The Local Control Funding Formula for School Districts and Charter Schools

AN LAO REPORT The Local Control Funding Formula for School Districts and Charter Schools GABRIEL PETEK | LEGISLATIVE ANALYST | JANUARY 2023 SUMMARY In 2013-14, the state created the Local Control Funding Formula (LCFF)—a major change to the school finance system. The LCFF was intended to simplify school funding and distribute funding based on student demographics. School districts and charter schools receive most of their LCFF apportionment through a per-student formula—based on average daily attendance (ADA)—that provides a base amount of funding by different grade spans. Almost one-fifth of LCFF funding for school districts and charter schools is provided through two separate calculations based on the proportion of their student population that is an English learner, from a low-income family, or a foster youth. The formula also includes a few add-ons that remain from the previous funding system. (The state also retained a few other categorical programs, such as special education and child nutrition.) The 2022-23 budget package provides $75.5 billion in LCFF funding, which represents about 80 percent of state funding for public schools. In this brief, we provide some historical background on LCFF’s implementation, describe how the formula works for school districts and charter schools, describe how the formula was phased in, and explain requirements for districts to adopt plans that describe how LCFF funding will be spent. INTRODUCTION funding prior to the state becoming more involved in financing K-12 education in the early 1970s. (The state Proposition 98 requires the state to annually took several steps to equalize rates in subsequent set aside a minimum amount of General Fund and decades, but some variation in per-student rates local property tax revenue for public schools and remained.) In addition to revenue limits, the state community colleges. Whereas Proposition 98 had more than 50 categorical programs. The level of establishes a minimum funding level, the Legislature categorical funding also varied significantly by district, decides how to allocate this funding among school as each categorical program had its own allocation and community college programs. About 80 percent formula and spending restrictions. of Proposition 98 funding to public schools is allocated through the LCFF, which was established LCFF Was Intended to Address Flaws of in 2013. In this brief, we discuss the LCFF for school Previous System. In the years leading up to LCFF, districts and charter schools. For brevity, we refer to policy makers and researchers had concerns with the both as school districts throughout this brief unless state’s K-12 funding system. Most notably, there was otherwise noted. (We do not discuss the LCFF for a broad-based consensus that the system was: county offices of education.) • Overly Complex. The system consisted of LCFF Replaced System of Revenue Limits a myriad of programs, each with different and Numerous Categorical Programs. Prior to allocation formulas and different spending LCFF, the state distributed about two-thirds of school requirements, which made tracking difficult for funding through revenue limits—general purpose school districts. grants that could be used for any educational • Antiquated. The allocation formulas for purpose. Revenue limits were allocated to districts numerous programs were based on historical based on a per-student rate (using student ADA), with factors that no longer had relevance—which the specific rate varying significantly by district. This led to variation in funding across districts with variation was largely based on historical local levels of no rationale. www.lao.ca.gov 1 AN LAO REPORT • Inequitable. Although some funding was also gives districts more control over how to spend targeted to support specific student groups, state funding, while also creating a local planning such as low-income students and English process that is intended to increase transparency learners, the state’s school finance system as and stakeholder engagement. a whole was not well-aligned to student need. • Inefficient. Due to the multiple COMPONENTS OF FORMULA funding streams, districts often took a As Figure 1 shows, school districts receive compliance-oriented approach that did virtually all of their LCFF apportionment (about not attempt to coordinate activities across 98 percent) through a per-student formula, with various programs. the remainder provided through several “add-ons.” • Highly Centralized. State restrictions Schools pay for most of their general operating limited districts’ ability to design educational expenses (including employee salaries and benefits, programs based on local needs and priorities. supplies, and student services) using these funds. In this section, we describe how the formula works During the Great Recession, the state reduced in more detail. funding