percent associated with school diploma courses.) Generally, 2018-19 and 1.6 percent associated with 2017-18). The state provided a 3.26 percent COLA in 2019-20, a 4.05 percent COLA in 2021-22, and a 6.56 percent COLA in 2022-23. The figure excludes a small amount adult education students do not (roughly 1 percent of total CAEP funding) that does not go directly to consortia. The excluded amount is designated for state-level agencies primarily to maintain the adult education data systems and provide qualify for state aid when taking technical assistance to consortia. these CTE courses, though in CAEP = California Adult Education Program and COLA = cost-of-living adjustment.• 4 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT The funding method used and amount provided for Community College Credit Instruction Is adult education instruction depends on whether Funded Based on Three Factors. Historically, a community college classifies a particular state funding for both noncredit and credit courses precollegiate course as “noncredit” or “credit.” was based solely on student enrollment. In 2018-19, Community College Noncredit Instruction the state changed how it allocated funding for credit Is Based Solely on Student Enrollment. In courses—creating the Student Centered Funding 2022-23, the published funding rate for most types Formula (SCFF). Under SCFF, funding for most of noncredit courses (including basic English and types of credit instruction, including precollegiate math, ESL, and CTE) is about $6,800 per full-time credit courses such as ESL, is now based only equivalent (FTE) student. The published funding partly on student enrollment. In 2022-23, colleges rate for the remaining noncredit courses (including receive a base rate of about $4,800 per FTE student citizenship courses) is about $4,100. (We discuss enrolled in credit courses. On top of this base rate, the difference between “published” and “effective” colleges receive additional funding for each student funding rates later in this section.) For both types enrolled who is low income and additional funding of noncredit instruction, apportionment funding based on performance, as measured by graduation generally is calculated based solely on student rates and various other student outcomes. The attendance. (The nearby box provides more detail overall credit per-student rate—comprised of all on the various ways adult education providers three allocation components—is similar to the rate calculate student attendance.) provided for most types of noncredit instruction Calculating Adult Education Attendance Historically, Adult Education Providers Calculated Attendance in One of Three Ways. Funding for adult schools historically has been based on average daily attendance (ADA), with one ADA equivalent to 525 instructional hours. Similarly, funding for community colleges’ noncredit programs has been based on students’ daily course attendance, known as “positive attendance.” One full-time equivalent student count in a community college noncredit program also equates to 525 hours of course instruction. Prior to the pandemic, calculating attendance in adult schools and community college noncredit programs was straightforward because the vast majority of instruction was in person and the attendance calculations basically relied on counting the number of in-person course hours. Counting student attendance for the purpose of funding community colleges’ credit programs has been different. Attendance in credit courses generally has been calculated based on the number of students enrolled at a given point in the academic term (commonly known as the census date), which is typically the third or fourth week of the term. Recent Changes in Instructional Modality Have Led to Additional Ways to Calculate Attendance. As a result of the pandemic, many adult schools and noncredit programs shifted their classes from an in-person to online modality. Attendance in online classes that were synchronous (meaning the teacher and student communicate with each other in real time) continued to be calculated based on contact hours. In cases in which the teacher and student interact asynchronously (that is, when a student can choose when to access lessons and send communications to the teacher), adult education providers needed to use a different set of rules in place of contact hours. Adult schools and noncredit providers ended up using different approaches. Specifically, based on teachers’ determinations, adult schools are assigning a fixed number of class hours for each assignment or lesson mastered by students. In contrast, community college noncredit programs are using a census approach, which is based on the average number of students enrolled in an asynchronous online class at two points during the term. (Credit instruction already was using a census approach to calculate student enrollment in both synchronous and asynchronous online courses. Over the past few years, these programs have made no changes to their attendance calculations.) www.lao.ca.gov 5 AN LAO REPORT (about $6,800 in 2022-23). (In a 2017 report, we in 2021-22 effectively received $6,600 per noncredit provide more information on the noncredit funding student (for most noncredit courses), compared rate, how it has compared over time to the credit to the published noncredit rate of $5,900 that funding rate, and the rationale for equalizing the year. The difference in rates was even greater for two rates.) credit courses, with colleges’ effectively receiving Noncredit Courses Account for Larger Share $7,900 per credit student, compared to an average of Precollegiate Instruction Than Credit Courses. total credit rate of about $6,000 (reflecting the In 2021-22, the state provided about $330 million combined published base, supplemental, and (Proposition 98 apportionment funding) for about student outcome rates). 