Recess at Redwood Heights Elementary School in Oakland, Calif., Wednesday, June 4, 2014. Photos by Alison Yin for EdSource

In an audit last fall of three districts’ spending, State Auditor Elaine Howle called on the State Board of Education and the Legislature to hold districts more accountable for how they spend money they receive from the Local Control Funding Formula.

In the state budget that he presented this month, Gov. Gavin Newsom included two proposals that respond to the audit, setting the stage for negotiations with legislators who have introduced bills that mirror two of Howle’s key recommendations.

The audit of San Diego Unified, Clovis Unified and Oakland Unified found that it was often impossible to track the spending for English learners, foster and homeless youth and low-income children. Districts receive extra money under the funding formula for these children, based on their proportions of enrollment, and in return are required to provide them with improved and increased services and programs. Along with a lack of transparency, the audit said that some expenditures appeared to be misspent on all students without clearly benefiting the targeted student groups.

The audit also called for an end of a practice that student advocacy groups have criticized for years and that State Board of Education and county offices of education, which review districts’ compliance with the funding formula, have permitted. Districts that haven’t spent money for the high-priority groups at the end of the year can roll the money into their general fund and use it however they want, including rising pension and health care costs and teacher raises.

Assemblywoman Shirley Weber, D-San Diego, who had requested Howle’s audit, called this a perverse incentive to hold on to money intended for high-priority students. She and Assemblywoman Sharon Quirk-Silva, D-Fullerton, have sponsored Assembly Bill 1835, which would prohibit the practice.

Howle’s recommendations would require changes to the funding formula law and to the requirements that the state board sets for districts when they write their annual Local Control and Accountability Plan, or LCAP, documenting spending and academic priorities.

In his K-12 budget summary, Newsom does not explicitly refer to the state audit or the bill, but in the section on “fiscal transparency” (see pages 6-7), he said his administration will explore ways to strengthen accountability for spending money for high-priority students, “particularly when actions described in an LCAP are not implemented as planned.” Department of Finance officials confirmed that was a reference to the carry-over practice.

At its meeting this month, the state board substantially revised instructions and the format of the LCAP that address many of the criticisms in the state audit and from others who had called for tighter accountability. The new rules should make the LCAP more readable, shorter and better organized. Each district’s LCAP will include Excel tables that bring together in one place the actions and expenditures for the student groups, enabling parents to total the expenditures and see what was left over from the previous year.

Newsom is proposing to spend $600,000 next year to create an “LCAP portal” where people would find every district’s LCAP and spending from every school as reported in the annual School Accountability Report Cards. The portal would enable legislators and the public to see how statewide funds from the Local Control Funding Formula are being used, the budget summary said.

Although the details haven’t been worked out, Newsom’s idea may not go as far as Howle recommended and Weber and Quirk are proposing in a second bill, AB 1834. They want to create codes that would track all of the expenditures for the targeted groups. Former Gov. Jerry Brown and the Department of Finance opposed this concept when Weber proposed it three years ago, and she dropped the bill. They argued that standardizing expenses could lead the Legislature to start mandating how districts spend their money, undermining local control.

But some form of standard categories are critical for an understanding of statewide efforts and best practices, said Rob Manwaring, a senior fiscal and policy adviser for Children Now, a national research and advocacy organization based in Oakland. It and Education Trust-West, a research and advocacy organization also based in Oakland, are co-sponsors of the two bills.

In their LCAPs, districts may identify what they’re doing to increase graduation rates by referring to programs like AVID or agencies tutoring foster youths that searches won’t catch or understand. “The challenge will be how to categorize spending in a way that makes sense statewide,” he said.

Weber and the Education Trust-West will serve on a work group on spending accountability that State Superintendent of Public Instruction Tony Thurmond has created. What should be reported in the LCAP portal could be an issue it considers.

Story originally published by EdSource.