A White Paper: Enrollment Based Funding Is Needed in California

By Tony Wold, Ed.D., (reach me at [email protected]) download this as a PDF here

Equity in Educational Funding: A Call to Action

Authors Note: This paper was started in September of 2021 as we saw the pending fiscal cliff coming head-on.?The Governor’s budget proposal of a 3-year average on ADA does help districts, but now enough due to the significant drops this school year.?Senator Portantino’s bill SB830 is a move in the right direction but still does not address the full issue. This paper outlines the history of school funding and projects a pathway that is desperately needed as school districts face the most daunting of challenges such as staffing shortages and morale issues. Layoffs are not the answer and for the first time in recent memory, the State has the opportunity to stabilize public Education.

?The Opportunity to Change the Education Funding Paradigm

• In a year where funding for Education will be the highest ever, but also have the sharpest ADA declines across the State move to an enrollment-based funding model for 2022 – 2023 that provides greater equity in funding.
• With data collection challenging adjust the UPP data collection methodology and hold harmless to 2019 – 2020 figures or the current year, whichever is higher.
• Create a new LCFF target that brings California back to the top quartile of states in funding and begin to fill that gap.
• Create an add-on to the LCFF for attendance rates to incentivize good attendance by supporting the base that supports all students.

?The History and Context

Calculating and Reporting ADA

?Education funding in California is based on the Average Daily Attendance (ADA) of students not the overall enrollment of the Local Educational Agency (LEAs). This formula takes the total district enrollment as reported in the California Longitudinal Pupil Achievement Data System (CALPADS) which is data as of October. To determine the final state aid payment the enrollment is then reduced by applying the overall attendance rate for the Second Principal Apportionment (P-2), which is data as of February.

?The actual state aid payment is calculated four times and adjusted in the LEAs budgets at separate times in the year:

• It begins with the Advanced Principal Apportionment which is based primarily on the prior year's fiscal funding in July which determines State aid funding from July through January.
• The First Principal Apportionment (P-1) is based upon data as of October and supersedes the Advanced Apportionment calculations and determines State aid funding from February through May
• The Second Principal Apportionment (P-2) is based upon data as of February supersedes the P-1 Apportionment calculations and determines the final State aid funding in June.
• The Annual Apportionment is then certified the following year in February and supersedes P-2 calculations for State aid.

?Budget Development Timeline and Process

?The reporting cycles for budgeting at the LEA do not fully align with when the attendance data is certified at the State level. For this reason, and to protect LEAs from having to react to sudden enrollment drops the Local Control Funding Formula calculates the State aid to each LEA based on the higher of the current or previous year. The calculations are complex and driven by grade spans, each with a different funding rate for the Base Grant. Using the LCFF Calculator the Blended Average equates to $8,916 per ADA (this is the estimation factor for this paper) the LEA builds the operational budget.

The timeline for reporting the budget to the LEA Board of Education and submissions to the County Office of Education for Review prior to certifying each budget with the State follows a cycle that is not in alignment with the reporting of ADA. This means that decisions are made based on partial data. Because the budget of most LEAs consists of 85% - 90% allocation to staffing, these decisions have significant consequences if the timelines do not align. The table below shows the reporting period and the data that is used to determine the multi-year projection by LEAs.

?LEA Budget Cycle

Traditionally LEAs must determine staffing levels for Certificated teachers by March 15th of each year. If a Certificated employee does not receive a notice by the March 15th deadline then that individual would have a job for the next year. With the passage of Assembly Bill 438 the Classified staff of an LEA now also have this March 15th protection, versus the previous 60-day requirement. The procedures for layoffs require significant work for an LEA Human Resources Office and to meet the statutory deadline of March 15th a decision based upon the projected budget would need to be made based on information received as of January.

The ADA State aid funding that drives the budgeting cycle is certified by the State has P1 certified in February, P-2 certified at the end of June, and the annual reconciled the following February. For LEAs, the January Governor’s Proposal is what will drive the decisions for March 15 layoff notices based on all the reporting timelines. The current operational system has a systemic disjoint between the actions of the Legislature and the planning and reporting requirements of LEAs

?The Enrollment and ADA Crisis

?The pandemic that began in March 2020 (during the 2019 – 2020 school year) dramatically changed the landscape of public education in California. Many LEAs across the State were already experiencing a slight decline in enrollment and the overall demographic projections showed a steady decline for the remainder of this decade due to numerous factors such as birth rate, cost of living, and gentrification of many neighborhoods. The trends and ability of LEAs to predict enrollment changed dramatically as the State moved to a Shelter in Place mode.

