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On October 17, 2024, PPIC senior fellow Julien Lafortune spoke about funding education on two panels for the California State Assembly Budget Subcommittee No.3 on Education Finance and Assembly Education Committee, Joint Oversight Hearing on California’s Local Control Funding Formula: Fiscal Design and Outcomes Oversight. These are his prepared remarks.
Achieving Equity through LCFF Supplemental Grant Design
The panels before me have appropriately set the stage: LCFF was a transformational shift, bringing stronger equity and greater flexibility to California school finance. Research has documented academic gains from these shifts. Yet student achievement is far below our expectations, and stubborn gaps by race and income persist.
Now, over a decade later, it’s worth considering what works—and what could work better. There are three broad points I wish to make.
First, the evidence of impact is stronger for district- than student-level gaps. From 2015 to 2019, the ELA proficiency gap between low-income and higher-income students fell by 2.5 percentage points, or 8%. But the gap between low- and higher-income districts fell by more: 6 percentage points, or 15%.
This underlies the crux of my remarks: we have a formula that targets district need. The impact of supplemental and concentration funding is most clear when we compare districts, and less so when we compare student groups.
Which brings me to my second point.
Second, how funding is targeted to schools and students matters. A substantial portion of supplemental funding appears to be spent broadly, like base funding. As a result, demographic differences across and within districts flatten the equity impact of the formula.
Let me outline a brief hypothetical. Suppose we give every district $10,000 of base funding. The supplemental grant then yields $2,000 per high-need student. If districts fully target funds, this is like putting an extra $2,000 in the “backpack” of every high-need student, so to say. But if districts spend equally across students, this yields a $1,443 increase for high-need students and a $1,025 increase for other students. In other words, without targeting, the relative gain for high need students is only $400 instead of $2,000—80% lower.
About 17% of low-income and 20% of EL students are in non-concentration districts. And more than half of high-need students are in districts with less than 80% need, which receive more in supplemental than concentration funds. We also see this by school: over 20% of school sites in districts with 30% to 55% high-need could be considered “concentration schools,” with 55% or greater high-need.
Thus, the ultimate impact of the formula depends on how districts target dollars. And yet, our research documents incomplete targeting. On average, for every extra dollar a school generates in high-need funding, spending is only 63 cents higher than at other schools in the district, with the rest being more equally spread districtwide.
Third, who we choose to target matters. In forthcoming work set to release next month, we examine high-need definitions and their implications. Free and/or reduced-price meal rates, or FRPM, have diverged from statewide income and poverty measures. Many states have moved away from FRPM for their funding formulas; universal school meals further complicate this measure and motivate considering a shift.
The socioeconomics of districts with similar FRPM can also vary. Consider two actual districts about 30 miles apart, in the same county. Both have similar FRPM, one 69% and the other 67%. However, one has nearly half the poverty rate and 50% higher household incomes. And yet, the formula does not reflect these differences, with less than a 3% difference in per student LCFF funding between them.
One final point on the “who”: unlike California, many states fund multiple categories of need in a “duplicated” rather than “unduplicated” manner. For example, low-income EL students receive funding for both socioeconomic disadvantage and EL supports. Our forthcoming research shows that duplicated counts better reflect need and would improve funding equity.
Changes are not simple and could create winners and losers absent new revenues. In part for this reason, many argue that we must first ensure adequate funding as a baseline. Yet efforts to improve equity are worth considering even in the absence of new funding. Our research suggests that better targeting and greater transparency are important places to start to ensure current supplemental dollars are reaching high-need students.
Achieving Equity through LCFF Concentration Grant Design
Like California, more than half of states fund for concentrated poverty or need. Broadly, these policies reflect a body of research that documents a place-based concentration of economic, environmental, health, and other socioeconomic factors that compound educational challenges.
Indeed, our research on LCFF finds that concentration funding improved test scores and A–G completion rates. Nationally, research tends to find larger impacts per dollar in lower-income and higher-need contexts. The evidence for equity—and efficacy—of the concentration framework is therefore strong and well-supported.
Yet for this panel, I want to return to a theme discussed earlier: whether dollars intended for high-need students reach them, or whether they effectively operate as base funding.
In fact, we find that districts receiving concentration grant funding—or “concentration districts”—spend more equally and target less. Earlier, I mentioned that statewide, spending is roughly 63 cents higher at a school for each high-need dollar it generates over other schools in the same district. Yet targeting is even lower for concentration districts: the median concentration district targeted less than 35 cents on the dollar in 2020–21, and under 15 cents per dollar pre-pandemic.
We also examine LCAP planned expenditures to see whether spending plans are proportional to the funding they receive. Here, concentration districts also show less targeting. About 80% of concentration districts planned less LCFF spending on high-need student groups than the total supplemental and concentration funding they received. That share is less than half in over 25% of concentration districts, suggesting that dollars are spread more equally across students and schools.
This lack of targeting is perhaps not surprising, nor may it be as much of a policy concern: dollars spent districtwide in concentration districts will mostly benefit high-need students no matter how they are spent.
But this lack of targeting has consequences. Just under half of higher-income students are in concentration districts, and many large districts have large variation in need across school sites, including more affluent schools with much lower concentrations of need. Thus, if these funds are not further targeted within district, the equity impact of the concentration grant is diminished.
What then, can we do about this issue of ensuring targeted dollars reach high-need students and their schools?
A key first step is better transparency. LCAPs are not financial documents, and the site-level spending data we are able to use is collected for federal purposes and comes with many caveats and limitations on its use.
Next, greater accountability over targeted spending is worth considering. As I mentioned before, California is not unique in its funding for need and concentrated need. But some other states require that all or a portion of additional targeted dollars are spent on the students that generate them. This includes states across the political spectrum: Maryland, Washington, and Texas.
I wish to offer one final consideration from our research. We find that even in districts that spend more on their high-need schools, the resulting staff mixture is not equivalent: high-poverty schools see smaller class sizes, but led by less experienced educators with fewer credentials. Thus, while we may measure more equal or equitable spending, the distribution of staffing resources may not reflect this effort.
Recent efforts to address these dynamics may help, including the expanded concentration grant and equity multiplier. To my knowledge, research has not fully studied their impacts. Nonetheless, ensuring that efforts to improve funding equity don’t overlook staffing distributions is key to maximizing the equity and efficacy of concentration grant funding.