The first significant change to the state’s 7-year-old K-12 funding system, the Local Control Funding Formula, is a signature away from becoming law.

But if Gov. Gavin Newsom accepts the recommendation of his advisers at the California Department of Finance and ignores the Legislature’s near-unanimous vote favoring the significant reform, he’ll veto the legislation within the next few weeks. Hundreds of nonprofits and civil rights groups signed a letter last week urging him not to do that; signing it instead would ensure that funding for “our highest-need, most vulnerable students is actually directed to support them,” the letter said.

Assembly Bill 1835 would end what advocates for years have called a glaring loophole that undermines the funding law’s cardinal purpose, which is to provide additional funding for four groups of underserved students: English learners, low-income students, homeless and foster children.

Under the Local Control Funding Formula, the funding law that former Gov. Jerry Brown persuaded the Legislature to pass in 2013, districts and charter schools where these “high needs” students predominate receive about 40% more funding per student than districts where few of these students are enrolled.

The funding formula requires districts and charter schools to proportionally increase programs and services for them. But there’s an escape hatch: whatever funding is not spent by year-end can be rolled over into a pool of unrestricted money that districts can use however they want the following year, including on employee raises and benefits.

In reports over the years, civil rights and student advocacy groups, such as Public Advocates, Education Trust-West and Children Now, have complained that this provision creates a perverse incentive not to spend the money on high-needs students and not to be straight with the public about what it’s doing. The Department of Finance defends the practice as compatible with the law, which gives districts funding flexibility.

But last year, State Auditor Elaine Howle joined those calling for reform in issuing the findings of an audit that the Legislature requested on spending by three representative districts. She concluded that the districts — Oakland, Clovis and San Diego — had not been transparent about spending “supplemental and concentration” money, as the additional funding is called. They had collectively carried over hundreds of millions of unspent funding for high-needs students over multiple years and, except for San Diego Unified, had not designated it for the future needs of those students. The audit also faulted county offices of education and the California Department of Education for lax oversight.

The bill, co-authored by Assemblywoman Shirley Weber, D-San Diego, and Sharon Quirk-Silva, D-Fullerton, and co-sponsored by Children Now, Education Trust-West and Teach Plus, would put two of Howle’s recommendations into law. It would require districts and charter schools to earmark unspent funding for high-needs students and spend it on those students in future years. And it would require that they track how they spend the money in districts’ annual spending plan, called the Local Control and Accountability Plan, or LCAP, and report the data to the state every year. Doing so, the audit said, would provide the public and legislators with a statewide picture on whether districts are doing what the law intends and, if not, what should be done to narrow achievement gaps.

An issue of timing?

In its opposition letter, the Department of Finance said that forcing districts to adopt a uniform system of reporting how they spend supplemental and concentration funding would be “a major shift in policy” and add “significant, unknown costs” to districts and the state. Creating this law during a pandemic, with possible budget cutbacks, would be “ill-advised,” the department said.

The California Association of School Business Officials also cited bad timing in a letter it sent last month to the Senate Appropriations Committee. Were it not for a pandemic and its uncertain long-term impact on state funding, the organization would not have opposed the bill, it said. While districts should go to great lengths to protect the interests of high-needs students, potentially huge cuts in basic funding will determine what’s possible, it said.

But Weber argues that the pandemic’s disproportionate impact on the learning loss of poor children and English learners is all the more reason to fix a flawed law now. “We have to ensure that these students — who consistently underperform — have the resources they need for academic success. We cannot allow school districts to continue to have an incentive to misappropriate these funds for other purposes,” she said in a statement.

More than 40 civil rights and advocacy organizations agreed in a letter supporting the bill. “The immediate and long-term consequences of shuttered schools, uneven distance learning opportunities and a severe economic crisis is falling disproportionately on California’s most vulnerable student populations,” they wrote.

In his initial state budget summary in January, Newsom didn’t explicitly refer to Howle’s audit, but he said his administration would explore ways to strengthen accountability for spending money for high-priority students, “particularly when actions described in an LCAP are not implemented as planned.”

But in the days leading up to AB 1835’s passage, Weber said she rejected amendments that Newsom’s aides proposed that would have weakened the bill. She said she hopes to have a personal meeting with Newsom to persuade him to sign it by the Sept. 30 deadline.

Jasmine Dellafosse is hoping Weber convinces him. She’s a leader of the Stockton Educational Equity Coalition, a group that includes community organizations and the ACLU Foundation of Northern California, that has been battling Stockton Unified over what it has done with supplemental and concentration funding it carried over from year to year.

Last year, the group assumed it had reached an agreement with former Superintendent John Deasy that $6.7 million of “misallocated” funding would be spent on high-needs students. But the district reneged, and last month, in response to the coalition’s formal complaint, its lawyer cited the lack of a written agreement and the fact that AB 1835 hadn’t become law as evidence that the district hadn’t done anything improper (see Page 12).

“We are really frustrated with the loophole,” Dellafosse said. “The district recognizes that it is ethically and morally ­but not legally bound, so it just spends the money as it chooses.”

Story originally published by EdSource.