50,000 noncredit FTE students served at the Community Colleges Also Receive Some community colleges. (Though adult schools also CAEP Funding. In addition to apportionment served about 50,000 ADA that year, the counts funding, most community colleges have received are not entirely comparable, for reasons discussed some of the needs-based CAEP funding since in the nearby box.) By comparison, we estimate the program was created in 2015-16. Currently, the state provided approximately $315 million 67 community college districts collectively receive (Proposition 98 apportionment funding) for about about $70 million (12 percent) of CAEP funding. (Five 40,000 precollegiate credit FTE students in 2021-22. community college districts have decided with fellow (We had to derive these precollegiate credit estimates consortium members not to receive any CAEP funds.) because community colleges do not classify their Community colleges typically use their CAEP funding credit CTE courses as precollegiate or collegiate.) to provide additional support for their noncredit Colleges’ Effective Funding Rates Are Higher students and, depending on the consortium, for Than Published Rates. In 2021-22, community CAEP coordination activities. (The next section colleges’ effective funding rates per student were provides more detail on these coordination activities.) notably higher than the state’s published rates Additional student support commonly includes that year. This is because college enrollment—in tutoring and career counseling. Some community both noncredit and credit programs—has dropped colleges also use CAEP funds—supplemented with significantly since 2018-19, but the state has allowed apportionments funds—to cover instruction-related colleges to use their pre-pandemic enrollment costs of certain higher-cost noncredit classes. For levels for funding purposes. (This funding protection example, a district may use CAEP funds to cover the currently is set to expire at the end of 2022-23.) As a costs of a supplemental ESL instructor embedded in result of these funding rules, we estimate colleges a CTE course aimed at English learners. Two Important Caveats When Comparing Attendance Estimates Different Course Offerings. One reason why adult school average daily attendance (ADA) counts are not entirely comparable with community colleges’ noncredit full-time equivalent (FTE) student counts is that statute has different rules for the courses each of these providers is allowed to offer. Statute allows community colleges to offer certain noncredit courses, including home economics and enrichment courses designed for older adults. In contrast, statute prohibits adult schools from offering these types of courses using their California Adult Education Program funds. As a result, the community college noncredit FTE student counts include students who are not included in the adult school ADA count. For this reason, one might view the noncredit FTE student count as somewhat overstated relative to the adult school ADA count. Different Attendance Accounting. Another reason the counts are not entirely comparable is due to the differences in how adult schools and community college noncredit programs are calculating attendance in their asynchronous online classes. Though these methodological differences likely are having an impact on student counts, we are unaware of any research that has been done on which method is yielding higher/lower student counts. 6 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Community Colleges Generate Little Fee Federal Funds Revenue From Precollegiate Courses. Unlike Federal Funds Supplement Many Providers’ adult schools, statute prohibits community colleges Budgets. Beyond CAEP funding, fee revenue, from charging any enrollment fees for noncredit and apportionment funding, some adult education instruction. For credit instruction, statute establishes providers also receive federal funding. In 2021-22, a community college enrollment fee ($46 per unit California received $108 million in federal Workforce in 2022-23). The credit enrollment fee is waived for Innovation and Opportunity Act (WIOA) Title II funds. students who are financially needy or enrolled in a Of the $108 million, the California Department of minimum of 12 credit units per term. Because most Education (CDE) used $12 million for administration students enrolled in precollegiate credit courses of the grant and certain statewide activities. are likely low income and receiving fee waivers, little The remainder was distributed directly to adult associated fee revenue likely is generated from these education providers. Pursuant to CDE policy, adult courses systemwide. education providers must apply for WIOA Title II funds. Successful applicants are those that use Consortium-Level Activities data to inform their instructional practices and have Some CAEP Activities Occur at the qualified teachers, among other factors. Historically, Consortium Level. Whereas adult schools and CDE has approved most applications. Grant community colleges provide adult education recipients tend to use WIOA Title II funds primarily instruction, certain CAEP activities occur at the to hire additional teachers to expand their adult consortium level. For example, a consortium education course offerings and additional staff to commonly has a director to organize meetings and expand their student support services. About half lead the regional planning process. A consortium of adult schools and one in four community college might also have other staff such as data