(1)Existing law establishes a system of elementary and secondary education in this state. Under this system, public and private schools provide instruction to pupils in kindergarten and grades 1 to 12, inclusive.

This bill would require the Superintendent of Public Instruction, the Controller, and the Director of Finance to take actions to ensure, for purposes of transparency, that the reporting of per-pupil expenditures of federal, state, and local funds, funds includes actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, disaggregated by source of funds, as specified, for each local educational agency and school in the state, as required by a specified provision of the federal Every Student Succeeds Act.

The bill would require the Superintendent, in compliance with federal requirements, to ensure that each local educational agency collects appropriate data, and includes specified information, in the local educational agencys annual report. The bill would also require the Superintendent, the Controller, and the Director of Finance to establish guidelines for the reporting of personnel and nonpersonnel expenditures, as specified, and to establish the methodology for disaggregating local control funding formula funds. specified. The bill would also require the Superintendent, the Controller, and the Director of Finance to consider, no later than March 1, 2018, the provisions of the bill in developing and adopting new standards and criteria for local budgets and expenditures pursuant to a specified statute.

The bill would require local educational agencies to adhere to the standards and criteria adopted pursuant to the bill commencing with the 201819 fiscal year. To the extent that this bill would impose new duties on local educational agencies, it would constitute a state-mandated local program.

(2)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

(1)Existing law establishes a system of elementary and secondary education in this state. Under this system, public and private schools provide instruction to pupils in kindergarten and grades 1 to 12, inclusive.

This bill would require the Superintendent of Public Instruction, the Controller, and the Director of Finance to take actions to ensure, for purposes of transparency, that the reporting of per-pupil expenditures of federal, state, and local funds, includes actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, disaggregated by source of funds, as specified, for each local educational agency and school in the state, as required by a specified provision of the federal Every Student Succeeds Act.

The bill would require the Superintendent, in compliance with federal requirements, to ensure that each local educational agency collects appropriate data, and includes specified information information, in the local educational agencys annual report. The bill would also require the Superintendent, the Controller, and the Director of Finance to establish guidelines for the reporting of personnel and nonpersonnel expenditures, as specified, and to establish the methodology for disaggregating local control funding formula funds. The bill would also require the Superintendent, the Controller, and the Director of Finance to consider, no later than March 1, 2018, the provisions of the bill in developing and adopting new standards and criteria for local budgets and expenditures pursuant to a specified statute.

The bill would require local educational agencies to adhere to the standards and criteria adopted pursuant to the bill commencing with the 201819 fiscal year. To the extent that this bill would impose new duties on local educational agencies, it would constitute a state-mandated local program.

(2)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Existing law establishes a system of elementary and secondary education in this state. Under this system, public and private schools provide instruction to pupils in kindergarten and grades 1 to 12, inclusive.

This bill would express the intent of the Legislature to enact legislation that would require, for purposes of transparency, the reporting of per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, disaggregated by source of funds as hereby defined, for each local educational agency and school in the state as required by a specified provision of the federal Every Student Succeeds Act.

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 1321 (Weber) - Education finance: fiscal transparency

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

This bill requires that the Superintendent of Public Instruction (SPI), the State Controller, and the Director of Finance ensure that the state report card required by the federal Every Student Succeeds Act include per-pupil expenditures of federal, state, and local funds for each local educational agency (LEA) and each school in the state. This bill also requires the SPI to ensure that each LEA collects appropriate data and includes it in the annual report of per-pupil expenditures.

Fiscal Impact:

• While the bill mostly mirrors federal requirements, the bill’s requirement for the California Department of Education (CDE) to establish guidelines for the reporting of personnel and non-personnel expenditures appear to exceed that of federal law. The CDE indicates initial one-time General Fund costs of at least $75,000 for this purpose. There would also be additional, unknown administrative costs to provide ongoing technical assistance regarding the reporting guidelines for LEAs and to refine any guidance as necessary.
• Unknown local costs to school districts to modify and/or replace school accounting software (SACS) that may be necessary to report school site expenditure information to the CDE. There will likely be additional costs for school districts to train staff on the software and for financial reporting purposes that presumably, would need to be consistent statewide pursuant to the guidelines established by CDE. To the extent these activities are necessary to comply with federal requirements, they would not be reimbursable by the state.

