In recent decades, many states have taken significant steps to equalize funding across school districts with some success. However, implementing equitable and efficient public school funding systems represents a persistent challenge.

One of the most significant efforts to overhaul public school funding has taken place in California. With its Local Control Funding Formula (LCFF) adopted in 2013, California reshaped school funding in the state and offered a potential model for other states. LCFF is distinct from many existing funding systems in that it aims to distribute money equitably by providing more funding to high-need districts (allocated based on student need), while also providing greater flexibility to local school boards and simplifying the funding system.

Here, we describe how LCFF has improved school funding equity and student outcomes, particularly for disadvantaged students, but remains incomplete in some ways. Now a decade past adoption, we reflect on what we know about the formula’s successes and challenges, as well as its implications for states attempting to accomplish similar objectives.

What is LCFF?

LCFF was developed to address flaws in California’s K-12 school district (and charter school) funding system. First, LCFF sought efficiency and flexibility. The previous funding system relied heavily on categorical funding streams with complicated formulas and spending restrictions. LCFF replaced many of these programs with unrestricted state aid that districts can largely use as they see fit, based on local needs and priorities.

Second, LCFF aimed to increase equity by funding districts based on students’ educational needs rather than simple enrollment counts or historical funding patterns. Most LCFF funding is determined by a per-student base grant to districts that varies by grade level. LCFF then “weights” this base grant to provide additional revenue for each student the law considers “high-need.” This is defined as being an English learner, from a low-income family, or in the foster system. Districts receive a “supplemental” grant worth 20 percent of the base grant for each high-need student. Additionally, when the share of such students exceeds 55 percent, LCFF awards a “concentration” grant for each high-need student over that threshold, worth another 65 percent of the base grant. Because each student can be counted as high-need only once, LCFF is said to fund districts based on their unduplicated pupil counts.

To promote accountability, transparency, and strategic planning, districts must regularly update a Local Control and Accountability Plan (LCAP). These LCAPs should reflect the engagement of staff and families, explain how resources will be used to achieve goals (especially for high-need students), and be used to monitor progress.

What do we know about LCFF’s implementation?

Successes

As shown in Figure 1, after LCFF was adopted, district revenues increased across California, particularly from sources that were unrestricted in how districts could use them. And thanks to targeted state support, those increases were faster in districts with more high-need students. Thus, funding equity for low-income students improved, albeit with different magnitudes across geography and choices of measurement.

Research indicates that LCFF also improved student outcomes. Consistent with other evidence that school spending tends to benefit students, particularly low-income students, LCFF appears to have increased test scores, graduation rates, and college readiness, while reducing grade repetition and exclusionary discipline. Researchers credit LCFF with reducing achievement gaps between districts by improving outcomes in higher-need districts.

Furthermore, LCFF improved between-sector funding equity by better aligning funding for charter schools and school districts. There is also evidence that LCFF’s targeted funding for high-need students increased the willingness of charter schools to enroll those students. Meanwhile, LCFF has enjoyed substantial support from stakeholders and the voting public.

Challenges

Despite this progress, LCFF’s equity advances have been undercut by non-LCFF contributors to district funding. Locally generated revenues outside of the state formula and other aspects of state and federal funding contribute to the existence of a funding “trough.” That is, overall district funding levels remain negatively associated with student need until districts enroll a large enough share of high-need students (55 percent) for LCFF’s larger concentration grants to kick in.

Moreover, because districts typically enroll both low-need and high-need students, how districts spend their LCFF funding matters for whether high-need students benefit from state funds. For example, only 45 percent to 75 percent of state aid for high-need students is spent at the schools where high-need students are enrolled. This is driven in part by districts opting for non-targeted spending, such as raises for staff no matter what schools they work in. It may also reflect longstanding challenges with staffing high-need schools. Even when districts use LCFF funding to increase staffing in high-needs schools, this does not increase school expenditures as much as would be expected because these schools tend to employ newer, lower-paid staff. This dynamic may be exacerbated within schools, given that classrooms with more high-need students tend to be assigned more novice teachers even compared to other classrooms in the same school. In other words, a good portion of this funding might not be reaching its intended beneficiaries.

LCAPs have also seen persistent challenges. Due to capacity and trust issues, districts have struggled to engage community stakeholders in the development of LCAPs even when they have attempted to do so. In addition, LCAPs have proven ineffective tools for transparency or accountability even if they have promoted some stakeholder involvement. In practice, LCAPs are complicated and long (and getting longer), which limits their accessibility. With few practical constraints on spending, even a well-crafted LCAP may direct substantial “targeted” funds to districtwide purposes, such as across-the-board teacher raises. While policymakers have attempted to improve the LCAP numerous times, it is unclear whether these changes have made the associated tools and processes more effective.

LCFF’s reforms are also in some respects incomplete. For instance, LCFF’s continued reliance on average daily attendance, rather than enrollment, sustains some funding disparities because disadvantaged students tend to miss more school. Similarly, most English learners are low-income, and  using “unduplicated” pupil counts means districts receive no additional funding under LCFF if their low-income students are also English learners (despite the associated costs). And LCFF does not incorporate many costs, such as for special education, facilities, pensions, or health benefits, that consume resources intended for high-need students.

Relatedly, even after improvements to the formula LCFF does not ensure that funding is adequate for schools to perform everything that we ask of them. While estimating the costs of schooling is complicated, diverse approaches suggest California’s schools remain substantially underfunded. This is not the fault of LCFF; total school spending is subject to many constraints. Yet there are limits to what a new funding formula can accomplish for schools if overall funding is insufficient.

So, what can we learn from LCFF?

LCFF provides a model for equity-minded school funding reforms. It replaces a complex, inefficient, inequitable system with a formula oriented more around student need and local control. California could further improve the LCFF’s formula by, for example, funding based on enrollment not attendance and weighting for multiple student characteristics simultaneously. However, policymakers from other states can learn from California’s experiences with LCFF—both the successes and challenges.

One lesson is that weighted funding alone cannot ensure that the total amount of funding for schools is adequate. If total funding is insufficient, even a weighted formula for allocating that funding will necessarily leave at least some students underserved.

Another lesson is that providing additional funding to high-need districts does not guarantee that high-need students will benefit. Requiring districts to develop expenditure plans with stakeholder involvement does not solve this problem and may result in costly and frustrating compliance exercises.

To address these issues, policymakers could consider a couple of approaches:

1. Distinguish local control over what money is spent on from local control over who money is spent on. LCFF regulations allow virtually any spending plan to be approved if it can make a colorable argument that the spending would benefit high-need students. It may be worthwhile to require that when dollars generated by high-need students are spent, most or all the benefit goes to the high-need students.
2. States should require more detailed tracking of actual spending (along with planned spending). This should include tracking at the school level and distinguish aid generated by high-need students from other revenues. Some states already do this, and this would help stakeholders better understand how money is spent and which students benefit.

Differences between states will make the lessons of LCFF hard to apply universally. For instance, most states rely more than California on local revenue to fund schools, complicating efforts to address between-district inequities. In states with fewer, larger districts, within-district spending inequities will tend to matter more.

Still, contextual differences should not prevent us from learning lessons in education finance. A decade of experience with LCFF has produced important insights that can be applied both in California and elsewhere.