BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1066
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          Date of Hearing:   May 1, 2013                     

                           ASSEMBLY COMMITTEE ON EDUCATION
                                Joan Buchanan, Chair
                    AB 1066 (Holden) - As Amended:  April 9, 2013
           
          SUBJECT  :   School finance:  average daily enrollment

           SUMMARY  :   Changes from an attendance-based to an  
          enrollment-based system of funding schools.  Specifically,  this  
          bill  :  

          1)Requires, commencing on July 1, 2016, that school district  
            revenue limit funding be based on average daily enrollment  
            (ADE) and that all other statutory references to average daily  
            attendance (ADA) be deemed to refer to average daily  
            enrollment.

          2)Defines "average daily enrollment" to mean the pupils in  
            enrollment in the school district, county office of education,  
            or charter school on the first day of school, plus all later  
            enrollees, minus all withdrawals.

          3)Phases in the ADE-based funding system as follows:

             a)   For 2014-15, defines ADA as consisting of two-thirds ADA  
               and one-third ADE; and
             b)   For 2015-16, defines ADA as consisting of one-third ADA  
               and two-thirds ADE.

          4)Requires that a pupil deemed a habitual truant have all of his  
            or her ADE funding allocated for the sole purposes of securing  
            pupil attendance and success.

           EXISTING LAW  

          1)Funds schools on the basis of average daily attendance, which  
            is the total number of all days of attendance for all pupils  
            during a school year divided by the number of days in the  
            school year.

          2)Defines "habitual truant" as a pupil who has been reported as  
            a truant three or more times per school year and with whom,  
            and with whose parent or guardian, an appropriate district  
            employee has made a conscientious effort to hold at least one  








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            conference.

          3)Defines "truant" as a pupil who is absent from school without  
            a valid excuse three full days in one school year or tardy or  
            absent for more than a 30-minute period during the schoolday  
            without a valid excuse on three occasions in one school year.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   The Center for Evaluation & Education Policy (CEEP)  
          has identified six commonly-used methods of counting pupils for  
          funding purposes ("Student Count Mechanisms for Funding  
          Purposes," Education Policy Brief, Volume 10, Number 2, Spring  
          2012).  They are:

                  Single Count Date:   A count done on a single day,  
               usually near the beginning of the school year, which can be  
               based on either enrollment or attendance (used by 10  
               states).
                  Multiple Count Dates:   Two or more counts done during  
               the school or calendar year, with one occurring in the fall  
               and the second occurring in the winter or spring (used by 9  
               states).  

                  Average Daily Attendance:   Seven states, including  
               California, use this.  The other states are Illinois,  
               Kentucky, Mississippi, Missouri, New York, and Texas.

                  Average Daily Membership:   An average of a daily count  
               during all or most of the year of pupils enrolled (used by  
               14 states).

                  Single Count Period:   An average of a daily count during  
               a designated period near the beginning of the school year;  
               may or may not include absent pupils (used by 3 states).

                  Multiple count period  .  An average of multiple daily  
               counts conducted during two or more periods during the  
               school year (used by 1 state).

          Six states did not respond to the CEEP survey, which also found  
          that nine states base their formulas on attendance, three on a  
          combination of attendance and enrollment, and the rest on  
          enrollment.









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          SB 727 (Rosenthal, Chapter 855, Statutes of 1997) changed the  
          method for computing ADA for apportionment purposes.  Prior to  
          the enactment of SB 727, ADA included excused absences.  SB 727  
          changed the calculation to exclude excused absences.  Thus, ADA  
          is currently based on actual attendance.  

           This bill  moves to an enrollment-based system over a three year  
          period, beginning in 2014-15.  It does not change the amount of  
          funding, particularly revenue limit funding, per pupil.  Rather  
          it changes the way pupils are counted.  By counting pupils on  
          the basis of enrollment instead of attendance, this bill  
          increases the total revenue limit funding to which districts are  
          entitled.

          The statewide average ratio of attendance to enrollment is about  
          95%, meaning that, on average, about 5% of the state's pupils  
          are absent each day.  However, there is variability around this  
          average, so some districts may have an average daily absence  
          rate of 10%, while others have a rate of 2%.  Because enrollment  
          is higher than ADA, all districts would see their total revenue  
          increase under this bill, but not by the same amount.  Districts  
          with larger gaps between ADA and enrollment would get larger  
          increases.  

          Supports of an enrollment-based finance system argue that an  
          attendance-based system penalizes districts that serve pupil  
          populations that are prone to higher rates of absenteeism.   
          Specifically, low-income students have a higher incidence of  
          health problems and are more likely to be subject to other  
          out-of-school conditions that lead to more absences.  Data from  
          the California Department of Education show that, in general, a  
          high percentage of low-income pupils is associated with a high  
          rate of absenteeism.  The out-of-school conditions that lead to  
          a high rate of absenteeism are beyond the ability of a district  
          to control.  Therefore, they argue that an attendance-based  
          system "punishes" districts with high percentages of low income  
          pupils.

          Supporters of an enrollment-based system also argue that school  
          districts must staff, provide classroom space, purchase books,  
          etc., on the basis of enrollment, not attendance.  An  
          enrollment-based system recognizes this reality.  According to  
          the author's office, "Using ADA as the multiplier for pupil  
          funding has the effect of unfairly and discriminately reducing  
          aid to school districts, county offices of education and charter  








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          schools with higher poverty, English learner, and minority  
          concentrations because education costs are fixed regardless of  
          variations in attendance.  Sometimes the disparity caused by the  
          current ADA funding calculation results in 10 to 20 percent less  
          funding."