Background:

Existing federal law requires the annual state report card prepared for the Every Student Succeeds Act (ESSA) to include the per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, disaggregated by source of funds, for each LEA and each school in the state for the preceding fiscal year.

Existing state law requires the SPI, the Controller, and the Director of Finance to develop and the State Board of Education to approve standards and criteria to be used by LEAs in the development of annual budgets and the management of subsequent expenditures from the budget. Further, existing law requires the SPI, during the development of the standards and criteria, to convene a committee composed of representatives from LEAs, state agencies, the Legislature, and appropriate labor and professional associations, and requires that any future revisions to the standards and criteria follow this process.

Proposed Law:

This bill requires the SPI, the Controller, and the Director of Finance to do the following:

1. Ensure that the state report card required by ESSA include the per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, for each LEA and school in the state for the preceding fiscal year.
2. Establish guidelines for the reporting of personnel and nonpersonnel expenditures that minimize the recordkeeping burden on local educational agencies (LEAs) and that result in a report card that can be quickly and easily understood by the public and enables transparent disclosure of the expenditure of local control funding formula (LCFF) funds.
3. Ensure that the per-pupil expenditures reported include and exclude certain expenditures, as specified.

Further, this bill requires the SPI, in compliance with federal requirements, to ensure that each LEA collect appropriate data, and include it in the annual report on per-pupil expenditures.

This bill provides that these provisions shall be considered no later than March 1, 2018, by the SPI, the Controller, and the Director of Finance when developing and adopting new standards and criteria for LEA budgets. This bill also requires LEAs to adhere to the standards and criteria adopted pursuant to this bill commencing with the 2018–19 fiscal year.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Benjamin Allen, Chair

2017 - 2018 Regular

Bill No: Hearing Date: July 12, 2017

Subject:

SUMMARY

This bill requires the Superintendent of Public Instruction (SPI), the State Controller, and the Director of Finance to: (1) ensure that per-pupil expenditures by fund source and type are included in the federal state report card for each local educational agency (LEA) and each school in the state, and (2) establish the methodology for requiring each LEA and each school to calculate their expenditures of local control funding formula base, supplemental, and concentration grants for state and local reporting purposes.

BACKGROUND

Existing federal law:

1. Requires the annual state report card prepared for the Every Student Succeeds Act (ESSA) to include the per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, disaggregated by source of funds, for each LEA and each school in the state for the preceding fiscal year.
2. Requires the ESSA annual state report card to be concise.

Existing state law:

1. Requires the SPI, the Controller, and the Director of Finance to develop and the State Board of Education to approve standards and criteria to be used by LEAs in the development of annual budgets and the management of subsequent expenditures from the budget.
2. Requires the SPI, during the development of the standards and criteria, to convene a committee composed of representatives from LEAs, state agencies, the Legislature, and appropriate labor and professional associations, and requires that any future revisions to the standards and criteria follow this process.

ANALYSIS

This bill:

1. Requires the SPI, the Controller, and the Director of Finance to do the following:
   1. Establish guidelines for the reporting of personnel and nonpersonnel expenditures that minimize the recordkeeping burden on local educational agencies (LEAs) and that result in a report card that can be quickly and easily understood by the public and enables transparent disclosure of the expenditure of local control funding formula (LCFF) funds.
   2. Enable the disaggregation of LCFF base grants and supplemental and concentration grant actual personnel and nonpersonnel expenditures for each LEA and each school.
2. Requires the Superintendent of Public Instruction (SPI), in compliance with federal requirements, to ensure that each LEA collect appropriate data, and include it in the annual report on per-pupil expenditures.
3. Requires these provisions to be considered, no later than March 1, 2018, by the SPI, the Controller, and the Director of Finance when developing and adopting new standards and criteria for LEA budgets.
4. Requires LEAs to adhere to the standards and criteria adopted pursuant to this bill commencing with the 2018–19 fiscal year.

STAFF COMMENTS

1. Need for the bill. According to the author, this bill aligns state law with the new federal requirement in Every Student Succeeds Act (ESSA) to report actual per-pupil expenditures by object of expenditure and funding source at both the LEA and individual school levels. ESSA requires this information to be included in state reports beginning with the 2017-18 school year.