Between March 2020 and June 2020, all the LEAs in the State pivoted to Distance Learning. Simultaneously the budget cycle at the State level predicted significant declines in revenue from all sectors for the upcoming 2020 – 2021 school year. The State final budget in June included significant apportionment deferrals and uncertainty for LEAs regarding the 2021 – 2022 current year budgets.

With respect to enrollment, however, there was a deeper decline than projected in most LEAs during the 2020 – 2021 school year as many LEAs were in distance learning for the entire year, with some reopening for students in different configurations for in-person instruction in the spring of 2021. Because there was not a methodology to appropriately attribute ADA to enrollment, the State provided LEAs with a hold-harmless and funded both the 2020 – 2021 and the 2021 – 2022 years based upon the 2019 – 2020 pre-pandemic data.

?The Department of Finance enrollment projections.

As the 2021 – 2022 school year began all LEAs had reverted to in-person instruction with the modified Independent Study rules and requirements. The State provided significant additional funding as part of a mega-COLA and additional one-time funds. The goal was to return to school operations as they were pre-pandemic. Operationally, however, LEAs across the State have seen a vastly separate set of outcomes:

• Many projected that the enrollment decline from 2020 – 2021 (Distance learning year) would be partially mitigated with the return to in-person instruction but for most LEAs in this current year (2021 – 2022) there was an additional decline that was greater than the total decline of the previous year.
• With the strict COVID protocols, LEAs were quick to quarantine students and full classes to protect against outbreaks. The protocols put in place did not allow students with any symptoms to attend in-person instruction. Students with mild symptoms such as sniffles would not attend daily and the average ADA in the current 2021 – 2022 school year for most districts sampled in this call for action saw decreases of approximately 3% in daily attendance on top of the additional decline in enrollment.
• In addition to a decline in student enrollment and daily attendance many LEAs, especially those in the Northern California Bay Area were faced with a dire shortage of staffing. Large Urban LEAs are still operating in December with, in many cases, more than 50 classroom teaching positions that do not have a permanent teacher.
• These LEAs had to shift out-of-classroom staff to those roles reducing other services.
• The shortages extended to Classified staff with 100’s of positions unfilled, especially in the Special Education Paraprofessional ranks.

Due to these shortages, the State extended the timeline for the implementation of the new Extended Learning Opportunities Grant due to the inability to implement based on the staffing. The result is that many LEAs are struggling to spend the one-time grants due to their inability to staff the base program.

• The implementation of the rigid Independent Study rules intended to ensure in-person instruction had a vastly different effect at the LEA level. The documentation required became challenging due to the shortages of staff support, and many LEAs had waiting lists for the virtual independent study programs (if they had one at all). The good intention of moving to in-person instruction created new administrative burdens that will not allow LEAs to fully capture ADA in the current 2021 – 2022 school year.
• The LCFF formula uses enrollment multiplied by ADA which is then multiplied by the Unduplicated Count of Pupils for the District to define the Supplemental and Concentration Grant funds. During the distance learning implementation of 2020 – 2021, many LEAs struggled to reach families to complete the multipurpose income form or lunch applications.

?In 2021 – 2022 the implementation of Assembly Bill AB 130 had the effect of further challenging the efforts of LEAs to obtain information from their families. The result is that the overall UPP will drop significantly for many LEAs. While a 3-year average is part of the formula this will have a significant impact on funding for the neediest of students.

?Why is this a crisis?

?At 2021 – 2022 First Interim reports in December LEAs are required to report the actual expenditures through October 31, 2021, and update their MYP for the upcoming two fiscal years 2022 – 2023 and 2023 – 2024.?These budget reports are reviewed by the County Offices of Education with respect to AB 1200 requirements and the LEA must demonstrate that it can meet all financial obligations for the current and two subsequent years to maintain a positive certification.