for the majority of categorical programs and temporarily exempted districts from most Main Components categorical program spending requirements. LCFF Is Based on ADA. The state allocates As the state was coming out of the recession and LCFF funding to school districts and charter categorical restrictions were scheduled to return, schools based on their ADA—the average number the Governor, Legislature, and stakeholders began of students in class each day throughout the school to discuss options for reforming the existing system. year. For funding purposes, the state credits school In 2013, as part of the 2013-14 budget package, districts with their ADA in the current year, prior the state replaced its general purpose grants year, or the average of three prior years, whichever and most categorical programs with the LCFF. is higher. (The option to fund based on the average The new funding formula is much simpler than the of three prior years was established in 2022-23.) previous funding system, treats districts similarly, Charter schools, by contrast, are funded according and provides dedicated funding to certain student to their ADA in the current year only. populations with greater needs. The new system Figure 1 Overview of the Local Control Funding Formula (In Billions) 2022-23 Funding Components Description (LAO Estimates) Base grant Provides a uniform level of funding per student in different grade spans. $60.8 Includes two grade span adjustments—one for smaller class sizes in grades K-3 and one to acknowledge costs of providing career technical education in high schools. Beginning in 2022-23, also includes additional funding for students in transitional kindergarten. Supplemental grant Provides an additional 20 percent of the adjusted base grant rate for each 7.5 student that is an English learner, low income, or foster youth. Concentration grant Each English learner, low-income student, and foster youth above 55 percent 5.5 of enrollment generates an additional 65 percent of the adjusted base rate. Total, Main Components $73.8 Add-ons Includes Targeted Instructional Improvement Block Grant, Home-to-School $1.7 Transportation, Economic Recovery Target, Education Protection Account, and Minimum State Aid. Total $75.5 2 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Base Grant Varies by Grade Span. As Figure 2 increase in funding for transitional kindergarten shows, school districts receive the bulk of their attendance, set to begin in 2022-23. (Transitional LCFF funding based on their ADA in four grade kindergarten is considered the first year of a spans. (This includes two grade span adjustments two-year kindergarten program and is therefore that will be discussed in the next paragraph.) funded using the K-3 base rates.) In addition to The base funding rates are higher for students in the funding generated through the base grant and higher grade spans—reflecting generally higher K-3 grade span adjustment, school districts will costs of education at higher grade levels. Districts receive $2,813 per transitional kindergarten ADA. may use their base funding for any educational To receive this funding in 2022-23, districts must purpose. As described in the box on the next page, maintain an average of 1 adult for every 12 students the base grant calculations differ for attendance in transitional kindergarten classrooms at each associated with certain small schools. school site. Beginning in 2023-24, districts must Grade Span Adjustments for Early maintain an average of 1 adult for every 10 students Elementary and High School Grades. The LCFF in their transitional kindergarten classrooms at each base rates include two specific grade span school site. Unlike the K-3 adjustment, districts adjustments that increase the base rates, with the cannot collectively bargain for higher transitional goal of maintaining some aspects of the previous kindergarten staffing ratios. (Charter schools finance system. The K-3 adjustment increases the can receive this adjustment, but unlike the K-3 base rate for grades K-3 by 10.4 percent. To receive adjustment, must meet the transitional kindergarten this adjustment, districts must maintain average staffing requirements to receive the funding.) K-3 class sizes of 24 students or fewer for each Supplemental Grant Funding Based on of their school sites—unless the district has a Proportion of English Learners/Low-Income collective bargaining agreement for a higher class (EL/LI) Students and Foster Youth. The LCFF size. This adjustment reflects a state commitment provides additional funds to districts based on to have relatively smaller classes in grades K-3. the proportion of their students who are EL/LI Prior to the LCFF, the K-3 Class Size Reduction (based on eligibility to receive free or reduced-price program provided funding to districts for this purpose. Absent a Figure 2 related collective bargaining provision, a district could lose its LCFF