The New K-12 Funding System Theresa Tena, Vice President Theresa - - PowerPoint PPT Presentation

The New K-12 Funding System

Association of Chief Business Officials 2013 Fall Conference — October 28, 2013 Association of Chief Business Officials 2013 Fall Conference — October 28, 2013

Theresa Tena, Vice President Community College League of California Michelle McKay Underwood, Director of Legislative Services School Services of California, Inc. Sheila G. Vickers, Vice President School Services of California, Inc. Theresa Tena, Vice President Community College League of California Michelle McKay Underwood, Director of Legislative Services School Services of California, Inc. Sheila G. Vickers, Vice President School Services of California, Inc.

A Brief History of California School Finance

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A Brief History of California School Finance A Brief History of California School Finance

Why does history matter? Answer: Because history repeats itself There have been four major factors that have shaped California’s school finance system over the last 40 years: Court decisions Statewide ballot initiatives The economy Major legislation These factors have influenced the perspectives of lawmakers, activists, education policymakers, and the broader community The enactment of Governor Brown’s Local Control Funding Formula (LCFF) in June 2013 marks the next major chapter in California school finance

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School Finance Timeline School Finance Timeline

1970s 1980s 1990s 2000s 2010s

1971 Serrano v. Priest Decision 1972 Legislature Enacts SB 90 1978 Voters Enact Proposition 13 1979 Voters Enact Proposition 4 Gann Limit 1988 Voters Enact Proposition 98 1993 Legislature Enacts SB 813 2004 Williams Lawsuit Settled 2013 Legislature Enacts AB 97, The Governor’s LCFF Reform Great Recession

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A Brief History of California School Finance A Brief History of California School Finance

The LCFF replaces the 40-year-old revenue limit and 50+ categorical programs Revenue limit entitlement calculations were very complex Add the statutory cost-of-living adjustment (COLA) to the prior year’s base revenue limit per average daily attendance (ADA) whether the COLA is funded or not Multiply the result by current year ADA Then apply the deficit factor Many adjustments and add-ons throughout – pages and pages of calculations The deficit factor reflects the cumulative effect of unfunded COLAs and revenue limit cuts The funding is eventually provided prospectively

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Revenue Limit Deficit Factors Revenue Limit Deficit Factors

0% 5% 10% 15% 20% 25% 30% 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 8.140% 11.010% 10.120% 8.801% 8.801% 8.801% 6.995% 0.000% 0.000% 0.000% 3.002% 2.143% 0.892% 0.000% 0.000% 7.884% 18.355% 17.963% 20.602% 22.272%

Basics of the Local Control Funding Formula

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Assembly Bill 97 – The LCFF Assembly Bill 97 – The LCFF

Enacted as a trailer bill to the 2013-14 Budget Act, Assembly Bill (AB) 97 (Chapter 47/2013) is the most sweeping revision to California’s school finance system since SB 90 more than 40 years ago Governor Brown first unveiled his reform proposal in January 2012 as the Weighted Student Formula This proposal, however, was rejected by the Legislature Urging reform of the system as education’s funding cuts are restored, the Governor championed his LCFF proposal as a matter of civil rights “Treating unequals equally is not justice,” explained Governor Brown in his January press conference unveiling the LCFF The final vote on AB 97 was 65 ayes to 12 noes in the Assembly and 38 ayes to 0 noes in the Senate

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LCFF Target Entitlement Calculation LCFF Target Entitlement Calculation

Each year the entitlement upon full implementation (2020-21) is calculated for each K-12 agency And the amount appropriated in the State Budget determines growth toward the target entitlement for that year $2.1 billion translates to 11.78% growth toward target in 2013-14 2013-14 target entitlement calculation: Grade span per-pupil grants plus COLA Factors K-3 4-6 7-8 9-12 Base Grant per ADA $6,845 $6,947 $7,154 $8,289 COLA @ 1.565% $107 $109 $112 $130 Base grants – 2013-14 $6,952 $7,056 $7,266 $8,419