?LEAs that follow the current LCFF funding rules as they are written into the law must use the following assumptions as part of their First Interim report:

Current 2021 – 2022 enrollment

• It is uncertain when we will fully be out of the current COVID protocols. Vaccine mandates and timelines continue to provide uncertainty for LEAs and families
• Projecting enrollment using historical data is deeply flawed based on the changes over the past two years due to COVID
• The impact of two years of decline will be accounted for in one year moving from 2019 – 2020 enrollment to 2021 – 2022 enrollment
• Some LEAs may believe that enrollment will increase next year but this is not certain at this time

Current 2021 – 2022 ADA

• Current year COVID protocols have resulted in lower than traditional ADA rates
• Independent Study documentation is challenging for many LEAs to maintain which will further erode the ADA rate
• Many LEAs can anticipate being funded in 2022 – 2023 at a decline of up to 3% on top of the loss of revenue from enrollment drops

Current 2021 – 2022 UPP

• Many LEAs had difficulty collecting the data in 2020 – 2021 which is now part of the 3-year rolling average
• The implementation of free meals made the collection even more challenging in the 2021 – 2022 year which will further deflate the 3-year rolling average with 2 of the 3 years being declines since the base year of 2019 – 2020
• Some of the neediest students will be impacted significantly with declines of up to 10% many LEAs will drop out of the band for concentration grants entirely losing 65% of the base funding for those students.
• It is important to recognize in many cases the students did not leave the LEA they just did not complete the multipurpose income reporting. LEA will have the students without the funding.
• This is a critical issue of equity and illustrates that the impact of ADA funding in California may be propagating ongoing systemic bias removing essential resources to those students who most need them.

?The resulting December First Interim Budgets could have many LEAs reporting as Qualified, along with larger Urban Districts reporting a Negative qualification

• Now in January, the LEAs will quickly adjust the MYP to the Governor’s budget proposal and will have to make decisions on staffing and the possibility of having to issue layoffs due to the March 15th deadline.
• For Districts that are already facing staffing shortages and employees working to exhaustion this could have a chilling effect on labor relations.

?What is the solution?

Even with all the increases in funding and the full implementation of LCFF California lags significantly behind other States in base funding per pupil, standing in the bottom quartile by almost any measurement. Before Proposition 13, California was in the top 10% of funding in comparison to other States. At the LEA level, the most important number is the base funding. Just as a home builder does not begin erecting a structure until they have poured the concrete to create a solid foundation, California LEAs need the same foundation in base funding.

The impact of the ending of the hold harmless from 2019 – 2020 will have a significant impact on the budget cycle this year. The State revenues are currently more than $10 billion above projection and could increase to over $31 billion by June of 2022 according to reports from the Legislative Analyst and Department of Finance. Even with inflation factors included there will assuredly be more State aid funding for LEAs available in 2022 – 2023 than is being apportioned in 2021 – 2022. The decisions of the legislature and the Governor on how to configure these funds will impact the actions of LEAs.

Last year the mega COLA was 5.07% for LEAs and likely the same, or greater can be expected for 2022 – 2023 based on the Governor's projection. Using a sampling of LEAs across the state that represent approximately 15 – 20% of the total State enrollment and applying average factors the impact of enrollment loss, ADA, and UPP will create a significant level of “savings” for the State prior to any COLA. Because the State and Proposition 98 are going to be in a Test 1 year that “savings” would still need to be allocated to K-12 which creates an opportunity that may never come again to update the existing LCFF formula which will address the likely declines of enrollment for the next decade and simultaneously create a pathway for the future.

This can be done by making the following adjustments to the LCFF funding formula that will benefit the State, LEAs, and more importantly, allow the Supplemental and Concentration grant funds to be used for their legislative intended purpose of providing additional services because the base services are fully funded.

SOLUTIONS

1. Move to an enrollment-based funding model: Fund LEAs based upon the higher of the previous or current year enrollment. California is one of only 5 states that still funds LEAs based upon ADA.