Adjusted Base Rates by Grade Span entire K-3 adjustment if at least 2022-23 one school site in the district has an average class size that is Grade Span Adjustmenta greater than 24. (Charter schools Base Rate receive the K-3 adjustment but $11,391 are exempt from the class size $10,119 requirement.) The adjustment $9,304 $9,580 for grades 9-12 increases the base rate by 2.6 percent and was intended to account for the additional cost of providing career technical education to high school students—though this funding is not explicitly restricted for this purpose. New Funding for Transitional K-3 4-6 7-8 9-12 Kindergarten Staffing Beginning a Reflects a 10.4 percent adjustment to the K-3 base rate and a 2.6 percent adjustment to the 9-12 base rate. in 2022-23. As part of the 2021-22 LCFF = Local Control Funding Formula. budget, the state enacted an www.lao.ca.gov 3 AN LAO REPORT school meals under a federal nutrition program) Concentration Grant Funding for Districts or foster youth. This proportion is commonly With Relatively High Shares of EL/LI Students. called the unduplicated pupil percentage. Districts serving a student population of more The additional funding is intended to recognize than 55 percent EL/LI also receive a concentration that, on average, these student groups typically grant equal to 65 percent of the adjusted base require additional support to meet grade level grant for each EL/LI student above the 55 percent standards. For each EL/LI student, a district threshold. (A charter school’s concentration grant receives a supplemental grant equal to 20 percent funding is calculated based on the proportion of the base grant (including the K-3 and 9-12 grade of EL/LI students in the district in which it span adjustments). A student who is both EL and resides, if it is lower.) Figure 3 illustrates how LI generates the same funding rate as a student the concentration grant is calculated. The state who belongs to only one of these groups. (Because adopted concentration grants in response to all foster youth also meet the state’s LI definition, numerous studies that showed EL/LI students we do not refer to them as a separate subgroup face greater educational challenges when they are for the remainder of the brief.). For the purposes enrolled in higher-poverty schools. When LCFF was of calculating LCFF allotments, the state uses a first enacted, the concentration grant amount was three-year rolling average of the district’s equal to 50 percent of the adjusted base grant. The EL/LI percentage. 2021-22 budget plan increased the concentration grant rate to 65 percent of the adjusted base grant. Base Grant Differs for Some School Districts With Necessary Small Schools What Is a Necessary Small School? The Necessary Small Schools (NSS) program provides an alternative base grant funding methodology for districts with average daily attendance (ADA) of 2,500 or fewer that operate very small schools (less than 96 ADA for an elementary school or less than 286 ADA for a high school). To be classified as an NSS, schools also must demonstrate that (1) students who attend the small school would otherwise be required to travel relatively long distances from their home to attend school, or (2) geographic or other conditions (such as annual snowfall) make busing students an unusual hardship. How Is Funding Determined for Necessary Small Schools? The NSS allocation uses funding bands based on the combination of a school’s ADA and its staffing levels, whichever provides the lesser amount. The number of full-time teachers is used for elementary schools that serve students in grades K-8, while the number of full-time equivalent certificated employees is used for high schools. The funding bands for elementary schools are shown in the Funding Bands for Necessary Small figure below. Districts receive NSS funding Elementary Schools for their eligible schools in place of Local 2022-23 Rates Control Funding Formula (LCFF) base grants, but they still receive LCFF base Number of grant funding for all other schools in their Certificated Average Daily Funding Teachers Attendance Amount district. Supplemental and concentration funding for NSS is calculated in the 1 1-24 $247,965 2 25-48 490,709 same way for all other ADA. As with 3 49-72 733,666 the base grant, the NSS amounts are 4 73-96 976,409 annually adjusted by the LCFF statutory cost-of-living adjustment. 