analysts and districts receive WIOA Title II funds. “transition specialists” who help students transition State Allocates Federal Adult Education Funds from precollegiate programs to collegiate coursework to Providers Based on Performance. Although the or the workforce. Other common consortium-level federal government does not require it, CDE allocates activities include marketing to prospective students WIOA Title II funds to grant recipients using a and coordinated professional development (such as pay-for-performance approach. Under this approach, joint CCC-adult school workshops). Statute limits the specified student outcomes earn a provider amount that can be spent on administrative activities performance point. For example, adult education to 5 percent of a consortium’s total CAEP allocation, providers earn points each time one of their students but no spending cap is placed on programmatic attains a high school diploma or when one of their activities. Within these parameters, each consortium students improves literacy pre- and post-test scores chooses how much to spend in these areas. by a set amount. Figure 2 lists the performance Funding for Consortium-Level CAEP Activities measures CDE uses. CDE then takes the state’s Can Be in Various Members’ Budgets. Most often, annual WIOA grant and divides available funding by funding for these types of consortium activities is part the total points earned across all grant recipients in of a community college member’s CAEP budget. In a smaller number of cases, funding for consortium-level services is part of Figure 2 a school district’s or county office of CDE Uses Several Performance Measures to education’s CAEP budget. In other Allocate Federal WIOA Title II Funds cases, funding for consortium-level activities is part of each member’s • Pre/post test learning gains. budget, with each member annually • Attainment of high school diploma (or equivalent). • Passage of course citizenship tests. contributing an agreed-upon amount • Gaining employment after leaving program. toward these activities. • Passage of task-based English and civics education assessments. CDE = California Department of Education and WIOA = Workforce Innovation and Opportunity Act. www.lao.ca.gov 7 AN LAO REPORT a given year to determine a per-point rate. Grants spending levels from a decade ago. Those spending are determined by multiplying the per-point rate by levels, in turn, were based on decisions made by the number of points earned by a particular provider. school districts during the Great Recession about This approach is meant to create a strong incentive how much adult education funding to shift to K-12 for providers to deliver services that improve programs. As a result, funding for certain adult academic performance, program completion rates, schools is significantly below “pre-flex” levels and and student transitions to the workforce. does not necessary align with student demand. For example, Sacramento Unified School District ASSESSMENT received $14 million in 2007-08 but repurposed the vast majority of that funding in subsequent years In this section, we provide our assessment of the when the state allowed funding flexibility. As a current funding model for adult education. Overall, result, even with the additional funding it received we think the consortium-based delivery approach as part of the needs-based CAEP appropriation has merit, but the state’s approach to funding adult in 2015-16, the school currently is receiving only education is flawed. about $1.4 million in CAEP funds. At this lower Some Positive Aspects of Consortia. After funding level, the district had to reduce the number decades of little coordination between adult of adult education sites it operates, refer adults schools and community colleges, the state’s move seeking to enroll in a high school diploma program to a consortium-based approach has improved to a neighboring district (Elk Grove), and reduce communication and collaboration among many the number of ESL classes it offers. In 2021-22, providers. In developing regional plans, for its ADA was less than 400—down substantially example, a number of consortia have identified from the approximately 5,400 ADA it served in unmet needs of certain groups—such as adults 2007-08. A related disadvantage of this historically with disabilities—and sought to expand programs based funding model is that adult schools with to meet that need. Consortium members also are increased student demand—such as those in areas more likely to discuss ahead of time proposals of the state experiencing an influx of refugees and to start a new adult education program, thereby other immigrants—do not have an opportunity to potentially reducing duplication of effort. In a few earn additional enrollment funds from the state. cases, providers within a consortium plan out which Instead, adult schools wanting to accommodate course sections each will offer in a given year. this increased enrollment demand must either Consortia’s transition specialists also are focused spend less per student or ask fellow consortium on promoting the state objectives of greater members (some of which also might be facing coordination and improved student success. greater enrollment demand) to relinquish some of Moreover, a number of consortia have added local their own funds. workforce development boards as partners. Under Funding Model Lacks Fiscal Incentive to these partnerships, the workforce boards (through Provide Access. Under current CAEP rules, their federally funded America’s Job Centers) refer adult schools receive a set amount of funding dislocated or other unemployed workers to an adult regardless of how many students they serve. This school