• The impact will address the ongoing decline of students without the draconian decreases that would occur otherwise
• To illustrate the impact the chart below shows a hypothetical LEA of 10,000 students pre-pandemic.
• The LEA declined in enrollment 2.83% in 2020 – 2021 and another 4.42% in the current year 2021 – 2022
• The LEA had a 94.00% ADA rate in 2019 – 2020 which was held harmless in 2020 – 2021 and the current year 2021 – 2022 though the ADA dropped down to 90.23% this year which will be attributed to the 2022- 2023 projection
• Three models of funding are provided as examples

1.????ADA based is the current law

2.????Enrollment based on the recommended approach

3.????A 3-year ADA average has been suggested and is included

• Under current law, the hypothetical LEA would have a funded decline of 1,020 ADA from the Hold Harmless or a 10.2% cut for 2022 – 23
• The same LEA would be funded for 9,288 students under the enrollment model, a 1.1% cut from the Hold Harmless
• The 3-year ADA model would be (94.0%, 94.0%, 90.23%) which would be a 92.74% rate and result in funding for 8,609 students which is a decline of 7.91% from the hold harmless
• LEA must staff based upon enrollment, not ADA they must also purchase technology, textbooks, and other materials based upon enrollment. Often the students that miss the most school to drive the ADA rate down are those that need the most additional support.
• The enrollment-based model accounts for the past two years of the pandemic and cleanly creates a methodology for a potential decline in the future in a manageable way for LEAs without costing the State additional funds since the difference between ADA and enrollment in 2019 – 2020 to the decline in enrollment the past two years. It also accounts for the anomaly of the rate of attendance this year.

2. Hold Harmless on the UPP factors: For 2022 – 2023 school year fund LEAs based upon the UPP from 2019 – 2020. With the likelihood of the continuance of the free meal program in California schools the collection of this data will be continually challenging

• Even prior to the pandemic it required significant resources to collect this information every year. These resources took valuable staff time away from other functions to query families.
• Many families hesitated to provide the information for privacy concerns and immigration status due to a significant lack of trust in the government
• High schools tended to have even lower rates of turning in the data to the social stigma and peer pressure to the point that some high schools that had all their feeder elementary schools at 90% would only be at 60% depriving those students of essential resources in the College and Career focus.
• Using a Hold Harmless instead of the 3-year average will allow the LEAs to re-bench this measurement. The categorizing of Homeless, English language learners, and Foster Youth can continue as it is with a change in methodology for the Socioeconomic data collection.
• In the proposed change of Hold Harmless from 2019 – 2020 LEAs would be able to code all students in 2022 – 2023 with their status from 2019 – 2020.
• Each year the previous year's status would stay with the student for their academic career with respect to Socioeconomic status and LEAs would utilize direct certification and collection of all new students to the LEA to update or validate status.

1.????This would result in a targeted approach to data collection as part of initial enrollment.

2.????This methodology would also provide for more accurate reporting and delivery at Secondary schools which supports the goal of graduating all students

3.????Census data for the zip code and attendance area can be utilized for extreme disproportionate reporting to validate data collected

3.????Add ADA as an LCFF add-on:

Moving to enrollment-based funding should not remove accountability for attendance in any way. In fact, the goal would be to increase the emphasis on this important indicator by providing an additional base grant adjustment

• Under LCFF there are additional funds provided to students under the UPP factor which creates the supplemental and concentration grant funds. Higher Socioeconomic LEAs do not qualify for concentration grants and receive only the base funding.
• The non-concentration grant LEAs often must rely on local support to maintain programs and services for students due to low supplemental dollar allocations
• These LEAs often have slightly higher ADA rates which would be supported in the model
• Many large LEA have had to use Supplemental and Concentration grant funds to maintain programs that should be in the base and do not have the local resources that higher socioeconomic LEAs have
• Providing an LCFF adjustment for attendance will increase accountability of daily attendance
• It is a widespread practice to provide one sick day per month for employees. This equates to 10 sick days each year.
• In a 180-day school calendar if a student misses 10 days the ADA rate would be 94.4% which provides a baseline that is equal for students and staff.
• Providing a scale to incentive attendance better than the average should be the overall goal of public education and can be accomplished with the following possible scale:?