4 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Figure 3 Illustration of How Main LCFF Components Are Calculated For a School District With 10,000 K-3 ADA and an EL/LI Share of 75 percent Funding Per Total Grant Type Associated ADAa Rateb Funding District ADA Base grant 10,000 $10,119 $101,190,000 $10,119 Supplemental grant 7,500 2,024 15,180,000 1,518 Concentration grant 2,000 6,577 13,154,000 1,315 Totals $129,524,000 $12,952 a Total ADA for base grant. For supplemental grant, consists of total ADA multiplied by EL/LI share. For concentration grant, consists of total ADA multiplied by 20 percent (the 75 percent EL/LI share minus 55 percent). Base grants reflect adjusted K-3 base rate, supplemental grants reflect 20 percent of adjusted K-3 base rate, and concentration grants reflect 65 percent of adjusted K-3 base rate. LCFF = Local Control Funding Formula; ADA = average daily attendance; and EL/LI = English learner/low income. Districts Must Ensure “Proportionality” When • Restrictions on Unspent Supplemental Spending Supplemental and Concentration and Concentration Grants. Trailer Grant Funds. A district must use their legislation included in the 2021-22 budget supplemental and concentration grant funding to package introduced a new requirement that proportionally increase or improve services for districts track their unspent supplemental their EL/LI students, relative to the base amount of and concentration grant funding and funding they receive. Statute also allows districts use the funding to increase or improve to use supplemental and concentration funding services for EL/LI students in future years. on a districtwide or schoolwide basis. The State Prior to this change, districts could use Board of Education (SBE) is required to develop unspent supplemental and concentration regulations implementing these provisions. The grant funding in subsequent years for any existing regulations allow districts to reflect their educational purpose. increase or improvement in services in quantitative • Use of Concentration Grant Funding for or qualitative ways. Districts must report the total Staffing at High Needs Schools. When the amount of supplemental and concentration funding state increased the concentration grant rate to they expect to receive, as well as describe how they 65 percent of the base grant, it also specified plan to use their supplemental and concentration that the associated increase in funding must funding for the benefit of EL/LI students. They also be used by school districts to increase the must report how the proportional increase in number of staff that provide direct services supplemental and concentration grant meets a to students in schools where more than proportional increase in services for EL/LI students. 55 percent of students are EL/LI. If districts choose to use supplemental funding for Effect of Supplemental and Concentration a schoolwide or districtwide purpose, they must Grants on Per-Student Funding. Supplemental explain how this approach will benefit and concentration grant funding provides higher EL/LI students. Districts demonstrate adherence levels of total LCFF funding per ADA for districts with these requirements through their Local Control with higher proportions of EL/LI students. Figure 4 and Accountability Plans (LCAPs), which we discuss on the next page shows how variation in a districts’ in greater detail later in this brief. EL/LI share affects their total per-pupil funding. Two Recent Changes Related to A district with an EL/LI share of 25 percent will Supplemental and Concentration Grant receive an additional $506 per ADA from the Funding. Since the enactment of LCFF, the supplemental grant (a 5 percent increase from the state made two notable changes related to how base rate). Comparatively, a district with an supplemental and concentration grant funding EL/LI share of 75 percent will receive $1,518 per must be spent. www.lao.ca.gov 5 AN LAO REPORT ADA from the supplemental grant Figure 4 and $1,315 from the concentration grant—for a total of $2,833 in Supplemental and Concentration Grants additional funding (a 28 percent Increase Effective Funding Per Student increase from the base rate). 2022-23 K-3 Funding Rates Per Student Based on District's EL/LI Share This results in a district with an EL/LI share of 75 percent receiving 22 percent more funding per $10,119 Total Funding 0% EL/LI Share student than a district with an $0 S/C Funding EL/LI share of 25 percent. Statute Requires a 25% EL/LI Share $10,625 $506 Cost-of-Living Adjustment (COLA) for LCFF. The COLA $11,131 rate is based on a price index 50% EL/LI Share $1,012 published by the federal government. This index reflects $12,952 changes in the cost of goods 75% EL/LI Share $2,833 and services purchased by state and local governments $15,103 100% EL/LI Share across the country. State law $4,984 provides an automatic COLA for Base Funding S/C Funding LCFF unless the constitutionally required Proposition 98 funding EL/LI = English learners/low income and S/C = supplemental and concentration. level is insufficient to cover the associated costs. In these cases, Targeted Instructional Improvement Block Grant the law reduces the COLA rate to fit within the (TIIG) and Home-to-School (HTS) Transportation available funding. The state applies the COLA to program—were treated as add-ons. Districts LCFF by increasing the grade span base rates, that received funding from these programs in necessary small schools rates, and the