or community college for training. Adult funding model does not create a strong incentive education providers, in turn, refer their students for adult schools to enroll students. Though data to the centers to find jobs. Often, strategies and are limited, they suggest a small share of eligible relationships such as these emerged from the adults currently are enrolled in adult education regional planning processes required by the state. courses. For example, more than 6 million adults in CAEP Funding Model Is Disconnected From California are estimated to lack English proficiency, Student Demand. Though the consortium-based whereas fewer than 140,000 adults enrolled in ESL delivery approach has positive aspects, the CAEP courses in 2021-22. Similarly, more than 4 million funding model has several significant flaws. One adults in California are estimated to lack a high flaw is that the CAEP funding model is based school diploma or its equivalent, whereas fewer primarily on school districts’ adult education 8 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT than 115,000 adults were enrolled in secondary colleges can claim apportionment funds to cover education courses leading to such a diploma in their costs, as well as supplement their programs 2021-22. Based on our conversations with various with CAEP funds, whereas adult schools receive consortium members, although some adult schools state funds only through CAEP. Moreover, some strive to connect with potential students, others are adult schools have much lower per-student CAEP less responsive. For example, some consortium funding amounts than other schools—amounts members have commented on the lengthy amount that might be insufficient to cover their associated of time some fellow consortium members take to costs. By allowing adult schools to collect fees open new classes or start new adult education for CTE courses, some of these schools therefore programs. This lack of a strong fiscal incentive might be able to maintain courses they otherwise to provide access also manifests itself in some would have to cancel due to a lack of state schools opening adult education programs to new funding. Fees, however, could be an impediment student enrollment only a few times during the year for some students and contribute further to both or eschewing other innovative strategies to attract unequal access and considerable variation in and accommodate students. program quality. Funding Model Results in Uneven Program Weak Incentives Are in Place to Improve Quality. Figure 3 shows that funding per student Student Outcomes. Though the restructuring of at adult schools varies considerably, even among adult education that the state began in 2013-14 was adult schools receiving similar levels of total CAEP intended to improve student outcomes, providers funding. Funding differences among adult schools, and consortia generally have been making little, if as well as between adult schools and community colleges, can result in uneven quality of programs Figure 3 for adults across the state. For Per-Student Funding Varies example, two schools with a Significantly Among Adult Schools similar level of CAEP funding can serve a notably different number CAEP Funding, 2018-19 of students. The school choosing to serve fewer students could Total Funding have full-time teachers and many $10,000,000 support staff (such as counselors) 9,000,000 available to students. In contrast, 8,000,000 the school choosing to serve 7,000,000 more students could be relying 6,000,000 almost exclusively on part-time 5,000,000 teachers and have very limited 4,000,000 student support services. We saw 3,000,000 examples of these program quality 2,000,000 differences on our visits to several 1,000,000 adult schools. Differences in Fee Policies 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 $50,000 Make Matters Worse. The Funding Per Student rationale for different CTE fee Notes: Each dot represents one adult school. In 2018-19, 289 adult schools were operating in California. For display policies among adult schools purposes, the chart excludes 6 schools receiving more than $10 million in total CAEP funding and 14 schools with more than $50,000 in funding per student. Among the 14 excluded schools, funding per student ranged and community colleges is not from $55,000 to $335,000. Funding per student is measured by average daily attendance. Adult schools with the highest funding per student are concentrated in coastal areas; portions of the Bay Area; and rural areas, particularly compelling. The particularly in the far north. Adult schools with the lowest funding per student are concentrated in inland areas rationale for different fee policies of the state, particularly the Inland Empire and Imperial Valley. appears to be that community CAEP = California Adult Education Program. www.lao.ca.gov 9 AN LAO REPORT any, progress on key performance Figure 4 measures. This was the case even before the onset of the pandemic. A Small Share of Adult Education Students As Figure 4 shows, from 2016-17 Earn a High School Diploma through 2018-19, the share of Percent of Adult Secondary Students Earning a adult students earning a high High School Diploma or Equivalent in Given Year school diploma or its equivalent increased only 1.1 percentage point 16% (before dropping by more than 14 4 percentage points over the next 12 10 two years). As Figure 5 shows, the 8 share of adult students transitioning 6 into college-level coursework 4 2 has fared about the same. One reason why student outcomes 2016-17 2017-18 2018-19 2019-20 2020-21 might not have improved is that Note: The data system used to track adult education outcomes started reporting these outcomes in 