- In 2013, California moved to a school finance system that provides base funding per student, plus additional money for students with above-average needs and districts that serve a high concentration of those students
- North Carolina can learn from California’s school finance reforms because they ushered in a more flexible system that allows school district leaders to have more control over spending decisions and increases funding fairness between districts
- Nevertheless, California’s system has its shortcomings, and North Carolina should avoid replicating California’s mistakes, including problematic methods of counting students, lingering categorical grants, funding fairness issues at the school level, and poorly implemented accountability measures
Conservatives don’t often look to California as a model for sound education policy. Nevertheless, there are lessons that North Carolina can — and should — learn from the school finance reforms California undertook in 2013.
Like most states around the country, California funds public district and charter schools using what’s known as a “student-based funding formula.” Essentially, this means that California puts student needs at the center of school finance. The state gives each district a set amount of money per student, supplemented with additional funds for students who have above-average needs.
A new report from the Center for Effective Education at the John Locke Foundation shows that the vast majority of states — 30, plus the District of Columbia, to be exact — are using student-based funding formulas, and 10 others employ hybrid systems that rely heavily on student-based elements.
K–12 Education Funding Formulas (2024)
Source: EdBuild, last accessed June 10, 2024
North Carolina, however, lags behind these states by continuing to rely on an antiquated and outdated system that prioritizes inputs like programs and student-to-staff ratios over student needs and outcomes.
It’s time for North Carolina to follow the examples of states like California and implement a student-based funding system that better reflects the needs of students.
Main Elements of California’s Student-Based Funding System
California undertook the onerous process of school finance reform in 2013. Its new system, known as the Local Control Funding Formula (LCFF), replaced one that was very similar to North Carolina’s current model. California’s old system doled out 33 percent of K–12 education dollars through a complicated web of general-purpose funding combined with more than 50 restricted-use categorical grants. The LCFF, fully implemented by 2019–20, streamlined California’s school finance system by getting rid of about 75 percent of those grants.
Under the LCFF, education dollars are now doled out through three main funding streams.
The base grant allocates a set level of funding per student, with the amount varying based on each student’s grade band (such as $10,951 per transitional kindergarten and K–3 student and $12,327 per high schooler in 2023–24).
Additional dollars in the form of supplemental weights are worth 20 percent of the base grant and are provided for students identified as English language learners, foster youth, or low-income children. Students can qualify for this funding only once.
Concentration weights, given to districts tasked with educating a greater percentage of high-needs students, are worth 65 percent of the base grant’s value and are distributed when the percentage of high-needs students exceeds 55 percent of the student population.
Categories of the LCFF and Their Associated Values for the 2023–24 School Year
Sources: California Department of Education; Brookings Institution; Reason Foundation
What California Can Teach North Carolina About School Finance
One reason why California’s funding formula is a model for North Carolina is because it’s a more flexible system that gives school district leaders greater autonomy to decide how to spend education dollars based on what students need.
The three main parts of the LCFF — base grants, supplemental weights, and concentration weights — don’t come with specific funding restrictions. Districts must “use supplemental and concentration funds to ‘increase or improve services for [high-needs] pupils in proportion to the increase in supplemental and concentration funds.’” Nevertheless, district leaders, who are most familiar with what students need and what programs and services have proven useful, may generally spend funds as they see fit.
North Carolina can also learn from how California’s school finance system improved funding fairness between high-wealth and low-wealth districts. Whereas California’s old system sometimes shortchanged needier districts, researchers found that “[t]he LCFF succeeded in reducing funding gaps between wealthy and poor districts.”
School Finance Mistakes that North Carolina Should Avoid
Although the LCFF represents a significant improvement over California’s prior funding system, it’s not perfect. While drawing lessons from California’s reforms, North Carolina should, to the extent possible, avoid replicating California’s mistakes.
For one thing, beginning with the 2022–23 fiscal year, base grant funding relies on a measure of student attendance known as “funded ADA,” which, according to the California Department of Education, means “the greater of current, prior, or the average of the three most recent prior years’ ADA.” In other words, funding will be based on the most favorable student count, regardless of whether districts are still serving those students.
Second, although the LCFF eliminated three-quarters of restricted-use categorical grants from California’s school finance system, it didn’t do away with all of them. About one-fifth of K–12 education funds are still distributed through categorical grants outside of the LCFF. Eliminating these grants and distributing the funds through the LCFF instead would streamline California’s school finance system even more.
Next, although the LCFF improved funding fairness between school districts, it was not a panacea. Research indicated that the LCFF did not necessarily make funding levels fairer between schools within a district, and it was unclear whether the increased funding given to needy districts led to increased opportunities for the students in those districts. Transparent and accessible school-level financial data can help parents and members of the public hold school districts accountable for spending and results.
Finally, California has struggled to implement accountability measures effectively. School districts must periodically adopt and revise “Local Control and Accountability Plans” (LCAPs) that set key performance goals and show how spending advances these goals. Unfortunately, however, some researchers questioned the “clarity and effectiveness” of early LCAPs, and others have concluded that, contrary to their intent, the plans just fostered a compliance mindset and didn’t help districts use funds more strategically.
By learning from both the successes and shortcomings of California’s reforms, North Carolina can move away from a school finance system that spends billions of dollars each year yet satisfies few stakeholders and toward a system that is fairer, more flexible, and more transparent.
Other states can serve as a model for North Carolina, too. Find out what North Carolina could learn from Tennessee about school finance here.