transitional 2012-13 continue to receive that same amount kindergarten staffing adjustment. These rate of funding in addition to what the LCFF provides increases also result in proportional increases to each year. Districts can use their TIIG funding the grade span adjustments and supplemental for any educational purpose. Regarding the HTS and concentration grants, since the value of these add-on, districts must spend at least as much on components are funded as a percentage of the school transportation as they spent from state base grant. funds in 2012-13. As long as districts meet this requirement, they can spend the HTS add-on Add-Ons to the Formula for any purpose. In 2021-22, the TIIG and HTS In addition to the main components of the LCFF, add-ons totaled $1.3 billion statewide. the state also included several add-ons to the 2022-23 Budget Included Changes to School formula. In this section, we describe three major Transportation Funding. The 2022-23 budget add-ons. A certain subset of school districts with package included two major changes to how the relatively high local property tax revenue also state funds school transportation. Beginning in benefit from other LCFF add-ons. We discuss local 2023-24, the existing HTS add-on will receive property tax revenue and the associated add-ons the same COLA as the rest of LCFF. The budget in the nearby box. also established a new funding stream, beginning Two Categorical Programs Remain as LCFF in 2022-23, for school districts and county Add-Ons. With the implementation of LCFF, funds offices of education (COEs) to be reimbursed for from two pre-existing categorical programs—the 60 percent of eligible transportation expenditures 6 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT How Local Property Tax Revenue Affects Total LCFF Funding LCFF Is Funded Through a Combination of State General Fund and Local Property Tax Revenue. The Local Control Funding Formula (LCFF) and add-ons are used to determine a district’s total LCFF target. To meet each district’s target, the state first credits each district with its share of local property tax revenue. For the vast majority of school districts, local property tax revenue is insufficient to cover their total LCFF target. The state provides funding to cover the remaining amount. School Districts With Local Property Tax Revenue Above Their LCFF Target Are Known as Basic Aid Districts. The term is derived from the section of the State Constitution guaranteeing all school districts at least $120 per student from the state. The property tax revenue in excess of their LCFF allotments is known as excess property tax revenue. Basic aid school districts can use their excess property tax revenue on their local education priorities. In 2021-22, the state had 118 basic aid school districts (about 13 percent of all districts), with a statewide total of $1.2 billion in excess property tax revenues. For Basic Aid Districts, Changes in Funding Are Driven by Property Taxes. For most districts, changes in LCFF funding are driven by changes in their average daily attendance (ADA); the per-ADA base rates; and the share of their students that are English learners, low income, or foster youth. For basic aid school districts, changes in their LCFF allotments typically have no effect on funding. Rather, changes in funding are driven by changes in local property tax revenue. A district’s status as a basic aid district can change over time. For example, a basic aid district with local property tax revenue slightly above their LCFF target might no longer be basic aid if the state made large increases to the LCFF rates, resulting in the LCFF target exceeding local property tax revenue. Similarly, a school district can become basic aid over time if its local property tax revenue grows at faster rates than its LCFF target. Basic Aid Districts Also Uniquely Benefit From Two Other Provisions. In addition to receiving excess property tax revenue above their LCFF targets, basic aid districts also receive additional funding due to two other provisions, discussed below. Minimum State Aid. The legislation creating LCFF includes a provision that specifies no district is to receive less state aid from LCFF than it received in 2012-13 from the pre-existing programs that were replaced by LCFF. For most school districts, the state General Fund they receive for their LCFF targets is sufficient to meet this provision. Since basic aid districts do not receive state aid towards their LCFF target, the state must provide additional General Fund to meet this requirement. (Other school districts with relatively high property tax revenue also receive additional funding due to this provision.) In 2021-22, the state provided $192 million in addition to the LCFF target to meet this provision. Education Protection Account. Proposition 30 (2012) temporarily increased tax revenues and required the revenue to be deposited into the Education Protection