PPIC report considers effectiveness of Local Control Funding Formula

As local educational agencies receive record-high funding through the Local Control Funding Formula — money that could play a major role in an equitable recovery following learning disruptions brought on by the COVID-19 pandemic — a new report is examining the finance system’s effectiveness.

Targeted K–12 Funding and Student Outcomes: Evaluating the Local Control Funding Formula,” published by the Public Policy Institute of California in October, considers how funding has been used under LCFF, now in its ninth year, as well as how districts are targeting school sites for funding and whether there have been meaningful improvements in K-12 student achievement.

According to PPIC Research Fellow Julien Lafortune, who presented findings during a subsequent webinar, LCFF brought two main changes to school finance in the state: a weighted funding formula including additional funding for districts with more high-needs students and increased local control, meaning fewer restrictions on spending.

Key takeaways of the report include evidence that resources were distributed more equitably across districts under LCFF and that revenues and spending increased the quickest in high-needs LEAs. Additionally, after full implementation, student outcomes “were distributed more equitably across districts” with test scores and A-G completion rising the most in districts with the highest needs.

“National evidence on state-level school finance reforms suggests that relative funding increases between high- and low-income districts reduced gaps in test scores between these districts,” according to the report. It did not however, have the same impact between students, “likely due to the imperfect targeting of additional resources.” The same trend was observed with graduation rates and A-G completion as gaps narrowed quicker at the district level than among student subgroups.

In 2019–20, the highest-needs districts were spending roughly $19,300 per student compared to $17,600 and $16,100 in lower-need districts and $18,500 in the lowest-need districts. During that period, there was a significant increase in all districts spending on teacher salaries. Districts of higher need upped spending on salaries for pupil services and support staff like nurses, counselors and teachers’ aides more than lower-need districts did.

The report points to the lack of state oversight for supplemental and concentration funding, stating “unfortunately, no comprehensive statewide financial information exists that explicitly details how and where supplemental and concentration grant funding is spent … and may therefore understate the extent to which low-income or high-need students receive additional resources under LCFF.”

Included in the 2021–22 Budget Act are new funding steams for K-12 education, a notable addition being an increase in concentration grants from 50 to 65 percent.

Districts must use the increased portion of the concentration grant to fund new staff expenditures that provide direct services to students, a new restriction on how districts can spend increased LCFF funding,” according to the report.

It was unknown at the time of the report how the funds would be used and targeted, but looking at LCFF funding and demographic date from 2019–20 as well as other measures, the report attempted to simulate the impact that the change in supplemental and concentration (S&C) would have in high-need districts.

High-need districts would get a boost of $200 per pupil as the highest-need districts would see a rise of $425 per pupil.

“However, the amount of S&C funding for high-need schools and students depends on how funding is targeted within the district. The average concentration school will see roughly $280 to $305 more per pupil under the new formula, depending on the level of within-district targeting — slightly higher than the difference between the S&C funding under perfect targeting versus no targeting,” researchers estimated. “S&C funding for high-need students would rise from $2,096 to $2,345 — roughly $250 more per pupil.”


The report concludes that, “taken together, these findings suggest that LCFF notably affects funding, resources and student outcomes in the highest-need districts — but that imperfect targeting of resources to high-need students within districts remains a concern.” To remedy this issue, the report notes that “policymakers should improve reporting to enhance tracking and transparency of funding” down to the site level. “While implementing and standardizing such a system would require significant new shifts in accounting practices for many districts — as well as funding, guidance and technical assistance from the state — building new capacity and transparency in the system would enable stakeholders, policymakers and researchers to ensure greater equity and efficiency in the tens of billions spent in California’s K–12 schools each year.”

Another report recommendation addresses the imperfect targeting of supplemental and concentration funds, explaining that many schools that would be eligible for concentration funds miss out on them when the overall district does not qualify for the funds. “Designing a way to fund these school sites commensurate with their need would improve the overall targeting of the formula’s dollars to more of the state’s high-need students and schools,” the report states.

And finally, the report recommends “increasing supplemental grants and/or lowering the threshold for concentration grants,” citing that while districts with the highest-needs students (80 percent of the school population and above) have seen the largest gains in spending and student outcome improvement, a majority of the state’s high-needs students attend districts that have a high-needs student population of 30 percent to 80 percent — and get about the same spending increases as the state’s lowest-needs districts.