Education finance

In 2013-14, California overhauled its outdated school finance system by enacting the Local Control Funding Formula (LCFF). As a result of LCFF, average per-pupil spending for all students increased, and more funds are directed to higher-needs districts and students. Recent research has shown that nearly all school district officials view the LCFF favorably and that most educators appreciate the increased attention to the targeted student groups and flexibility in allocating resources. While identifying the causal effects of the LCFF on student learning is difficult, initial research provides evidence that LCFF-induced increases in school spending led to increases in high school graduation rates and academic achievement, particularly among low-income and minority students. LCFF was also accompanied by changes to California’s support and accountability systems, which remain a work-in-progress.

Despite recent investments as a result of the Local Control Funding Formula, per-pupil spending in California remains consistently below the national average. The shortage of resources combined with high salaries has resulted in California having far fewer adults in schools than most other states, including teachers and non-instructional staff who support students’ mental and physical health. Researchers have estimated that an additional $25.6 billion—38% above actual spending—is necessary for all students to have the opportunity to meet the goals set by the State Board of Education. Results from the PACE/USC Rossier Poll suggest that voters are supportive of increased investments in public education and a open to property tax changes associated with Proposition 13.  

California school districts are facing budget challenges that have the potential to strain the system and exacerbate inequalities if left unchecked. First, the state has required school districts to increase their contributions to the state’s teacher pension system to make up for the state’s large unfunded liability. The cost of health care has also increased, yet some districts have allowed health care costs to soar unchecked. Additionally, the number of young people with disabilities is rising, but funding has not kept up to meet the need for Special Education services. Finally, school facilities are aging and demand expensive repairs and utilities, other operational costs, and labor costs are rising. Recent case studies explore the local impact of these statewide budget pressures in two unique locations: Sacramento City Unified School District and Marin county. 

Special education is the largest categorical funding program in California’s K-12 education budget. The Local Control Funding Formula (LCFF), passed in 2013, transformed the way the state allocates funding to school districts and the way the state supports at-risk students, however, special education was left untouched by LCFF.  State AB 602 funds, earmarked for special education, are distributed to Special Education Local Planning Areas in proportion to the total number students in attendance in the K-12 districts that make up each SELPA. Find more on special education finance and governance in Revisiting Finance and Governance Issues in Special Education, which was produced as part of the PACE Policy Research Panel on Special Education.