Account (EPA). (Proposition 55 [2016] extended some portion of these tax increases to 2030.) The state allocates EPA funding to schools and community colleges as part of their primary funding formulas—LCFF in the case of school districts. The state must also must provide at least $200 per student from the EPA to all school districts, charter schools, and county offices of education and at least $100 per full-time equivalent student to community college districts. For most school districts, EPA allocations count toward their LCFF targets and do not affect their individual funding levels. For basic aid school districts (and a few other districts with relatively high property tax revenue), the state must provide additional funding to meet this requirement. In 2021-22, the state provided $64 million in EPA funding in excess of the LCFF targets. www.lao.ca.gov 7 AN LAO REPORT they reported in the previous year. (Charter was largely due to greater-than-anticipated revenue schools are not eligible to receive this funding.) increases during the period. In several instances, A district’s HTS add-on would count towards the state also has provided increases to the main meeting the 60 percent threshold. To qualify for LCFF components beyond COLA. Specifically, the this funding, districts and COEs must adopt local state provided increases to LCFF beyond COLA of plans describing the transportation services they $570 million in 2018-19, $520 million in 2021-22, will provide for their students. These plans must and $4.2 billion in 2022-23. prioritize transportation for students in grade 6 or LCFF Now Represents About 80 Percent below and LI students. For 2022-23, the cost of of School Funding. As Figure 6 shows, out of the new transportation increases is estimated to the $95.5 billion Proposition 98 funding provided be $637 million. to K-12 education in 2022-23, $75.5 billion went LCFF Also Provides Economic Recovery towards funding the LCFF for school districts and Target to Some Districts. Some districts were charter schools (about 80 percent). Outside of expected to receive less total LCFF funding the LCFF, roughly half of the remaining funding than they would have received if the state had is provided through two large categorical maintained its previous funding system and programs for special education ($6.1 billion) adjusted it for inflation. The state provided some and providing before/after and summer school of these districts with an Economic Recovery programs ($4 billion). Of the total LCFF funding, Target in addition to their base, supplemental, the state allocates 81 percent through base and concentration grants. This funding was grants, 17 percent through supplemental and phased in over seven years (from 2013-14 through concentration grants combined, and 2 percent 2019-20), and is now a permanent, fixed add-on. through the add-ons. Funding from the Economic Recovery Target can be used for Figure 5 any educational purpose. More than 120 districts (13 percent LCFF Was Phased In Over Six Years of districts statewide) receive (In Billions) funding through the Economic Recovery Target, for total costs of Target $61 million. Gap Funding Base LCFF IMPLEMENTATION $60 48% 100% of gap 58% of gap funded AND FUNDING of gap funded 53% 50 34% of gap funded LCFF Was Phased In Over of gap funded 12% funded Multiple Years. When first enacted 40 of gap funded in 2013-14, LCFF was estimated to cost $18 billion more than the 30 previous funding system. In order to accommodate this increase, 20 LCFF was to be implemented over a multiyear period using a transition 10 formula that increased LCFF rates as more funding became available. 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19a The administration projected the 73% 83% 91% 96% 97% 100% state would fully fund LCFF by Percent of Target Level Funded 2020-21. As Figure 5 shows, LCFF was fully implemented by 2018-19— a The 2018-19 budget package increased LCFF by an additional 1 percent beyond full implementation. two years ahead of schedule. This LCFF = Local Control Funding Formula. 8 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Most Students Attend Figure 6 Districts Receiving Concentration Grant Funding. In LCFF Represents Majority of Proposition 98 2021-22, 62 percent of the state’s Funding for K-12 Education 5.9 million students enrolled in 2022-23 (In Billions) public schools were classified as EL/LI students. As Figure 7 shows, about 64 percent of statewide Total Proposition 98 Funding = $95.5 Billion enrollment is in districts with an EL/LI share of at least 55 percent. Figure 7 also shows that 79 percent $20.0 Other of the state’s EL/LI students attend districts that receive concentration $1.7 Add-Ons grant funding. $5.5 Concentration $7.5 Supplemental LOCAL CONTROL AND $60.8 Base ACCOUNTABILITY PLANS LCFF Componentsa In conjunction with creating the LCFF, the state established a new system of transparency and accountability centered