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Lesson 8.5

The formula that controls most school funding

Here’s how the Local Control Funding Formula works. The short version.

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In politics and government, the golden rule gets a new spin:

“He who has the gold makes the rules.”

Not so long ago, California's education finance system was very centralized. Sacramento controlled the money, and doled it out to school districts with quite specific instructions about how it could legally be used. Today, however, most of the spending decisions in California's education system are made in school districts. (Technically, the state apportions funds to "Local Education Agencies", a term that includes districts, county offices of education and charter schools. Insiders call them LEAs.)

LCFF Provides Funds Based on Student Characteristics

Prior to 2013, California had an almost impossibly complex system for allocating funds to school districts. Developed without consistent principles over many years, it was loaded with inconsistencies and special arrangements. That system was erased when California lawmakers created the Local Control Funding Formula (LCFF), a much simpler and fairer set of rules.

The big idea of LCFF is that school districts and charter schools with "higher need" students get more money to invest in those students. Here is how it works:

  1. Base Funding: All districts receive a base grant for each student. 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 higher needs — children learning English, in poverty, and/or in foster care.
  3. Concentration Funding: Districts with large concentrations of students with these identified needs get additional money. If more than 55% of children in the district are in poverty, in foster care, or learning English, the district receives an extra 50% of the base grant for each student beyond the 55% threshold. (For example, a district where 60% of the students fall into a high-need category receives 150% of base funding for 5% of its students.)

The end result is that districts receive very different levels of funding based on how many English language learners, children in poverty and children in foster care they have.

In the old system, funds were apportioned with strong restrictions on how they could be used. Under LCFF, those restrictions are gone: the use of funds is substantially unrestricted, meaning 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.

There can be a big difference between intent and reality. Are districts actually following through on the intent of LCFF by investing more money in higher-need students?

Maybe not. A 2020 study of 14 districts by the Edunomics Lab found that only two spent money on high-need students in proportion to the additional money received. The Local Control Accountability Plan (LCAP) is intended to provide information 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 use LCFF targeted funds in untargeted ways. These cases are difficult. 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

The transition to the LCFF system was unexpectedly rapid. Originally forecast to take seven years, the job was essentially done in three due to strong growth in California's tax receipts. Education funding for virtually all school districts is determined by LCFF, with a few exceptions generally known as Basic Aid districts.

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. 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 fill or overflow the LCFF Funding Bucket. In those cases, the districts keep all their local property taxes and get no LCFF money from the state. These are known as “Basic Aid” or “Excess Tax” districts.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 State Funds Are Outside of LCFF

There are several programs outside of LCFF for which a given district or charter school might be eligible. Together they represent more than 10% of the state funds that go to K-12 education. These funds come with strings attached. If a district does not run a particular program or have eligible students, it generally won’t receive the funds.

Source: LAO CalFacts card 34

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?

In 2018 a major research project known as Getting Down to Facts II (GDTFII) examined a big, important question: How is LCFF working? The short answer is 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:

“We find that LCFF-induced increases in school spending led to significant increases in high school graduation rates and academic achievement, particularly among poor and minority students. …In sum, the evidence suggests that money targeted to students’ needs can make a significant difference in student outcomes and can narrow achievement gaps.”

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.

Of course there is still plenty of room for improvement, according to the research. In particular, the report finds weakness in the central idea of local control through the reporting and public discussion system known as the Local Control Accountability Plan (LCAP). We examine the LCAP in Lesson 7.10.

Updated August, 2017 with new LCFF budget data.
Updated April, 2017 and September, 2017 to include litigation to enforce equity in use of LCFF funds.
Updated April, 2018 to reflect budget changes.
Updated Nov, 2018 to incorporate GDTFII research.
Updated December 2020.


Which ONE of the following statements about the Local Control Funding Formula (LCFF) is TRUE?

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Questions & Comments

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user avatar
Carol Kocivar October 19, 2021 at 12:09 pm
LCFF Funding Update:
To increase the number of adults providing direct services to students on school campuses, the 2021-22 Budget includes an ongoing increase to the LCFF concentration grant of $1.1 billion Proposition 98 General Fund, increasing the concentration grant from
50 to 65 percent of the LCFF base grant. Local educational agencies that are recipients of these funds will be required to demonstrate in their local control and accountability plans how these funds are used to increase the number of certificated and classified staff on their campuses, including school counselors, nurses, teachers, paraprofessionals, custodial staff, and other student support providers
user avatar
Carol Kocivar October 8, 2021 at 4:21 pm
Targeted K–12 Funding and Student Outcomes
An Oct, 2021 report from the Public Policy Institute of Callifornia on LCFF funding shows positive results. These include:
1. Under LCFF, resources were distributed more equitably across districts.
2. Revenues and spending increased fastest in high-need districts.
3. Test scores and A–G completion increased most in the highest-need districts after the state fully implemented the funding formula.

Among the PPIC recommendations:
1. Improve reporting to enhance tracking and transparency of funding.
2. Consider a funding mechanism based on school site need
3. Increase supplemental grants and/or lowering the threshold for concentration grants.

