The West Contra Costa Unified School District received nearly $40 million in attendance-based state grants for greater than 3,700 students who didn’t attend the district's schools through the 2022-23 school yr. Across the bay, San Francisco Unified collected $42 million for about 4,000 students who didn’t attend the district's classes.
A brand new Study by the Reason Foundation The study found that the 2 Bay Area districts were among the many 10 biggest beneficiaries of recent statewide changes in public school funding designed to ease the financial burden of declining enrollment.
But researchers on the Reason Foundation, which describes itself as a libertarian, free-market public policy research organization, argue that scarce education funds are going to varsities whose actual student populations don’t reflect that funding. According to the report, California spent about $4 billion statewide on students who stopped attending their district due to the policy.
“Often, lawmakers aren't really clear about how much these policies will cost or how the money will ultimately be allocated to school districts,” says Aaron Smith, co-author of the study and director of education reform at Reason.
Kenneth Kapphahn, a fiscal and policy analyst with the state Legislative Analyst's Office, noted that the study focuses on the 2022-23 school yr – the yr with the biggest gap between actual attendance and the attendance for which the funds were allocated.
“That's the year when districts were still funded based on their pre-pandemic levels, but their actual attendance reflected all the declines that were occurring at that time,” Kapphahn said. “Starting in 2023-24, pre-pandemic attendance funding will gradually phase out while districts' actual attendance increases.”
In California, schools are funded based on average day by day attendance – the number of scholars who attend class every single day throughout the varsity yr – somewhat than the number of scholars enrolled in the varsity district. The study examined the difference between schools' actual attendance numbers and the numbers they were funded for.
California's enrollment declined by nearly 15,000 students within the 2023-24 school yr, marking the seventh consecutive yr of statewide declines. Although enrollment declines are slowing, the state is forecasting the Bay Area an extra enrollment lack of 14% until 2033.
The San Francisco Unified School District declined to comment on the rules, said it was working to handle the state's concerns about deficit spending and stabilize the district's funds. Total enrollment for the 2023-24 school yr was 55,452 students.
“We are putting SFUSD on the path to long-term financial solvency and positioning ourselves to create the best possible learning environment for students,” district Superintendent Matt Wayne said at a June 25 board meeting.
In West Contra Costa Unified, the district temporarily turned over budgeting responsibility to Contra Costa County last month after the varsity board didn’t pass its budget by a deadline set by the state. The state Fiscal Crisis and Management Assistance Team determined earlier this spring that the district was at high risk of insolvency attributable to declining enrollment and deficit spending. Officials on the district, which has 29,528 students, didn’t reply to questions.
State funding for education has been boosted by recent state “hold harmless” policies designed to guard district budgets from unexpected enrollment declines which have accelerated attributable to the COVID-19 pandemic. The policies guarantee schools that state funding won’t fall below 2012-13 levels and permit them to average attendance to mitigate the impact of larger declines.
The enrollment reduction policy was made more generous after the COVID-19 pandemic hit student numbers, which might have had a big impact on school funding under existing policies, Kapphahn said.
“The legislator’s concern,“The decline is too overwhelming for the districts to handle all at once,” said Kapphahn.
Julian Lafortune, a researcher on the Public Policy Institute of California, said the “Hold Harmless” policies are intended to temporarily stabilize budgets and provides schools and districts somewhat more time to regulate to significant changes in student enrollment or a funding formula. The policies don't fund schools perpetually, he said.
“Think of it as a delay,” Lafortune said. “If the decline continues, they'll still have to cut staff. … The timeline just got pushed back a year or two.”
But the nonprofit Reason Foundation argues that such a policy would fund 1000’s of additional students who usually are not enrolled within the districts and arbitrarily allocate funds that could possibly be higher spent.
The study found that for the 2022-23 school yr, nearly 85% of California's 931 school districts received $4.06 billion in hold-harmless funding under the declining enrollment policy. That covered 400,000 more students than the actual attendance number. More than a 3rd of that was for transitional children from kindergarten through third grade.
The Los Angeles Unified School District received greater than half a billion dollars under the state's enrollment reduction policy and had a complete of greater than 50,000 additional students supported, the study said.
Other Bay Area schools benefiting from the arrangement included the Alum Rock Union Elementary School District in San Jose, which received greater than $15 million for about 1,500 students who now not attend the district's schools. The Cupertino Union Elementary School District received $24 million in funding for greater than 2,400 students who weren’t attending class.
The Reason Foundation also criticized California's minimum state aid policy, which it said primarily advantages wealthier school districts that may not normally receive state aid because they’re funded by local property taxes. Under current law, these districts keep any additional property tax revenue and receive the minimum state aid they were promised.
“This increases their financial advantage over other districts,” Kapphahn said. “The study addressed this as an equity issue. This means that districts that already have a significant financial advantage over other districts are getting more money, and we've heard similar criticisms of this policy in the past.”
Smith, the study's co-author, expressed hope that California politicians will rethink their “hold harmless” policies, especially since California schools face a “bleak” financial future.
“If you're going to fund public schools and allocate funds for use in classrooms, you should do it in a way that ties the funds to the students,” Smith said. “And in my opinion, these hold-harmless policies don't do that.”
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