around eight state priority areas. To provide transparency regarding how LCFF funding is spent, the state requires districts to adopt LCAPs. Districts must develop and adopt their a Reflects LCFF funding for school districts and charter schools. LCAPs with specific requirements LCFF = Local Control Funding Formula. for stakeholder engagement. In their LCAPs, districts must set Figure 7 goals in the eight state priority areas and specify actions they will Majority of Students Attend take to meet these goals. In this Concentration Grant Districts section, we discuss the specific 2021-22 Statewide Share of Enrollment by District EL/LI Percentage requirements in more detail. (In this brief, we do not discuss the state’s system of accountability, which Under 55 Percent 55 Percent or Greater was developed in conjunction with All Students LCAPs and is also based around the eight state priority areas.) LCAPs Based on Eight State EL/LI Students Priority Areas and Associated Performance Measures. The legislation enacting LCFF 10 20 30 40 50 60 70 80 90 100% establishes a framework for LCAPs based around goals in eight state priority areas. Statute also directs EL/LI = English learners/low income. www.lao.ca.gov 9 AN LAO REPORT SBE to address several implementation details, aligned, the school district would be required to such as developing an LCAP template that all include sufficient funding for EL tutors in its adopted districts must use. As shown in Figure 8, some budget plan. priority areas focus on academic success (such LCAPs Must Include Information on Services as student achievement and course access), while for EL/LI Students. As mentioned earlier in others address issues outside of academics (such the brief, districts must include information as parental involvement and school climate). SBE demonstrating that they are increasing or improving also has established 13 performance measures services for EL/LI students in proportion to their in the state priority areas intended to monitor supplemental and concentration funding. As part districts’ performance. As Figure 8 shows, seven of these requirements, districts must provide of the performance measures are metrics that justification for spending their supplemental districts report to the state and are measured and concentration funding for districtwide or consistently statewide. The remaining six measures schoolwide purposes. are local indicators for which districts report Districts Must Solicit Input From Various locally developed metrics or qualitative information Stakeholders in Developing Plan. Figure 9 describing their progress in the priority area. In outlines the process a district must follow in addition to these required state and local measures, adopting its LCAP. One of the main procedural districts may include other performance measures requirements is that a district consult with its in their LCAPs. school employees, local bargaining units, parents, Statute Requires Districts to Set Goals in State Priority Areas. Figure 8 For each of the state and local State Priority Areas and measures, statute requires districts to establish performance targets for Associated Performance Measures all students and student subgroups State Local and schools. (Statute identifies Measure Measure 13 student subgroups—eight Basic Conditions of Learning racial and ethnic groups as well Access to instructional materials, appropriately assigned X teachers, and facility conditions as English Learners, low-income students, foster youth, students Implementation of State Standards Implementation of academic standards X with disabilities, and homeless Parent Engagement students.) Statute requires that Parent and family engagement X districts establish these targets for Student Achievement the coming school year as well as English Language Arts assessment X the next two years. Mathematics assessment X Districts Must Specify Actions English learner progress X They Will Take to Achieve Goals. College and career readiness X A district’s LCAP must specify the Student Engagement actions the district plans to take High school graduation rate X Chronic absenteeism X to achieve its goals. The specified School Climate actions must be aligned with the Suspension rate X school district’s adopted budget. Local climate survey X For example, a school district could Course Access specify that it intends to provide Access to a broad course of study X tutors to all EL students reading Other Student Outcomes below grade level to improve its —a X EL reclassification rate. To ensure a The state has not adopted specific indicators that districts must use for this priority area. Districts the LCAP and adopted budget are may choose to include specific measures as part of their local planning process. 