Lots more data. Read the report.
user avatar
francisco molina August 19, 2019 at 2:10 am
Summer is the best time for the board and the district to spend money. That is the time when school families are taking their vacations -- when they are back everything is done, nothing to say.
user avatar
Caroline August 15, 2019 at 6:00 pm
Can LCFF funds be used for capital improvements?
user avatar
Jeff Camp August 16, 2019 at 11:11 am
No, LCFF funds are for operations.
user avatar
Jennifer B February 19, 2019 at 9:24 pm
Your description of property tax funding omits a key element. Yes, property owners pay taxes allocated directly to their local districts. In addition, however, a portion of EVERY tax bill is allocated to that county's Educational Revenue Augmentation Fund (ERAF). That fund is ONLY available to support LCFF-funded districts within that county and only to the extent of the State's top-up liability. Thus, an LCFF-funded school district receives (first) revenue directly allocated to it out of its local residents' property tax payments, (second) revenue indirectly allocated to it out of its county residents' property tax payments (up to, but not beyond, the State's school funding commitment to that school), and (finally) State top-up funding, if required, up to the commitment.
user avatar
Jennifer B February 20, 2019 at 8:10 am
The tragedy now is that over half a billion dollars a year of ERAF is being distributed outside of education annually. This "excess" ERAF occurs in counties with high regional costs of living — notably, San Francisco ($267M), San Mateo ($194M), Marin ($64M) and Santa Clara ($99M). Since LCFF funding is flat across the state, that money is considered unneeded by education, hence redistributed among other local entities (the county, cities, fire and other special districts). This means that -- even though local residents have paid property tax "for schools," their LCFF-funded districts don't get it. These (generally disadvantaged) districts cannot compete with other employers, with nearby basic-aid districts, or with LCFF districts in lower-cost areas. (Note, basic-aid district residents pay heavily into county ERAF, so they, too, are suffering as local children go without an adequate education.)
user avatar
Gloria Lucioni January 6, 2019 at 6:55 pm
I think here the question is confusing. The funding is " unrestricted" but funds ca not be used for just "any purpose." Parents and boards decide uses which schools are legally held accountable for at the state level. The funding is more complex , overall, because it works on a 1/2 or 2/3 city tax base as well as state matched funds. So, neither answer is optima. Unrestricted should be exchanged for a word like "unaccountable" is funds are unethically or negligently distributed among schools. This was exactly the case with Community Coalition vs LAUSD in which a community won 150 million.
user avatar
francisco molina August 20, 2019 at 1:19 am
I agree with you. All people need a common sense about how to use money. Before to using money the community need to know our educational priorities. But, the reality shows the administration and the board behaving as the owner of that money.
user avatar
luciab September 24, 2018 at 2:24 pm
I recently saw that our school site budget this year is about $1.5 million and our school has about 252 students (K-5). That is less than $6k per student per year. Our school does not qualify for any supplemental or concentration funds. However, it still seems low. Am I missing something, or am I comparing apples to oranges?
user avatar
Jeff Camp October 1, 2018 at 11:11 am
Funds are allocated to school districts, not to schools, and school districts have a lot of freedom about how to account for the use of funds by site. Most of the money actually spent at a school is in the form of salaries and benefits, and the actual cost of salaries can vary depending on where the specific teachers land on the salary schedule. The bottom line is that there is no single, dependable answer to your question; you need to ask your school district... and they may have trouble giving you a really clear answer. Are the costs of staff allocated based on actual expenses, or on average expenses per teacher, for example?
user avatar
April 16, 2017 at 1:33 pm
A clarification with regard to item #2 above, "Districts receive 20% additional “Supplemental Funding” per student for students with higher needs -- children Learning English, in poverty, and/or in foster care.". Supplemental funding per LCFF uses an "unduplicated" pupil count. Thus, for the purposes of funding, a pupil may be counted in only one category.
user avatar
Caryn-C September 11, 2017 at 12:07 pm
That is a helpful clarification--thanks!
user avatar
Jeff Camp October 1, 2018 at 11:18 am
Yes. The system counts a student as having additional needs under LCFF if he or she is in the lunch program and/or foster care and/or learning English. The formula is meant to create an "unduplicated" count of these students. In a nasty twist of jargon, a student that falls in any of these categories is now known as an "unduplicated" student in educationese. For example: "Our school has 27 unduplicated students." "We provide well for our unduplicated students." "Jose and Maria are unduplicated students."
user avatar
Robin Pendoley October 11, 2021 at 1:51 pm
Jeff, can you share the rationale for why LCFF counts students with need (i.e. unduplicated students) rather than incidents of need (i.e. a student who is homeless and an English Learner experiences two needs that are barriers to learning).
user avatar
Jeff Camp - Founder October 13, 2021 at 5:31 am
Politics is the art of the possible. LCFF passed at a time and under conditions that allowed it. It stuck to three conditions of durable need (economic need, language acquisition, foster care). Special Ed, homelessness were left for future political leaders to tackle. Lesson 10.4 discusses this more.
user avatar
Jeff Camp - Founder October 13, 2021 at 5:31 am
Politics is the art of the possible. LCFF passed at a time and under conditions that allowed it. It stuck to three conditions of durable need (economic need, language acquisition, foster care). Special Ed, homelessness were left for future political leaders to tackle. Lesson 10.4 discusses this more.
user avatar
Sherry Schnell April 6, 2015 at 8:37 pm
I think it's important for parents in our district to understand how money flows to the district, but because of the size of the state, we have limited influence on that. It may be more important for parents to understand how money flows to schools WITHIN the district. Some schools don't have enough to meet basic needs, while others have more.
user avatar
Mary Perry April 7, 2015 at 1:19 pm
Sherry - it's absolutely true that parents ought to understand how districts allocate money to their schools. Since those decisions vary a lot from one school district to another, we'd encourage parents to directly ask school officials that very important question. You might want to start with your school principal, but if you don't learn what you want to know or that raises additional questions, my next stop would be the superintendent's office. Your locally elected school board members should also be helpful. Some districts make school budget decisions very transparent and others do not. In my view, all should be happy to answer these kinds of parent questions.


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