2016-17. CAEP and CCC noncredit funding are not linked to performance. Without performance-based Figure 5 funding or some other form of state accountability for student A Small Share of Adult Education Students outcomes, consortia members Transition to College-Level Coursework lack strong incentives to improve Percent of Adult Education Students Enrolling in a their results. College-Level Class the Subsequent Year No Funding Is Provided Specifically for 15% Consortium-Level Activities. Despite seeking to improve 10 coordination among providers 5 and streamline student pathways between adult schools and 2016-17 2017-18 2018-19 2019-20 community colleges, the state provides no CAEP funding ASE Students ABE/ASE and ESL Students specifically for consortium-level Note: The data system used to track adult education outcomes started reporting these outcomes in 2016-17. activities. Instead, when ASE = adult secondary education; ABE = adult basic education; and ESL = English as a second language. needs-based funding was provided in 2015-16, consortium members had to decide how much to allocate RECOMMENDATIONS to their own budgets for direct student services and Given the notable shortcomings with the how much to use for consortium-level activities. existing adult education funding model, we believe Though data is very limited, budgeted amounts for a full redesign is warranted. In this section, we consortium-level activities appear to vary widely recommend creating a new model consisting of across the state, with some consortia spending several components. The new model we present notably larger shares of their CAEP budgets on is better aligned with the state’s existing program these activities. Those consortia spending more objectives of enhanced regional coordination and on these activities generally appear to be offering improved student outcomes. Moreover, it could their members greater programmatic benefits be implemented such that it costs no more or less (such as coordinated student outreach and than the existing adult education funding model. professional development). 10 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Given the multiple components of the new model per-student funding rate and funding providers and the associated redistributive implications, the based on attendance would better connect state could phase it in over several years. Figure 6 funding with student demand, incentivize and summarizes our recommendations and Figure 7 reward providing student access, and create more on the next page shows how funding would be consistent program services across California. allocated under the new model. We describe the A uniform base rate also would send clearer signals components of the new model throughout the about the basic quality of programs that the state remainder of this section, ending with an illustrative expects providers to offer. This, in turn, could phase-in plan. help in establishing a consistent corresponding Begin by Setting Uniform Base Per-Student fee policy (discussed later in this section), treating Rate for Adult Education Providers. We think the providers and students more similarly across most important first step is to set a uniform funding the state. rate per student. We recommend the state provide Build Performance Component for Providers the same base per-student funding rate for adult Into New Funding Model. A potential downside schools and community college noncredit courses. to a funding model that relies solely on a uniform The state might start with the existing CCC per-student rate is that it could create an incentive noncredit rate of $6,788 per student. This rate is for providers to “hold on” to their students (such as about the same as the overall CCC credit rate and ESL students) longer than necessary to continue about the same as the average per-student rate that generating funding—even if that is not best for adult schools received in 2018-19 after adjusting for students. To create a stronger financial incentive for inflation since that time. Providing a uniform base adult education providers to serve students well and collaborate in ways that accelerate student success, we recommend Figure 6 adding a performance-based New Adult Education Funding Model component to both CAEP and CCC Summary of Recommendations noncredit apportionment funding. This performance-based funding • Establish Uniform Base Per-Student Adult Education Funding Rate – Apply uniform base rate to both adult school and CCC noncredit instruction. would be in addition to the base – Provide funding according to number of students served (attendance). uniform funding per student that • Add Performance Component to Funding for Adult Schools and providers would receive. To keep CCC Noncredit Programs the model cost neutral, the state – By end of implementation period, allocate approximately 30 percent of funding to could reduce base funding gradually adult education providers based on performance points. – Use WIOA Title II performance measures but add one measure for providers over the phase-in period, building (number of CTE certificates earned). up performance funding in tandem. • Eliminate Fees for Adult School Courses The performance component we • Allocate Some CAEP Funding Directly for Consortium-Level Activities envision is somewhat akin to the – By end of implementation period, designate about 10 percent of all CAEP funding performance-based components for consortium-level activities. that already exist for CCC credit – Provide each consortium a base amount, an amount linked to the number of its members and students, and an amount linked to its performance (specifically, apportionment funding and federal student transitions to collegiate