10 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT and students. As part of this consultation process, expenditures, and budgeted expenditures for districts must present their proposed plans to a planned actions and services. The summary must parent advisory committee and, in some cases, a also break out LCFF funding by component type separate EL parent advisory committee. (EL parent and provide estimates of current-year expenditures advisory committees are required if ELs comprise to increase or improve services for EL/LI students. at least 15 percent of the district’s enrollment In addition, the overview must contain a brief and the district has at least 50 EL students.) The description of the activities or programs supported advisory committees can review and comment on by general fund expenditures that are not included the proposed plan. Districts must respond in writing in the LCAP. to the comments of the advisory committees. Districts Must Adopt LCAPs Every Three Consulting with students may include conducting Years and Update Them Annually. LCAPs are student surveys, holding student forums, or three-year plans that school districts must update working with student advisory committees. Districts annually. Through a vote of their local governing also are required to notify members of the public board, districts must adopt (or update) their LCAP that they may submit written comments regarding by July 1 every year, in conjunction with their annual the specific actions and expenditures proposed in budget adoption. Districts also are required to hold the LCAP. at least two public hearings to discuss and adopt LCAPs Must Include an LCFF Budget (or update) their LCAPs. The district must first hold Overview for Parents and Guardians. Beginning at least one hearing to solicit recommendations and in 2019-20, districts must include in their LCAPs comments from the public regarding expenditures a short summary for parents and guardians. This proposed in the plan. It then must adopt (or officially summary must include projected total revenue update) the LCAP at a subsequent hearing. for the upcoming fiscal year (including LCFF and other state, local, and federal funding), projected Figure 9 School District LCAP Adoption Process Solicit written comments on proposed plan from public. Present proposed plan to parent Respond in writing to Develop proposed plan. advisory committees for review comments of parent Adopt plan in public hearing. and comment. advisory committees. Solicit recommendations and comments from the public in hearing. Consult with school employees, local bargaining units, parents, and students. LCAP = Local Control and Accountability Plan. www.lao.ca.gov 11 AN LAO REPORT COEs Must Review and Approve a School CONCLUSION District’s LCAP. Each district must submit The state created the LCFF with many goals its LCAP to its COE for review. The COE must in mind: to simplify school finance, give more approve a district’s LCAP if it determines that discretion to school districts, distribute funding (1) the LCAP adheres to the required template, more equitably based on student needs, and avoid (2) the district’s budgeted expenditures are a compliance-oriented approach to operating sufficient to implement the strategies outlined programs. As the state approaches ten years since in the LCAP, and (3) the LCAP adheres to the the LCFF was enacted, the Legislature may want to expenditure requirements for supplemental and consider whether the LCFF has met these intended concentration funding. As part of its review, the goals. Some effects, such as the simplification COE can then seek clarification from the district of the school finance system and greater local about the contents of its LCAP. If a COE seeks control, are easier to assess. Others, such as the such clarification, a district must respond in writing. effects on student outcomes, are more challenging Based on a district’s response, the COE can submit to determine. Some preliminary studies (using recommendations for amendments to the LCAP pre-pandemic data) suggest that the LCFF has back to the district. The district must consider any resulted in improvements on standardized tests COE recommendations at a public hearing, but and graduation rates for EL/LI students, most the district is not required to make changes to its notably in districts with high concentrations of plan. The annual deadline for approval or rejection EL/LI students. The Legislature may also want to of a district’s LCAP by a COE is October 8. Charter consider whether changes to the formula could help schools are not required to have their LCAPs in further meeting the intended goals. For example, reviewed and approved by a COE. the Legislature could evaluate whether the levels of funding for the main components of the formula (base, supplemental, and concentration grants) are distributed in a way that aligns with best practices for serving EL/LI students. LAO PUBLICATIONS This report was prepared by Michael Alferes, and reviewed by Edgar Cabral 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. 12 LEGISLATIVE ANALYST’S OFFICE