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California's Quest to Make Education Money 'Smart'

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Money is not born smart; it has to be educated. 

California's Local Control Funding Formula creates a financial structure that allows school districts to link revenue with the student outcomes they value.  Creating this connection requires schools to move from dumb money thinking to smart money thinking.

Smart Money.jpgSchool finance expert Jacob Adams tells a story about how our dumb-money compliance-oriented system worked.  A school superintendent told him that they controlled their funds by "putting colored dots on kids' desks."  Each dot represented a category of students, and programs were designed for each category.  That way they could see if the student got the right workbooks or was sent to lessons they qualified for.  "The programs that developed from a kids' point of view were so chopped up and there was no continuity between what developed during a day," he said in an interview.  Adams set out to change things.

Adams, now the provost at Claremont Graduate University, headed a working group of school finance experts drawn from all political persuasions, and their thinking is summarized in a book with the Smart Money title.  School finance experts had long been puzzled by the disconnect between added funding for schools and achievement on tests, particularly the National Assessment of Educational Progress (NAEP), sometimes called "the nation's report card."  It was hard to find the effects of marginal additions in test scores or other indicators, and school reformers of all stripes were frustrated that often-costly interventions seemed not to yield much improvement.

Adams and others came to the conclusion that the problem was the finance system itself.  California's school finance system was considered a nightmare.  Fix that and schools would have a fighting chance of educating all their students.  

Policy scholars had long advocated what they called a "weighted student formula" approach to budgeting.  Instead of delivering money in categories, deliver it in a single bundle, but give more to students with particular learning needs, English Language Learners, for example.  Give schools flexibility to design coherent instructional programs.

A Rare Opportunity

Stanford University professor Michael Kirst had a rare opportunity to transform this academic policy idea into legislation when he became president of the California State School Board and a close advisor to Gov. Jerry Brown.  

He had written that the state's school finance system was among the most centralized in the nation, and "has no coherent conceptual basis, is incredibly complex, fails to deliver an equal or effective education to all children, and is a historical accretion."  With wide bipartisan support, his weighted student formula idea was transformed into the Local Control Funding Formula, which began implementation during the 2013-2014 school year.  The LCFF contains most of ideas Kirst, Alan Bersin, and Goodwin Liu advocated in their paper, including increased funding for English Language Learners, foster youth, and students in poverty.  (Special education students continue to receive funding through a large categorical program.)

The new system has critics in the civil rights community who fear that funding flexibility will result in siphoning funds from the neediest students.  Their fears are not unfounded.  The history of targeted funding going back a half-century has been one of money being delivered in a leaky bucket.  The response of advocates has been to tighten the categorical system to insure an audit trail from incoming funds to students.  At the extreme, that leads to the "five dots on a student's desk" and the substitution of compliance for educational coherence.

The State Board tried to circle this problem by marrying the funding formula to a new accountability framework, the Local Control Accountability Plan.  The LCAP, as it is called, requires districts to link funding to its learning priorities in eight accountability categories.  This system the makes both budgeting and accountability subject to local district management and grassroots politics.

With various degrees of enthusiasm, California's 1,000 school districts went through the process last year, and they produced—if not a thing of beauty—at least a serviceable trial of the new system.  Along with most everyone, the State Board found the reporting template unhelpful, and a revised one is close to approval.  (EdSource follows this story.)

Do these changes make California's money smart?  Not yet, but it's learning.

Over the coming weeks, we will be following the Local Control Funding Formula and the accountability plan from several perspectives, including those who are suspicious of its ability to insure that education resources are actually delivered to the targeted students.  Tomorrow we'll hear from Karen Hawley Miles, who has written extensively about budgeting strategies.

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