School districts in California receive funding to educate each student in their care.

The amount they receive from the state varies depending on the characteristics of students. This system is known as the Local Control Funding Formula, or LCFF.

To understand any system, it helps to follow the money. This lesson explains how LCFF works, how it came to be, why it's important, why it is generally admired as good policy, and why informed community members have become so essential to it.

Local control vs. state control

The LCFF system gives school districts a lot of local power. It was not always so.

The golden rule: “Whoever has the gold makes the rules.”

From 1978 through 2013, California's education finance system was very centralized, complicated, and unfair. Laws and policies set in Sacramento determined the amount of money each school district received. Significant portions of the money were earmarked for specific categorical purposes, almost like coupons. To prove their compliance with the terms of each categorical program, districts filed bushels of reports. In effect, California had a statewide system of state schools.

In 2013, as this lesson will explain, the California legislature dramatically decentralized the school finance system, aiming to create a statewide system of local school districts. The Local Control Funding Formula eliminated virtually all categorical programs. School districts were given far more power to make choices locally about how to put money to use.

Today, school districts have considerable control over money and how to spend it. (In Educationese, the state apportions funds to Local Education Agencies, a term that includes school districts, county offices of education and charter schools. Insiders call them LEAs, pronounced as the letters, not like the name of a certain Jedi princess.)

What is LCFF?

California's Local Control Funding Formula (LCFF) allocates state funds to school districts based on the characteristics of students attending school in them, providing more money to districts where student needs are greater. The big idea of LCFF is that schools should be equipped to serve the needs of the students they are educating. Districts that have many "higher need" students get more money from the state budget to serve those students. Here is how it works:

1. Base Funding: All districts receive a base grant for each student who comes to school. The base grant is larger for grades 9-12 than for other grade levels.
2. Supplemental Funding: Districts receive 20% additional funding per student for students with high needs — specifically defined as learning English, in poverty, homeless, or in foster care.
3. Concentration Funding: Districts are provided additional money if more than 55% of children in the district qualify as having high needs. Specifically, the district receives an extra 65% of the base grant for each high-need student beyond the 55% threshold. For example, a district where 60% of the students are in a high-need category receives 165% of the base for 5% of its students.
4. Equity multiplier: Beginning in 2023-24, the state added the option of providing additional funding in support of high-need school sites where more than 70% of the student population is socioeconomically disadvantaged. Total funding for this program is specified in the state budget each year. Learn more.

The end result under the LCFF system is that districts where students have higher needs receive more money to address those needs.

Under LCFF, the use of funds is substantially unrestricted, which means that school districts have a lot of latitude, so long as they spend the supplemental and concentration funds in ways that follow the intent of the law. This was a big change. Now it is school districts that hold the gold, and make the rules.

Now it is school districts that hold the gold and make the rules.

LCFF accountability: the LCAP

In principle, school districts are accountable to their community for using LCFF funds as intended. Are districts actually following through on the intent of LCFF by investing more money in higher-need students?

It is up to each community to enforce the intent of LCFF.

Often not, unfortunately. But it's unfortunately hard to know.

A document known as the Local Control Accountability Plan (LCAP) is meant to provide transparency about the actual use of LCFF funds, but the accounting detail in the LCAP is minimal. Who enforces the use of funds under LCFF? In practice, it is up to community members to stand up for the intent of the law. They don't have to do it alone, thankfully. Nonprofit law firms and advocacy groups like Public Advocates and ACLU have supported communities in this critical role, bringing cases against districts that have used LCFF targeted funds in untargeted ways. These cases are difficult and widespread.

A 2020 study of 14 districts by the Edunomics Lab found that only two of them spent money on high-need students in proportion to the additional money received.

In 2023, Public Advocates found that "most districts exclude significant programs and expenditures from their LCAPs, include only a fraction of their budgets, and fail to describe actions – including discretionary school site allocations – with enough detail for communities to understand what districts are doing or monitor whether programs and services are implemented and effective."

Standard public reports don't necessarily show where school district money is spent. Organizations have had to use Freedom of Information Act requests and the threat of litigation to obtain the detailed information required. It's a serious matter: in 2017 Los Angeles Unified settled such a case for $150 million.

In order to encourage local oversight, an important element of the Local Control Funding Formula is that school districts must engage parents and community to create a Local Control and Accountability Plan (LCAP). See Lesson 7.10 and the Ed100 LCAP Checklist for more information about how spending decisions are made.

The exceptions to LCFF

California accomplished the transition to the LCFF system with unexpected speed and unity. Originally forecast to take seven years, the job was essentially done in three due to strong growth in California's tax receipts.

In the Ed100 blog
Basic Aid districts aren't part of LCFF. Here's why.

Education funding for virtually all school districts is determined by LCFF. There are only a few exceptions, generally known as Basic Aid districts, where locally-generated taxes are greater than the level guaranteed by the state.

The first step in filling a district's LCFF bucket is to pour in all the local property taxes. If those taxes fill the bucket halfway, state money is used to fill the other half of the bucket. If property taxes fill the bucket two-thirds of the way, state money fills the other third.

In perhaps as many as 100 school districts in California, the property taxes will fill or overflow the LCFF Funding Bucket. In those cases, the districts keep all their property taxes and get no LCFF money from the state. These are known as Basic Aid or Excess Tax districts.

Some funds are outside of LCFF

LCFF did not eliminate all categorical funds, partly because some of them are designed to align with the requirements of federal programs. The largest of these programs is Special Education, which has its own set of allocation rules and also requires the district to spend funds from its base allocation. Ed100 Lesson 8.6 explains more about the exceptions to the LCFF funding system.

Is LCFF Working?

The short answer is yes. LCFF made California's education funding system dramatically better.

In 2005-2007 a set of 20 research studies collectively known as Getting Down to Facts set the stage for change and led to the adoption and implementation of LCFF. In 2018 a set of follow-up studies known as as Getting to Facts II (GDTFII) was examined a big, important question: How is LCFF working? The findings were encouraging. According to the researchers, "The data provide initial evidence that money targeted to districts with the greatest student needs has led to improvements in student outcomes."

One of the associated studies, provocatively titled Money and Freedom, found that additional funds apportioned through LCFF were put to work in ways that made a distinct, measurable difference:

The studies suggest considerable support for the funding formula's basic design, which directs more funding to districts where needs are greater. For example, one study for the GDTFII project surveyed Chief Business Officers, who oversee the deployment of funds in school districts. These officers generally expressed support and confidence for the changes brought about by LCFF, even in districts that did not get additional funds from the policy.

In 2023, ten years after the implementation of LCFF, studies of the impact of the policy were even more conclusive:

Of course, there is still plenty of room for improvement. Local accountability is great in theory, but implementation matters. The Local Control Accountability Plan (LCAP) is a complex report. Understanding it and advocating for tradeoffs relies heavily on well-informed and deeply engaged community members. That's a tall order. We'll get back to the LCAP in Lesson 7.10.

For now let's stay with this chapter's theme, which is to explore where money for education in California comes from, where it goes and why. The next lesson, 8.6, examines the use of categorical funds, which districts can only spend in specific ways.

This lesson was updated in July, 2024.