instruction). WIOA Title II funding. Whereas – By end of implementation period, allocate approximately 30 percent of funding to the CCC credit apportionment consortia based on performance points. formula allocates 10 percent of • Adjust Funding Allocations Annually to Account for Key Cost Drivers funds based upon performance and – Adjust CAEP funding annually based on demographic and economic factors that influence enrollment demand for adult education courses. WIOA Title II funds are allocated – Adjust CAEP and CCC noncredit funding annually in response to changes in entirely based upon performance, performance points earned at provider and consortium level. we recommend 30 percent of • Phase In New Funding Model Over Several Years the CAEP and CCC noncredit WIOA = Workforce Innovation and Opportunity Act; CTE = career technical education; and funding be linked to performance. CAEP = California Adult Education Program www.lao.ca.gov 11 AN LAO REPORT Figure 7 Funding Allocations Would Be Linked to Need and Performance Percentages at Full Implementation Minimum Fixed Amount 10% Consortium-Level Activities 70% Consortium Size Number of Members CAEP Funding 30% Student Outcomes Number of Students (Transitions to College) 90% Adult Schools 70% Student Attendance 30% Student Outcomes 70% Student Attendance CCC Noncredit Funding 30% Student Outcomes CAEP = California Adult Education Program. Though a different amount could be justified, we think state could set a dollar value to each performance 30 percent is high enough to promote improvement point and adjust by COLA each year. This is similar in student outcomes (which have not shown much to how the state adjusts student success funding improvement) but not so high that providers’ funding under SCFF, but varies from how CDE administers levels fluctuate over time too notably or unpredictably. WIOA, in which the point value can fluctuate year Tailor Performance Component to Key to year depending on the number of points earned Adult Education Outcomes. As a starting point and the total size of the WIOA grant. The approach in creating this new performance-based funding we recommend would give providers more funding component, we recommend using the performance stability from year to year. measures that CDE already uses to allocate federal Eliminate Fees at Adult Schools. Given the WIOA Title II funds to providers. All adult schools— vast majority of adult education students are low even those that do not participate in the WIOA Title income, we recommend the Legislature make II program—are required to collect data on these fee policies for adult schools consistent with the performance measures. In addition, a majority of zero-fee policy for CCC noncredit instruction. We community colleges currently collect these data recognize that requiring students to pay a fee can either because they are required to as WIOA Title be associated with positive behavioral tendencies, II recipients or volunteer to do so as part of CAEP. such as making students more deliberate in their (These data from adult schools and community selection of courses. Given that students do incur colleges are publicly reported in LaunchBoard, a costs to attend school—including transportation, state-funded adult education data system.) To the child care, and the opportunity cost of not being WIOA Title II measures, we recommend adding one able to work while they attend classes—we believe performance measure for providers—the number adult learners already have sufficient “skin in the of CTE certificates earned by adult education game.” Though some adult schools would lose students. To allocate performance funding, the fee revenue under this recommendation, the 12 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT new uniform base rate per student described colleges to work together to identify strategies that above would be designed to fully cover providers’ improve pathways for students. To implement this expected program costs. Moreover, the state recommendation in a cost-neutral manner, the state would not necessarily face higher overall program could consider re-designating CAEP funding from costs. This is because current state funding rates community colleges. A large share of these funds is per student are elevated due to recent enrollment already being used for similar purposes. drops not being accompanied by state funding Annually Adjust CAEP Funding Based on Key reductions. (In response, some providers have Cost Drivers. We recommend a new CAEP funding revisited their fee policies—suspending or lowering model include the opportunity for adult schools them in some cases.) and consortia to earn growth funding if they are Allocate Some CAEP Funding Directly facing heightened enrollment demand. Specifically, for Consortium-Level Activities. In addition we recommend the state budget for overall to an allocation to providers based on student CAEP enrollment growth based on underlying attendance and certain performance outcomes, demographic and economic changes, such as we recommend the new funding model allocate a changes in the adult population and unemployment portion of total CAEP funding (such as 10 percent) rate. Currently, the state considers similar factors directly to consortia. Consortia would have flexibility when providing enrollment growth funding for in how they spent these funds for administrative and CCC apportionments, including CCC noncredit programmatic purposes, with possible activities instruction. The state also could adjust adult including regional planning, conducting student education funding annually based upon the change outreach, building partnerships with workforce in the number of performance points that