BILL ANALYSIS Ó AB 1066 Page 1 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 AB 1066 Page 2 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. AB 1066 Page 3 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 AB 1066 Page 4 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) AB 1066 Page 5 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 AB 1066 Page 6 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