However, while this bill is, in part, consistent with federal law, it also goes beyond federal law by requiring the disaggregated reporting of LEA-level and schoolsite expenditures by the three components of the local control funding formula: base, supplemental, and concentration grants. According to the author, “…we still do not know if the additional grants generated by English language learner, low-income, and foster youth enrollment are actually resulting in additional expenditures at the schools they attend…AB 1321 simply expands upon federal reporting requirements to ensure greater alignment and transparency with respect to California’s LCFF expenditures. This ensures that administrators are given clear guidance on how to report this information at the local level, while at the same time allowing the public to know where expenditures are being made across California.”

1. Recent guidance from the feds delays per-pupil expenditure reporting until 2018-19. According to a July 28, 2017 “Dear Colleague Letter” from the federal Department of Education, state and local educational agencies will be provided an additional year to implement the new requirement to include on annual state and LEA report cards per-pupil expenditures of federal, state, and local funds for each LEA and school for the preceding fiscal year, disaggregated by source. Therefore, state and local educational agencies may delay, until the 2018-19 school year, this requirement and instead include on report cards for the 2017-18 school year a brief description of the steps the state and locals are taking to ensure that information on per-pupil expenditures will be included for the 2018-19 school year.

Given that additional time has been provided at the federal level to comply with per-pupil expenditure reporting, the Committee may wish to consider whether it is premature to codify these federal reporting requirements in state law at this time.

1. Proportionality within the Local Control Funding Formula (LCFF). Central to the LCFF is the principle of proportionality, discerning the appropriate balance of funding received and services provided. Local educational agencies (LEAs) receive additional funding under the LCFF—supplemental and concentration grants—to the extent that they serve students that are English-learners, low-income, or foster youth, often referred to as “unduplicated pupils”. Existing law charged the State Board of Education (SBE) with adopting regulations governing the expenditure of supplemental and concentration grants that: (1) require LEAs to increase or improve services for unduplicated pupils in proportion to the increased funds the pupils generate, and (2) allow supplemental and concentration grants to be used for schoolwide and districtwide purposes.

The LCFF spending regulations adopted by the SBE provide a calculation that LEAs use to determine their minimum proportionality percentage. LEAs must describe within their Local Control and Accountability Plan (LCAP) how they will meet this percentage of increased or improved services for unduplicated pupils over what is provided for all other students using qualitative and/or quantitative measures. This is a snapshot of services that an LEA is providing in a given year.

The spending regulations also cover the conditions under which supplemental and concentration grants can be used for districtwide and schoolwide purposes and still count towards meeting the minimum proportionality requirement. An LEA planning to use supplemental or concentration funds in this way must identify these expenditures in their LCAP and describe how the services are directed towards meeting the LEA’s goals for its unduplicated pupils. If the school district’s enrollment or a school’s enrollment is made up of less than 55 percent or 40 percent unduplicated pupils, respectively, the district must additionally describe how the services provided are the most effective use of funds to meet the district’s goals for its unduplicated pupils.

1. County offices review and approve district LCAPs. Existing law tasks county offices of education with both fiscal and academic oversight of districts within their jurisdiction. The academic oversight responsibilities consist primarily of reviewing and approving district LCAPs. As part of this process, state law requires county offices of education to verify that district LCAP documents use the state-approved format, align with districts’ adopted budgets, and appropriately direct funds to unduplicated pupils. If district LCAPs meet these requirements, county offices of education must approve them. If an LCAP is rejected, the county office of education must provide technical assistance in refining the plan.
2. Concerns with the state collecting Local Control Funding Formula (LCFF) expenditure data. When the state adopted the LCFF in 2013 and changed the way in which funding is provided to schools, it also changed the associated school accountability structure. Rather than controlling local educational agency (LEA) expenditures through various categorical programs, the state now requires LEAs to improve student outcomes, with a required strategic planning document, the LCAP, and a rubric to assist LEAs in evaluating their strength and weaknesses and establishing their goals, the School System Dashboard. The Local Control and Accountability Plan (LCAP) and the Dashboard are the primary accountability instruments for LEAs and their communities, with the Dashboard also being used to identify struggling districts that need assistance from a county office of education or the California Collaborative for Educational Excellence.