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LCFF Target Entitlement Calculation LCFF Target Entitlement Calculation

2013-14 target entitlement calculation K-3 Class-Size Reduction (CSR) and grades 9-12 Career-Technical Education (CTE) adjustments are additions to the base grant CTE is unrestricted; CSR requires progress toward maximum site average

• f 24 students enrolled in each class

Factors K-3 4-6 7-8 9-12 Base grants – 2013-14 $6,952 $7,056 $7,266 $8,419 Adjustment percentage 10.4% CSR

• 2.6% CTE

Adjustment amount $723

• $219

Adjusted grant per ADA $7,675 $7,056 $7,266 $8,638

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LCFF Target Entitlement Calculation LCFF Target Entitlement Calculation

2013-14 target entitlement calculation Supplemental and concentration grant increases are calculated based on the percentage of total enrollment accounted for by English learners, free and reduced-price meal (FRPM) program eligible students, and foster youth Factors K-3 4-6 7-8 9-12 Adjusted grant per ADA $7,675 $7,056 $7,266 $8,638 20% supplemental grant $1,535 $1,411 $1,453 $1,728 50% concentration grant (for eligible students exceeding 55% of enrollment) $3,838 $3,528 $3,633 $4,319

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LCFF Target Entitlement Calculation LCFF Target Entitlement Calculation

A sample 2013-14 target entitlement calculation: A district with 60% eligible students (about the statewide average) would calculate the following LCFF target grants for 2013-14

Factors K-3 4-6 7-8 9-12 Adjusted grant per ADA $7,675 $7,056 $7,266 $8,638 % Enrollment eligible (example) 60% 60% 60% 60% 60% of Supplemental $921 $847 $872 $1,037 5% of Concentration (percentage above 55%) $192 $176 $182 $216 Total 2013-14 LCFF target grant per ADA $8,788 $8,079 $8,320 $9,891

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LCFF – From 2012-13 to 2013-14 LCFF – From 2012-13 to 2013-14

2013-14 target entitlement calculation: Multiply each grade span per-pupil grant amount by the ADA for that grade span, and add the results Add any amounts received in 2012-13 for Home-to-School Transportation and Targeted Instructional Improvement Grant (TIIG) Determine 2012-13 base funding – add together: 1) 2012-13 deficited base revenue limit or charter school base grant 2) 2012-13 funding received for categorical programs included in the LCFF or charter school block grant 3) 2012-13 funding received for Transportation and TIIG Subtract the 2012-13 base funding total from the calculated LCFF entitlement Multiply the difference (if it is positive) by 11.78% for 2013-14 Add the difference to the 2012-13 base funding amount to get 2013-14 funding

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2013-14 Growth Toward Target 2013-14 Growth Toward Target

$6,500 $6,500 $6,500 $6,500 $6,500 $6,500

Low Medium High $8,000 $9,100 $11,300

12% 12% 12%

2012 Base Year 2012 Base Year 2012 Base Year LCFF Target LCFF Target LCFF Target

$180

$312 $576

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Categorical Programs Rolled Into the Local Control Funding Formula Categorical Programs Rolled Into the Local Control Funding Formula

Administrator Training Program Community-Based English Tutoring Adult Education Deferred Maintenance Advanced Placement Grant Programs District revenue limits Alternative Credentialing Economic Impact Aid Apprentice Programs Educational Technology Arts and Music Block Grant Gifted and Talented Education California High School Exit Exam Grade 7-12 Counseling California School Age Families Education Program High School CSR Certificated Staff Mentoring Instructional Materials Block Grant Charter Schools Block Grant K-3 CSR Civic Education National Board Certification

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Categorical Programs Rolled Into the Local Control Funding Formula Categorical Programs Rolled Into the Local Control Funding Formula

