BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 69
Author: Liu (D), et al.
Amended: 5/28/13
Vote: 21
SENATE EDUCATION COMMITTEE : 7-0, 5/1/13
AYES: Liu, Block, Correa, Hancock, Hueso, Jackson, Monning
NO VOTE RECORDED: Wyland, Huff
SENATE APPROPRIATIONS COMMITTEE : 5-0, 5/23/13
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
SUBJECT : School finance: new pupil funding formula
SOURCE : Author
DIGEST : This bill replaces the existing revenue limit and
categorical school funding structure and establishes a Local
Control Funding Formula (LCFF), beginning in the 2014-15 fiscal
year, comprised of a base grant and a supplemental grant for
school districts, charter schools and county offices of
education. The bill provides supplemental grant funding equal
to 40% of the base grant for every pupil identified as an
English Learner (EL), eligible for a free or reduced price meal,
or in foster care. Pupils that fall into more than one category
are counted only once. This bill establishes an LCFF
accountability and intervention system, to be administered by
the Superintendent of Public Instruction (SPI).
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Senate Floor Amendments of 5/28/13 change the value of a
supplemental grant funding to 40% of base grants, rather than
35%.
ANALYSIS : The California K-12 public school system is
supported predominantly with state funds. Of the state funds
that are provided to K-12 schools, there are two major types of
funding: discretionary funds and categorical funds.
Discretionary funds comprise approximately two-thirds of the
funds the state provides to school districts and categorical
funds comprise approximately a third.
Discretionary Funds are provided to school districts to support
the general costs of operating schools. The revenue limit is
the general purpose money school districts receive for each
student. Established in 1972, the per student average daily
attendance (ADA) revenue limits varies slightly between
districts. The district revenue limit income is a combination
of local property taxes and state general fund support as
determined statewide through the Proposition 98 funding formula.
Any increase in local property taxes is offset by a reduction
in state funds (except for basic aid districts). In some school
districts the amount of property taxes exceeds their revenue
limit. Historically, these districts keep all of their property
tax revenues and received approximately $120 per pupil or a
minimum of $2,400 per district consistent with the State
Constitution.
Funding is provided on a continuous appropriation basis, meaning
that the funds are provided on an ongoing basis and are not
subject to the annual budget act. Funding is provided to school
districts and county offices of education based on a formula
that takes their ADA over the course of the year and multiplies
it by their individual funding rate (also known as a "revenue
limit"). Each district has its own unique revenue limit based
on historical spending. The end result is a school district's
"apportionment funding."
Although this funding does not require an annual appropriation
in the budget, the state can still affect the amount of total
funding that is provided for this purpose by increasing or
decreasing the rates (revenue limits) that are used to calculate
apportionments. In addition, the Legislature's ability to
approve or deny a cost-of-living adjustment (COLA) for revenue
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limits also affects the total amount of funding that is provided
in discretionary funds.
Under existing law, when state General Fund is insufficient to
fully fund revenue limits statewide, a deficit factor is created
to reduce funding to all schools by the same percentage. The
deficit factor keeps track of reductions to school district
revenue limits which will be restored when sufficient funding is
available in the future. The deficit factor reflects both the
cumulative loss of purchasing power due to inflationary cost
increases that occurred in the years where the statutory COLA
was not funded and the cuts to base funding that were imposed on
schools as the state struggled to balance its Budget. Below is
a table of the estimated undeficited revenue limits by school
district type. In terms of "real" funding each of the revenue
limits below would need to be reduced by approximately 22.5% to
reflect actual cash a school district would expect to receive.
------------------------------------------------------------
| | | |
------------------------------------------------------------
-------------------------------------------------------------
|Undeficited Statewide Average Revenue Limit |
| |
-------------------------------------------------------------
|----------------------+-------------------+-----------------|
|District Type |2012-13 |2013-14 |
|----------------------+-------------------+-----------------|
|Elementary |$6,449 |$6,555 |
|----------------------+-------------------+-----------------|
|High School |$7,747 |$7,875 |
------------------------------------------------------------
|Unified |$6,748 |$6,859 |
|----------------------+-------------------+-----------------|
| | | |
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Categorical Funds have been created over the years to provide
school districts funding for specific purposes, such as
improving school safety or improving the academic achievement of
struggling students. Unlike discretionary funds, categorical
funds (also known as "categorical programs") are all funded
through the annual budget act. They are usually accompanied by
regulations that require that they be spent in specific ways or
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for specific purposes.