          The argument in support of an attendance-based system is that it  
          provides an incentive for school districts to reduce absenteeism  
          and truancy.  An enrollment-based system, on the other hand,  
          does not provide such an incentive.   This bill  addresses this  
          issue by requiring districts to use all of the ADE funding for a  
          habitually truant pupil on efforts to secure his or her  
          attendance and success in school.  The committee may wish to  
          consider whether a focus on habitually truant pupils is  
          sufficient to address general absenteeism.

           Problems with the definition of "average daily enrollment  ."  The  
          bill defines "average daily enrollment" as "the pupils in  
          enrollment in the school district, county office of education,  
          or charter school on the first day of school, plus all later  
          enrollees, minus all withdrawals."  Accordingly, if a district  
          has 100 pupils on the first day of school, and one pupil  
          transfers in during the last week of school, then the district  
          would be credited with 101 ADE, even though it really had only  
          100 ADE for nearly the entire year.  Conversely, if the district  
          had a pupil transfer out during the last week of the year, then  
          it would be credited with only 99 ADE.  Using this method to  
          compute ADE is not an accurate measure of a district's workload  
          or staffing needs throughout the course of the school year.

           Impact on revenue limits  .  School district revenue limits are  
          currently deficited by about 22%.  This means that districts  
          receive about 78 cents for every dollar they are entitled to.   
          The revenue limit is an amount per student, and the amount is  
          not changed by this bill.  However, ADE is a larger number than  
          ADA, so multiplying the revenue limit per student by ADE instead  
          of ADA increases revenue limit funding for each district as well  
          as the statewide cost of funding district revenue limits.  Since  
          revenue limits are already deficited, the likely effect of this  
          bill is to increase the deficit by an unknown amount.  Unless  
          more funding is provided for revenue limits, districts will  
          receive a smaller funded revenue limit amount per student,  
          multiplied by a larger number of students, as defined by ADE.   
          Until the revenue deficit is eliminated, this may result in some  
          districts (i.e., districts with a low rate of absenteeism)  








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          getting less total revenue limit funding than under current law.

           Interactions with Proposition 98 and the appropriations limit  .   
          The California Constitution defines "changes in enrollment" as  
          the percentage change in average daily attendance for  
          determining the Proposition 98 minimum guarantee and defines  
          "change in population" as the change in average daily attendance  
          for purposes of computing the appropriations limit.   
          Accordingly, districts would still need to collect and report  
          ADA for these purposes unless the Legislature could statutorily  
          define ADE to mean ADA for purposes of the Constitution.
           
          Impact on the Local Control Funding Formula  .  The Governor has  
          proposed a Local Control Funding Formula (LCFF) to replace the  
          current system of school finance.  The LCFF establishes a target  
          level of funding for each district, which is higher than the  
          current level of funding.  The Department of Finance estimates  
          that it would cost an additional $15.5 billion per year to fully  
          fund the target statewide, and that we will reach that level of  
          funding in seven years, given current state revenue estimates.   
          Changing from ADA to ADE would increase each district's target,  
          and therefore the statewide cost of funding all targets.  K-12  
          Proposition 98 funding is now about $50 billion.  ADE is about  
          5% higher than ADA.  Therefore, changing from ADA to ADE would  
          increase the statewide cost of funding the target by about $2.5  
          billion.  This would increase the length of time it would take  
          for each district to reach its target.

          The LCFF would provide a base grant (a flat amount per ADA,  
          adjusted for grade level) and a supplemental grant, based on the  
          number of English learners, low income students, and students in  
          foster care enrolled in a district.  These students would  
          generate additional funding for the district equal to 35% of the  
          base grant.  If these students comprise more than 50% of a  
          district's ADA, then each such student over 50% would general  
          additional funding equal to 70% of the base grant (this is the  
          "concentration factor").  The base grant is based on ADA, and  
          the supplemental grant and concentration factor are based on  
          enrollment.

          As discussed research shows that the rate of absenteeism is  
          higher among pupils from low income families.  Therefore,  
          changing from ADA to ADE is likely to have the largest upward  
          impact on the base grants of the same districts that qualify for  
          the supplemental grant and concentration factor.  This would  








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          amplify the effect of the LCFF by directing more resources to  
          districts with high numbers of the qualifying pupils.  The size  
          of this impact is unknown.

          SB 69 (Block), which is currently pending in the Senate,  
          eliminates the concentration factor proposed in the LCFF and  
          increases funding for the base grant, among other things.  The  
          impact of this bill on SB 69 is unknown.

          Given the broader discussions taking place on school finance  
          reform, and the lack of information on how an enrollment-based  
          system would affect current allocations for deficited revenue  
          limits as well as the alternative school finance models being  
          considered, the committee may wish to consider whether it is  
          premature to move ahead with this proposed change without  
          further study and analysis.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Advancement Project
          Association of California School Administrators
          Bonita Unified School District
          California Federation of Teachers
          California School Employees Association
          California Teachers Association
          Franklin-McKinley School District
          Turlock Unified School District

           Opposition 
           
          None received
           
          Analysis Prepared by  :    Rick Pratt / ED. / (916) 319-2087