providers organizations, and providing student transition and consortia have earned in recent years (such as services. Under our recommendation, consortium by using a lagged three-year rolling average). members could choose to augment funding using Phase In New Funding Model Over Several their own CAEP allotments if they desired to Years. Figure 8 on the next page provides an undertake more of these types of activities. illustration of how the state might phase-in the Link Funding for Consortium-Level Activities components of the new model. To help adult to Three Main Components. Specifically, schools and community colleges adjust to the new we recommend the state provide each CAEP funding model, we recommend the state phase in consortium with a fixed amount to cover a implementation of the new model over a multiyear minimum level of staff for planning and coordination period, for example, five years. A multiyear phase purposes. On top of this fixed allotment, we in would give providers and consortia time to recommend the state provide additional funding adopt new strategies designed to increase funding to consortia based on the number of members (such as to improve student outcomes and recover and students served. Consortia with larger enrollment lost during the pandemic) and adjust memberships and programs would receive larger their budgets. The state could begin with small allotments, in recognition that coordination and changes the first year, giving providers time to joint programmatic activities (such as marketing re-size their programs. The state gradually could and professional development) tend to require more align funding with enrollment over the five-year time and be costlier the larger the consortium. period. About halfway through the phase-in, Lastly, we recommend allocating some amount the state could begin implementing the new of consortium-level funding (such as 30 percent) performance components of the model, both at the based on outcomes. Specifically, we recommend provider and consortium level. consortia be evaluated based upon how successful Impact on Providers Would Vary. Like nearly all they are at transitioning students into college-level funding model redesigns, the new adult education instruction. Providing some performance-based funding model would impact some adult education funding at the consortium level would create a providers and consortia more than others. For stronger incentive for adult schools and community adult schools, the specific impact on any particular www.lao.ca.gov 13 AN LAO REPORT Figure 8 State Could Phase In a Redesigned Adult Education Funding Model Illustrative Phase-In Plan Component of New Model Phase In of New Model Year 1 Year 2 Year 3 Year 4 Year 5 Uniform base rates Have providers begin Gradually adjust provider rates such that by year 5 all adult schools are funded at the for providers internally adjusting their same base per-student rate as the noncredit funding rate, with their funding tied to budgets and programs actual enrollment. in anticipation of rate changes. Provider Adopt new Give providers Gradually lower program funding that is linked to base performance performance measures an opportunity per-student rate while raising amount linked to performance funding and calculate to improve their (for example, having performance linked to 10 percent of associated funding performance in program funds in year 3, 20 percent in year 4, and 30 percent rates. these areas. in year 5). Adult school fees Have providers begin Prohibit adult internally adjusting their schools from budgets and programs charging enrollment in anticipation of new fees. fee policy. Funding formula Adopt new three- Give consortia Gradually replace CAEP funds going to community colleges for consortia part consortium-level an opportunity with funding based on new formula. Gradually increase share funding formula (base to improve linked to performance (for example, 10 percent in year 3, amount as well as their regional 20 percent in year 4, and 30 percent in year 5). supplemental rates coordination and linked to consortium student transitions. size and performance). Annual funding Moving forward, adjustments adjust funding for providers and consortia based on changes in students served and performance points earned. CAEP = California Adult Education Program. provider would depend upon how much it currently pandemic-related funding protections, providers was spending per student, the extent to which it overall currently are receiving substantial funding could increase enrollment over the transition period, beyond their program costs. This is evident by and its performance over time in serving students. the amount of CAEP funding adult schools have The specific impact on community colleges would been carrying over. Unspent CAEP program funds depend mostly on their performance in serving grew from $83 million at the end of 2018-19 to students (at both the college and consortium level). $162 million at the end of 2021-22. Given these Now Is Opportune Time to Implement New factors, we believe now is an opportune time to Model. Given enrollment levels across adult implement the new model, as the impact likely will education providers are depressed and per-student be less disruptive than it would be during a period funding rates are substantially elevated given in which enrollment levels were high and program reserves were small. 14 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT www.lao.ca.gov 15 AN LAO REPORT LAO PUBLICATIONS This report was prepared by Paul Steenhausen, and reviewed by Jennifer Pacella and Anthony Simbol. 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, California 95814. 16 LEGISLATIVE ANALYST’S OFFICE