As part of the February 2009 budget package, most categorical
programs were placed into three categories or "Tiers." School
districts with categorical programs in "Tier III" were allowed
to use the funding associated with about 40 categorical programs
for any education purpose. This change essentially made roughly
$4.5 billion in restricted funding discretionary. About 20
state-funded categorical programs totaling roughly $7.5 billion
were excluded from this flexibility. Categorical flexibility
has been authorized through the end of 2014-15. The following
provides an explanation of each tier.
Tier I. Tier I programs remained intact, that is, no reductions
were made to their allocation, no programmatic changes were
made, and no flexibility granted. These programs included:
Child Nutrition, Economic Impact Aid (EIA), Charter EIA,
K-3 Class Size Reduction, Special Education, After-school
programs, and Child Development (Pre-K only in 2011-12).
Tier II. Programs in this tier were subject to program cuts but
the program requirements were kept in place, that is, they were
not "flexible". These programs included: Apprenticeship
programs, County Office Oversight Fiscal Crisis Management Team
(FCMAT), Home-to-School transportation (HTS), Student
assessments, Foster Youth Programs, Adults in Correctional
Facilities, Partnership Academies, Agricultural Vocational
Education, K-12 Internet, Charter School Facility Grants, and
Year Round Schools.
Tier III . The majority of categorical programs were included in
this category. Funding for roughly 40 programs was reduced and
then made flexible, that is, all program requirements were
removed, and the funding associated could be used for any
educational purpose.
This bill replaces the existing revenue limit and categorical
funding structure with the LCFF, beginning in the 2014-15 fiscal
year. The LCFF is comprised of a base grant and a supplemental
grant for school districts, charter schools and county offices
of education. Specifically, this bill:
1. Establishes an LCFF for school districts, charter schools,
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and COEs.
2. Specifies legislative intent to: (a) Phase-in
implementation of the LCFF in a manner and on a timeline that
allows the state to restore local educational agency (LEA)
funding levels to those that existed prior to the past budget
cuts; (b) Redirect funds that were proposed for concentration
grants to instead increase both base grants and supplemental
grants, in proportions to be determined; (c) Require that
funding adjustments for grades 9-12 be spent on programs that
prepare pupils for college and career; (d) require funds
allocated for HTS be spent accordingly; (e) Consider remedies
for other funding allocations that are distributed according
to inequitable, historically-based formulas; and, (f) Provide
some level of supplemental support for ELs beyond any 5-year
limit and ensure greater transparency of instruction and
services for EL pupils.
3. Provides that the base grant per ADA shall be adjusted by
grade level as follows: (a) grades Kindergarten-3 -$6910;
(b) grades 4-6 -$7013; (c) grades 7-8 -$7221; and, (d) grades
9-12 -$8368, with additional adjustments for grades K-3 and
9-12 of 11.23% and 2.8% respectively.
4. Establishes a phase-in formula, as specified, to gradually
close the gap between actual funding and the target level of
funding.
5. Establishes a supplemental grant equal to 40% of the base
grant for every pupil identified as either an EL, eligible
for a free or reduced price meal, or in foster care; LCFF
uses an "unduplicated count" for pupils who fall into more
than one category.
6. Specifies that a pupil cannot be classified as an EL for
more than five years in total.
7. Requires the pupil-to-teacher ratio in grades K-3 to be no
more than 24:1, when the formula is fully implemented, unless
a higher ratio is negotiated in collective bargaining, and
requires a gradual reduction to 24:1 during the phase-in
period.
8. Caps funding for HTS and the Targeted Instructional
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Improvement Program (TIIBG) at their 2013-14 levels and
continues to provide this funding to school districts
currently receiving it in addition to their LCFF grants.
9. Maintains funding and program requirements for the following
categorical programs: (a) Special Education; (b) After
School Education and Safety Program; (c) State Preschool; (d)
Quality Education Investment Act; (e) Assessments; (f)
American Indian Education Centers; and, (g) Early Childhood
Education Programs.
10.Repeals funding and program requirements for all other
categorical programs and redirects their funding to the
supplemental grant portion of the LCFF.
11.Establishes a hold harmless provision to maintain total
revenue limit and categorical program funding for each
district and charter school at its 2013-14 level, unadjusted
for changes in ADA or COLA.
12.Provides, for basic aid districts, that local property tax
revenues be used to offset the entire LCFF allocation.
13.Repeals the requirement that districts receiving state
general obligation bond funding for facilities set aside 3%
of the general fund expenditures in a routine maintenance
account.
14.Requires each school district and COE, beginning in 2015-16,
to adopt an annual LCAP using a template adopted by the State
Board of Education (SBE), and to file its LCAP with the SPI,
the county board of supervisors, and the county auditor.