Oral Health Assessments School and Library Improvement Block Grant Partnership Academies School Safety Block Grant Physical Education Block Grant School Safety Competitive Grant Principal Training Staff Development Professional Development Block Grant Student Leadership/California Association of Student Councils Professional Development Institutes for Math and English Summer school programs Pupil Retention Block Grant Teacher Credentialing Block Grant Regional Occupational Centers and Programs Teacher Dismissal Apportionments Home-to-School Transportation* TIIG* * Retained as add-ons to the formula

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Significant Categorical Programs Remaining Outside the Local Control Funding Formula Significant Categorical Programs Remaining Outside the Local Control Funding Formula

Program Rationale After-School Programs Proposition 49 requires a ballot initiative approved by the voters to make any changes to after-school funding American Indian Education* Federal accounting requirements Necessary Small Schools Funding needed to maintain schools in sparsely populated areas Preschool Program Program/funding is not a K-12 program Quality Education Investment Act Part of a legal settlement Child Nutrition* Federal accounting and maintenance-of-effort requirements Special Education* Federal program requirements and maintenance-

• f-effort issues

*Received 1.565% COLA for 2013-14

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Other Considerations Under the LCFF Other Considerations Under the LCFF

The LCFF protects selected programs from potential local funding reductions by requiring a maintenance of effort funding floor equal to the state-funded expenditures for 2012-13 This protection applies to the following programs: Home-to-School Transportation Adult Education (for 2013-14 and 2014-15) Regional Occupational Centers/Programs (for 2013-14 and 2014-15) Also, there are about 20% of districts that would never get back to their 2007-08 levels of revenue limit and categorical program funding under the LCFF So for many of them a special adjustment, the Economic Recovery Target (ERT), provides a minimal level of growth each year of implementation

Implementation of the Local Control Funding Formula

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The LCFF Accountability System The LCFF Accountability System

The LCFF comes with a new accountability system School districts and county offices of education (COEs) are required to adopt a Local Control and Accountability Plan (LCAP) every three years, with annual updates Formally approved by the board and submitted with the adopted budget each year Includes basic aid districts as well However, detailed regulations have yet to be issued by the State Board of Education Scheduled for January 2014, with the LCAP template in March 2014 The extent to which K-12 agencies will have flexibility over expenditure of supplemental and concentration grant funds is still uncertain

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The LCFF Accountability System The LCFF Accountability System

Pupil Engagement School Climate Adopt Standards Course of Study Credentials/Materials Pupil Outcomes Parental Involvement Pupil achievement Expulsion Coordination

(COE only)

Foster Student Services

(COE only)

State Priorities

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Adopting and Updating the LCAP Adopting and Updating the LCAP 1 2 3 4

Consultation with: Teachers Principals School personnel Pupils Local bargaining units Present for review and comment to: Parent advisory committee English learner parent advisory committee The superintendent must respond in writing to comments received Opportunity for public input: Notice of the

• pportunity to

submit written comment Public hearing The superintendent must respond in writing to comments received Adoption of the plan: Adopted concurrent with the budget Submitted to COE for approval Posted on district website COE posts LCAP for each district/school or a link to the LCAP

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The LCFF Accountability System The LCFF Accountability System

Oversight responsibilities built into the new accountability system: COE now reviews the LCAP as well as the budget COE has authority to approve or disapprove the LCAP and the budget If the LCAP is not approved: Identify strengths and weaknesses in regard to state priorities Assign an academic expert or team of experts Request that the Superintendent of Public Instruction (SPI) assign the California Collaborative for Educational Excellence to provide advice and assistance

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Criteria: A district or COE fails to improve outcomes for three or more subgroups three out of four consecutive years, and the CCEE finds that the LEA is unable to implement its recommendations Stay and rescind action of the governing board – except where such action would violate a local CBA Impose budget revisions Make changes to the LCAP

The LCFF Accountability System The LCFF Accountability System

With approval by the SBE, the SPI is authorized to: Appoint an academic trustee

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LCFF Targeted Funds LCFF Targeted Funds