Opponents of this bill argue that, while still a work in progress, the accountability system under the LCFF was never envisioned to be an input-based compliance system, but rather one that offers technical assistance and support to the LEAs that fall short of achieving their goals for student outcomes. As envisioned, the LCAP was meant to be a strategic and long-term planning tool, not an accounting document. By requiring disaggregated reporting of the expenditure of state funds at the LEA and school levels, this bill represents a return to an input-based accountability model, while still holding LEAs accountable for outputs.

This bill requires the disaggregation of LCFF base, supplemental, and concentration grant expenditures for each LEA and each school for state and local reporting purposes. This level of expenditure tracking will create significant costs and complication for LEAs and school sites. Moreover, requiring this level of expenditure reporting at the state and local levels implies that LEAs and school sites will be required to demonstrate their LCFF minimum proportionality solely through expenditure totals. This would be inconsistent with the current requirement that LEAs demonstrate how they will increase or improve services for unduplicated pupils over what is provided for all other students using qualitative or quantitative measures.

To address concerns that this bill is inconsistent with the state’s approach to the LCFF and its associated accountability structure, and that it places costly and complex reporting requirements on LEAs beyond what is required under the federal Every Student Succeeds Act, staff recommends that the bill be amended to remove the requirement that the Superintendent of Public Instruction, the State Controller, and the Director of Finance require each LEA and each school to calculate their expenditures of LCFF base, supplemental, and concentration grants for state and local reporting purposes.

SUPPORT

Children Now (co-sponsor)

Education Trust-West (co-sponsor)

Abriendo Puertas/Opening Doors

Act 4 Entertainment

Alliance for a Better Community

Alliance for Boys and Men of Color

Alliance for Education Solutions

Amah Mutsun Tribal Band

Arriba Juntos

Arts Bridging the Gap

Autism Deserves Equal Coverage Foundation

Black Parallel School Board

Brighter Beginnings

California Alliance of African American Educators

California Association for Bilingual Educators

California Charter Schools Association

California Competes

California Latino School Boards Association

California Partnership

Californians Together

Catholic Charities

Caulder Lamm Alliance for Children

Center for Ecoliteracy

Center for Leadership Equity and Research

Cesar Chavez Foundation

Child’s Pace Foundation, Inc.

Children's Defense Fund

Citizen Schools in California

Congregation Beth Am

Congregations Organized for Prophetic Engagement

Coleman Advocates for Children and Youth

Cope Family Center

Court Appointed Special Education Advocates of Santa Cruz County

Crescent City/Del Norte County Chamber of Commerce

Cultiva La Salud

Dolores Huerta Foundation

Echo Parenting & Education

Educate78

Educators for Excellence

EdVoice

Equal Justice Society

Escuela de la Raza Unida

Families in Schools

Families Now

Family Paths, Inc.

Fathers & Families of San Joaquin

Fight Crime: Invest in Kids

Focus on Family Foundation

Fresno Metro Ministry

Friends of the Family

Future is Now

Girls, Inc.

GO Public Schools

The GreenHouse

Half Moon Bay Brewing Co.

Harbour Consulting

Heart of Los Angeles

Hispanic Foundation of Silicon Valley

Inner-City Arts

InnerCity Struggle

Innovate Public Schools

Innovation Bridge, Inc.

