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Lesson 8.5

Local Control Funding Formula:
LCFF Dictates How State Funds Flow to School Districts

Here’s how LCFF 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. It had been developed without consistent principles over many years, and 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. All districts receive a “base grant” for each student. The base grant is larger for grades 9-12 than for other grade levels.
  2. 2020-21 2020-21 "Base Rate" targets for funding per student established under the Local Control Funding Formula in 2013. Click image for current rates.
  3. Districts receive 20% additional “Supplemental Funding” per student for students with higher needs -- children Learning English, in poverty, and/or in foster care.
  4. 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. This is called “Concentration Funding”. (For example, a district with 60% high need students 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. But unlike the old system, in which funds were apportioned with strong restrictions on how they could be used, under LCFF the use of funds is substantially left to school districts, subject to the intent of the LCFF 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? It's hard to know. The districts hold the gold, make the rules, and conduct their own accounting. 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. In practice, it is up to community leaders to enforce the intent of the law.

Nonprofit law firms and advocacy groups like Public Advocates and the ACLU have begun playing 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. In 2017 Los Angeles Unified settled such a case (Community Coalition v. LAUSD) for $150 million.

All LCFF funds are technically “unrestricted,” which means school districts have discretion over how they are used. However, as explained in Lesson 7.8, there are also new accountability rules that apply. 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 What's an LCAP? for more information on 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. http://fairshare4kids.org/ is a good site to see if your district is among the rare exceptions. EdSource also keeps a list of 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 (see Lesson 8.6). Other programs include the Quality Education Improvement Act, the state’s after school program, home-to-school transportation, and child nutrition (e.g. school lunches).

Lottery funds of about $150 per student are also outside of the LCFF funding formula, but they are uniformly distributed. In any given year the state may also provide some one-time monies for specific purposes.

A few districts continue to receive small amounts of funding through state grant programs, but these exceptions are small.

In addition, the federal government largely delegates to the state department of education the task of disbursing federal funding. Most of those funds are for specific programs as largely explained in Lesson 7.2.

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.

Review

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

Answer the question correctly and earn a ticket.
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Questions & Comments

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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 September 11, 2017 at 12:07 pm
That is a helpful clarification--thanks!
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.

CHAPTER 8:

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