The regulations aren’t out yet, but the LCFF is in place, school is underway for the year, and spending has begun And the first LCAP is not due until July 1, 2014 Are all LCFF dollars available for districtwide purposes? Generally, no Districts must document how supplemental and concentration dollars are used to provide services for eligible students Also, maintenance of effort (MOE) requirements may restrict some funds Are dollars tied to belly buttons? We don’t think so Supplemental and concentration grant funds are intended to be used to increase and improve services for all eligible students Dollars are tied to LCAP goals and activities

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LCFF Targeted Funds LCFF Targeted Funds

Some spending decisions are being made now Eliminating furlough days, restoring the school year, providing compensation increases However, once regulations are adopted, K-12 agencies may need to make corrections in their spending plans going forward Meeting the requirements will vary among districts A district with 90% or more eligible students may have great flexibility A district with 10% or fewer students may find it easier to target funding A district in between, or with widely varying counts of eligible pupils among schools, may face greater challenges

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A Different Approach Now A Different Approach Now

Policy Funding Program Rules Local Board Implementation School Site Performance Audits and Compliance Reviews

Old System State of California

Compliance Model

New System

Empowerment Model

Board Revises Policy Results Reported to Public Local Board Empowers Schools State Provides Funding Local Board Sets Policy Community Involvement Focus on Students

Student Achievement

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Where Did the COLA Go? Where Did the COLA Go?

Under revenue limits, state law provided for a COLA based on the change in the Implicit Price Deflator, as published by the U.S. Department of Commerce The Legislature, however, could appropriate less than the amount needed, creating a revenue limit deficit, which was tracked by the deficit factor If funded, the COLA was the same percentage increase received by all revenue limit districts If not funded, the COLA was still part of the revenue limit calculation but the deficit factor was applied to negate it During the eight-year implementation of the LCFF, the change in funding received by each K-12 agency will not necessarily correspond to the statutory COLA

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Where Did the COLA Go? Where Did the COLA Go?

The statutory COLA is used each year to increase the base grants and the add-

• ns under the LCFF, but that calculation is for the 2020-21 target

So technically only 11.78% of the COLA is funded in 2013-14 Also, the starting point for the LCFF in 2013-14 is funding received in 2012-13 – deficited revenue limit and categorical program funding The deficit factor is eliminated Though not explicitly identified, LCFF funding includes both COLA and funding to restore prior-year cuts

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Where Did the COLA Go? Where Did the COLA Go?

A local agency’s annual change in funding will depend primarily on the following: Its funding level in the 2012-13 base year Its percentage of eligible students The amount appropriated for LCFF in the State Budget The projected COLA for base grants is 1.8% for 2014-15 The Administration has indicated that it intends to provide about $2.5 billion for LCFF in 2014-15 This would equate to an average increase of 5.5%, well above the projected COLA A district with a high eligible student count could receive over 9%

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Example: Differential Funding Levels Example: Differential Funding Levels

$0 $100 $200 $300 $400 $500 $600 New Funding Per ADA Low Percent Eligible - 1% Medium Percent Eligible - 60% High Percent Eligible - 100% High LCFF Low LCFF Medium LCFF 1st Year 2nd Year 3rd Year

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Reserve Levels Reserve Levels

K-12 agencies have been required for many years to prepare multiyear financial projections with every budget revision Three to five times per year, depending on the situation Adequate reserve levels must be demonstrated for the current and subsequent two years Or the COE must intervene to assist Reserve requirements have been based on district size – 3% for most But with the LCFF each K-12 agency’s financial vulnerability is now related to their unique funding level The State Board of Education is weighing this issue among many others In the meantime, we advised each agency to set aside an additional amount equal to one year’s revenue growth

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Questions? Questions?

Thank you! Thank you!

Questions, please contact: Michelle McKay Underwood (916) 446-7517 michelleu@sscal.com Sheila G. Vickers (916) 446-7517 sheilav@sscal.com Questions, please contact: Michelle McKay Underwood (916) 446-7517 michelleu@sscal.com Sheila G. Vickers (916) 446-7517 sheilav@sscal.com