Kids First

Kids' Own Wisdom

LA Voice

Latino and Latina Roundtable of the San Gabriel and Pomona Valley

Legal Services for Children

Lincoln

Little Manila Foundation

Los Angeles Urban League

Mexican American Opportunity Foundation

Mission Readiness

Morgan Family Foundation

Motivating Individual Leadership for Public Advancement

National Center for Youth Law

National Council of La Raza

North Bay Leadership Council

Orange County Business Council

Our Family Coalition

Parent Organization Network

Parent Institute for Quality Education

Parent Revolution

Partners in Impact

Partnership for Children and Youth

Partnership for Los Angeles Schools

Peninsula Bridge

Peninsula Family Service

PICO California

Pro-Kid

Professional Association of Childhood Educators

Public Counsel

Public Profit

Puente de la Costa Sur

Reading and Beyond

Ready Nation

Restorative Schools Vision Project

Riverside County Alliance for Boys and Men of Color

San Bernardino School District African American Advisory Committee

San Carlos Chamber of Commerce

San Francisco Organizing Network for Education

Solano Community Foundation

South Stockton Schools Initiative

Speak UP

Students for Education Reform

Students Matter

Teach for America – California

Teach Plus

TeenForce

The Inn at Mavericks

The Krause Center for Innovation

The LA Trust for Children’s Health

United Advocates for Children and Families

United Nations of Consciousness

United Ways of California

United Way of Greater Los Angeles

Watts/Century Latino Organization

Women's Empowerment

Youth Alliance

Youth Policy Institute

OPPOSITION

Association of California School Administrators

California Association of Suburban School Districts

California County Superintendents Educational Services Association

California Association of School Business Officials

California Teachers Association

Small School Districts’ Association

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1321

Author:(Weber)

As Amended Ver:May 3, 2017

Majority vote

SUMMARY: Requires the state report card that is required by the federal Every Student Succeeds Act (ESSA) to include per-pupil expenditures of federal, state, and local funds, including actual personnel and nonpersonnel expenditures for each local education agency (LEA) and each school in the state. Specifically, this bill:

1. Requires the Superintendent of Public Instruction (SPI), the Controller, and the Director of Finance to do the following:
2. Establish guidelines for the reporting of personnel and nonpersonnel expenditures that minimize the recordkeeping burden on LEA’s and that result in a report card that can be quickly and easily understood by the public and enables transparent disclosure of the expenditure of local control funding formula funds.
3. Enable the disaggregation of local control funding formula base grants and supplemental and concentration grant actual personnel and nonpersonnel expenditures for each LEA and each school.
4. Requires the SPI, in compliance with federal requirements, to ensure that each LEA collect appropriate data, and include it in the annual report on per-pupil expenditures.
5. Requires these provisions to be considered, no later than March 1, 2018, by the SPI, the Controller, and the Director of Finance when developing and adopting new standards and criteria for LEA budgets.
6. Requires LEAs to adhere to the standards and criteria adopted pursuant to this bill commencing with the 2018–19 fiscal year.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Approximately $30,000 in administrative costs to California Department of Education (CDE). CDE would incur costs associated with changes to the criteria and standards, including time spent analyzing the law's effects on the criteria and standards, convening and meeting with the committee to discuss and approve changes to the criteria and standards, and implementing the changes in the financial reporting software. Should a software update be needed, additional costs would be incurred.
2. Unknown reimbursable costs to LEAs for complying with this new expenditure reporting methodology. The costs incurred would depend on the capability of LEAs' financial systems to account for various activities at the school level. Assuming every LEA in the state submits a claim of $1,000 (the minimum threshold established by the Commission on State Mandates) this bill could result in costs over $2.3 million general fund for the 2,287 LEAs in the state.

COMMENTS: According to information provided by the author's office, this bill aligns state law with the new federal requirement in ESSA to report actual per-pupil expenditures by object of expenditure and funding source at both the LEA and individual school levels. ESSA requires this information to be included in state reports beginning with the 2017-18 school year.

However, while this bill is, in part, consistent with federal law, it also goes beyond federal law by requiring the disaggregated reporting of LEA-level and schoolsite expenditures by the three components of the local control funding formula: base grant, supplemental grant, and concentration factor grant. According to the Assembly Appropriations Committee analysis, because this level of disaggregation of state funds is not required by federal law, it could be a reimbursable K-12 mandate.

Arguments in support. Letters of support and information provided by the author's office focus on the requirement to disaggregate LCFF funding, rather than the federal conformance provisions, and argue that "we still do not know if the additional grants generated by English language learners, low-income youth, and foster youth enrollment are actually resulting in additional expenditures at the schools they attend." Supporters argue that the disaggregation of LCFF funds required by this bill "will finally enable the transparent reporting of supplemental and concentration grant expenditures for each local education and each school in California."