15.Requires each LCAP to identify goals and describe the
specific actions and strategies they will use to achieve all
of the following:
A. Implement the Common Core content standards for all
pupils;
B. Increase the Academic Performance Index (API) for each
school and for each numerically significant pupil subgroup
and reduce gaps in the API and other measures of pupil
achievement between numerically significant pupil
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subgroups;
C. Improve pupil achievement of the content standards
adopted by the SBE;
D. Increase high school graduation rates and reduce dropout
rates;
E. Increase the percentage of pupils who have successfully
completed courses that satisfy the University of California
and California State University entrance requirements,
Advanced Placement courses, and CTE programs;
F. Identify and address the needs of pupils, and schools
predominately serving pupils, who are ELs, qualify for free
and reduced-price meals, in foster care, or enrolled in a
juvenile court school;
G. Remedy deficiencies in any school in the areas of
textbooks and instructional materials; safe, clean, and
adequate school facilities; and qualified teachers; and
H. Provide meaningful opportunities for parent involvement,
including, at a minimum, supporting effective schoolsite
councils or other structures at each school and advisory
panels to the governing board or, creating other structures
to address complaints and other issues raised by parents.
1. Requires the county Superintendent to develop, and present
at least twice per year, to parents and the County Board of
Education, information to enhance their understanding of the
LCFF and LCAP.
2. Requires the SPI to examine each LCAP budget, as specified,
and to approve or disapprove the budget by August 15 of each
year, based on specified criteria. If the budget is
disapproved, the SPI must provide written recommendations, as
specified. This bill outlines a process for multiple
disapprovals and revisions to a local budget.
3. Specifies legislative intent to strengthen the
accountability provisions in the following ways:
A. Ensure supplemental funds generated by low income, EL
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pupils, and foster pupils are used to improve services to
those pupils, and not supplant existing resources dedicated
to those pupils.
B. Provide authority to state entities, county entities, or
both to intervene and support school districts that do not
demonstrate improvements, as specified.
C. Rescind flexibility provisions for school districts that
do not demonstrate improvements, as specified.
D. Ensure more robust data collections for purposes of
state accountability and state and local oversight.
E. Ensure that the majority of funds allocated through any
funding formula are spent on services and programs with
direct benefits to pupils.
1. Requires the COE plan to also describe specific actions and
strategies to: (a) conduct effective fiscal oversight of
school districts; (b) provide support to school districts in
the county, as specified; and, (c) coordinate instruction for
expelled pupils.
2. Requires the annual audit of school district and COE
expenditures to ascertain and verify whether funds have been
spent in accordance with the LCAP, the sufficiency of
textbooks, teacher misassignments, and proper accounting.
3. Requires the COE to review audits, and outlines procedures
for certifying reviews to the SPI, and establishes a required
process for the SPI to ensure any necessary corrections are
completed.
4. Requires the COE review of school district budgets to verify
that funds will be spent in accordance with the district's
LCAP.
5. Requires charter schools to submit an annual LCAP to their
chartering authorities and COEs.
6. Replaces the existing funding model for COEs and with a two
part formula based on the cost of providing regional services
and alternative education.
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7. Provides that the regional services component of the COE
funding formula consist of the following: (a) the base
grant; (b) an additional unspecified amount per school
district in the county; and, (c) an additional unspecified
amount per ADA in the county (based on a sliding scale, with
less populated counties receiving more per ADA).
8. Provides that the alternative education component of the COE
funding formula include: (a) A specified base rate per
eligible pupil (pupils who are incarcerated, on probation,
probation-referred, or mandatorily expelled); and, (b) a
weight of 40% for pupils who are ELs, receiving free or
reduced price meals, or are in foster care.
9. Continues funding for the TIIBG and the HTS to LEAs at
current levels.
10.Adds foster youth as a subgroup to the API.
11.Makes this bill contingent upon the enactment of SB 344
(Padilla) and SB 660 (Hancock).
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, The education
finance system proposed in this bill would take effect beginning
in 2014-15.
LCFF: Substantially increased per-pupil allocations,
beginning in 2014-15; the extent to which the new
allocation formula will drive costs and cost pressure in
other Prop 98 General Fund supported programs and
activities is unclear.
Mandates: Potentially substantial reimbursable mandates
on LEAs to produce LCAPs and provide data required by the
accountability mechanisms.
Accountability: Significant state administrative costs
(both upfront and ongoing), potentially offset over time by
savings from not having to administer a variety of
categorical programs that the LCFF would repeal. The CDE
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estimates it requires up to 5 new Education Programs
Consultants ($105,284 per position) for one to two years to
prepare for LCFF. This would be short-term staff likely
for one to two years. Ongoing costs to manage LCAPs will
depend upon the level of compliance and intervention
necessitated by LEAs, but is expected to be significant.
OPPOSITION : (Verified 5/29/13)
Californians Together
PQ:ejd 5/29/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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