4.????Create a new LCFF Base Target:

The essence of the LCFF was that it set a goal to obtain funding. That goal was to restore the 2007 – 2008 spending allocation levels to LEAs. The model worked in good and bad years because the funding to LEAs was to fill the gap. The legislature ensured the support for Education and in a tight year could reduce the percentage of the remaining gap that would be filled. Over time California did reach the LCFF targets, but those targets did not account for the current cost of living or the increases in pensions from STRS and PERS that have effectively reduced the new funds that could be allocated. The past year saw the mega COLA and this year there are even more funds to distribute, yet across the State, LEAs are planning for reductions because the base funding has fallen farther behind.

• This can be changed by demonstrating a commitment to education and declaring a goal to bring California back to the top quartile in funding among all States.
• With that target the COLA for 2022 – 2023 would become the first allocation to bridge the new LCFF goal.
• If the goal of a COLA is to be about 5% all that is required is for the Department of Finance to calculate how much of the gap this would bridge and that becomes the apportionment figure.
• The most recent data on State Educational funding was published by the Edweek Research Center in 2021 using pre-pandemic 2019 – 2020 data.
• In that study, the national average was $13,679 per pupil (enrollment)
• California was at $11,269 which is $2,410 below per pupil based upon enrollment and even lower when funded by ADA
• The highest state was Vermont at $23,205, or more than double what California allocates per student
• Using even the most conservative of measures, California would need to increase funding of the base allocation by at least $5,000 per pupil which would then be augmented by the supplemental and concentration grant funds. Using this measurement, the State spent $79.3 billion in 2019 – 2020 and $93.7 billion in 2021 – 2022 (not all funds ongoing or part of the base) bringing a target for the LCFF that might require an additional $41 billion ongoing.

The potential COLA proposed by the Governor could move to close this gap by up to 10% right off the bat if implemented and keep Education on the top of the priority chart.

Call to Action

?The newspapers in the Bay Area have already provided numerous articles regarding the financial situation of school districts such as San Francisco USD, Oakland USD, and West Contra Costa USD which have already garnered the attention of the Fiscal Crisis and Management Team (FCMAT) and will begin to craft draconian cuts. This does not need to be the course of action. In 2021 – 2022 the Legislature and Governor acted swiftly from January to March to provide guidance on the funding for the coming year.

Nothing would prevent the immediate utilization of the February budget announcement and state of the State to create a new day for California Educational funding and provide guidance to LEAs that will otherwise need to go through an exercise of reductions on a larger scale than may be necessary. There do need to be reductions to address the enrollment decline, but there are better ways to accomplish this from the model present.

Appendix

The data collected in these charts is not certified data is estimates only, in no way should this be used to make MYP projections. The budget for an LEA is complex with grade span adjustments and multiple other calculations, this illustrative model was to use simple formulas to show the scale and magnitude of the impact of the policy decisions.

?Data was collected in September and October and gleaned from printed First Interims for early projections or augmented based upon first interim reports. The total number of students in this model is approximately 15% of the total enrollment in the State. The actual data could vary by a percent or more in either direction for each LEA. In addition, the LCFF grade spans were not used in this reporting and an average base grant of $8,916 was for Unified School Districts.

?Implementing ALL the recommendations in the paper for these districts would increase the State aid to schools by about $500 million, which would require an investment in Proposition 98 of approximately $3 billion dollars of new funding, which is significantly below what likely will be available for education. This can be done, and it can be done now!

Figure 1 Demographic Information from Selected Districts

Figure 2 Impact of Current LCFF Funding Law

Disclaimer: Data is not certified and is a rough estimate only

Figure 3 Impact of Current Law with Added COLA of 5% for 2022 – 2023

Figure 4 Total Impact of Moving to Enrollment Based Funding – NO COLA

Figure 5 Implementation of Enrollment Funding & UPP Hold harmless No COLA

Figure 6 New LCFF Target, Enrollment based funding and UPP Hold Harmless

LCFF Target increase used the 5% COLA for this calculation

Figure 7 Attendance Adjustment to LCFF

Additional Funds to LEAs based upon 2019 – 2020 ADA rate

Figure 8 Attendance Add-on Adjustment to LCFF Potential Targets

?Figure 9 Estimate of 3-year rolling ADA average Governor’s Proposal

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