Analysis Prepared by: Rick Pratt / ED. / (916) 319-2087 FN: 0000682

Date of Hearing: May 17, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 1321

Author:(Weber) – As Amended Ver:May 3, 2017

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill requires the state report card required by the federal Every Student Succeeds Act (ESSA) to include per-pupil expenditures of federal, state, and local funds, including actual personnel and nonpersonnel expenditures for each local education agency (LEA). This bill also requires a methodology for disaggregate local control funding formula funds. Specifically, this bill:

1. Requires the Superintendent of Public Instruction (SPI), the Controller, and the Director of Finance to do the following:
2. Establish guidelines for the reporting of personnel and nonpersonnel expenditures that minimize the recordkeeping burden on LEA’s and that result in a report card that can be quickly and easily understood by the public and enables transparent disclosure of the expenditure of local control funding formula funds.
   
3. Enable the disaggregation of local control funding formula base grants and supplemental and concentration grants for each LEA and each school.
   
4. Requires the SPI, in compliance with federal requirements, to ensure that each LEA collect appropriate data, and include it in the annual report on per-pupil expenditures.

FISCAL EFFECT:

1. Approximately $30,000 in administrative costs to California Department of Education (CDE). CDE would incur costs associated with changes to the criteria and standards, including time spent analyzing the law's effects on the criteria and standards, convening and meeting with the committee to discuss and approve changes to the criteria and standards, and implementing the changes in the financial reporting software. Should a software update be needed, additional costs would be incurred.
   
2. Unknown reimbursable costs to LEAs for complying with this new expenditure reporting methodology. The costs incurred would depend on the capability of LEAs' financial systems to account for various activities at the school level. Assuming every LEA in the state submits a claim of $1,000 (the minimum threshold established by the Commission on State Mandates) this bill could result in costs over $2.3 million general fund for the 2,287 LEAs in the state.

COMMENTS:

1. Background and Purpose. State law requires the State Board of Education (SBE) to approve standards and criteria to be used by LEAs in the development of annual budgets and the management of subsequent expenditures from the budget. Existing law also requires the SPI, during the development of the standards and criteria, to convene a committee composed of representatives from LEAs, state agencies, the Legislature, and appropriate labor and professional associations, and requires that any future revisions to the standards and criteria follow this process.

According to information provided by the author, this bill aligns state law with the new federal requirement in ESSA to report actual per-pupil expenditures by object of expenditure and funding source at both the LEA and individual school levels. ESSA requires this information to be included in state reports beginning with the 2017-18 school year.

1. Staff Comments. The provisions of this bill do not align with current federal (ESSA) and state provisions. Federal law requires a concise annual state report to include the per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel disaggregated by source of funds for the preceding fiscal year. Prescribing the calculation of per-pupil expenditures in state law does not adhere to federal policy. While LEAs are already able to identify the source of funds (e.g. federal, state or local), further disaggregating LCFF revenue between base, supplemental and concentration components is not necessary to meet the requirements of ESSA. Because this level of disaggregation of state funds is not required by federal law, it could be a reimbursable K-12 mandate.

Analysis Prepared by: Daisy Gonzales / APPR. / (916) 319-2081

Date of Hearing: April 26, 2017

ASSEMBLY COMMITTEE ON EDUCATION

Patrick O'Donnell, Chair

ABPCA Bill Id:AB 1321 (

Author:Weber) – As Amended Ver:March 30, 2017

SUBJECT: Education finance: fiscal transparency

SUMMARY: Requires that the state report card required by the federal Every Student Succeeds Act (ESSA) include per-pupil expenditures of federal, state, and local funds, including actual personnel and nonpersonnel expenditures for each local education agency (LEA) and each school in the state. Specifically, this bill:

1. Requires the Superintendent of Public Instruction (SPI), the Controller, and the Director of Finance to do the following:
   1. Ensure that the state report card required by Section 1111(h)(1) of ESSA (Public Law 114-95) includes the per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, for each local educational agency and each school in the state for the preceding fiscal year;
   2. Enable the disaggregation of state and local funds by the source of the funds, including, but not necessarily limited to, local control funding formula base grants and supplemental and concentration grants and other state and local funds for each local educational agency and each school for purposes of state and local reporting; and
   3. Ensure that the per-pupil expenditures reported include expenditures for free public education, including expenditures for administration, instruction, attendance and health services, pupil transportation services, plant operation and maintenance, fixed charges, and net expenditures to cover deficits for food services and student body activities; but do not include expenditures for community services, capital outlay, and debt service, or any expenditures made from funds received under Title I of the federal Elementary and Secondary Education Act (Public Law 89-10, as amended).
2. Requires the SPI, in compliance with federal requirements, to ensure that each local educational agency collects appropriate data, and includes in the local educational agency’s annual report the information on per-pupil expenditures as applied to the local educational agency and each school within the jurisdiction of the local educational agency.
3. Requires these provisions to be considered, no later than March 1, 2018, by the SPI, the Controller, and the Director of Finance when developing and adopting new standards and criteria for LEA budgets.
4. Requires LEAs to adhere to the standards and criteria adopted pursuant to this bill commencing with the 2018–19 fiscal year.

EXISTING LAW:

Federal:

1. Requires the annual state report card prepared for ESSA to include the per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of federal, state, and local funds, disaggregated by source of funds, for each LEA and each school in the state for the preceding fiscal year.
2. Requires the annual state report card to be concise.

State:

1. Requires the SPI, the Controller, and the Director of Finance to develop and the State Board of Education (SBE) to approve standards and criteria to be used by LEAs in the development of annual budgets and the management of subsequent expenditures from the budget.
2. Requires the SPI, during the development of the standards and criteria, to convene a committee composed of representatives from LEAs, state agencies, the Legislature, and appropriate labor and professional associations, and requires that any future revisions to the standards and criteria follow this process.

FISCAL EFFECT: Unknown

COMMENTS: According to information provided by the author's office, this bill aligns state law with the new federal requirement in ESSA to report actual per-pupil expenditures by object of expenditure and funding source at both the LEA and individual school levels. ESSA requires this information to be included in state reports beginning with the 2017-18 school year.

The law itself does not specify the level of detail that is required, and implementing regulations adopted last December by the Obama administration have been repealed. However, nonregulatory guidance adopted in January 2017 is available on the U. S. Department of Education's website. According to the guidance, the following expenditures must be included:

• Administration
• Instruction
• Instructional support
• Student support services
• Pupil transportation services
• Operation and maintenance of plant
• Fixed charges
• Preschool
• Net expenditures to cover deficits for food services and student body activities.

The guidance states that expenditures spent for a school, but not necessarily at the school, should be included in the calculation. This refers to funds spent centrally on behalf of each school. Two ways to do this are suggested. One way is to assign expenditures to the school level only if those costs are related to instruction and support functions (like professional development). The other way is to attribute all of an LEA's central expenditures to individual schools, prorated on the basis of an appropriate measure, such as school enrollment.

Actual expenditures. ESSA requires that "actual" expenditures be reported. The primary purpose of this provision is to require the reporting of the actual expenditures at each school site for salaries and benefits rather than using district-wide averages. However, the term "actual" is applied to all personnel and non-personnel expenditures. This could require the tracking of personnel changes that occur at a school during the school year, because actual personnel costs would be affected by the turnover of employees with different salaries and benefits. It likely would also require tracking expenditures that change from day to day, such as the employment of substitute teachers and other temporary employees at a school site, to include those costs in the "actual expenditures." The cost of tracking and reporting this level of detail could exceed the benefits derived therefrom and the resulting report would be inconsistent with the requirement in ESSA that state report cards be "concise." In addition, an overwhelming amount of data can result in less transparency, not more. Accordingly, staff recommends that the bill be amended to require the Controller, SPI, and the Director of Finance to develop a definition of "actual expenditures" in a way that minimizes detailed, day-to-day record keeping, while still fulfilling the intent of the federal law. This could also help find a reasonable balance between the dual requirements that the state report be both, detailed and concise.

This bill expands on federal law. ESSA requires the disaggregation of expenditure data by federal, state, and local funds. This bill requires the further disaggregation of state funds, which is not required by ESSA. Although the sponsors and supporters of the bill indicate their primary objective is the disaggregation of the local control funding formula (LCFF) by base grant, supplemental grant, and concentration factor grants, the bill requires the disaggregation of all state funds. Other state funding sources include special education, the K-3 LCFF add-on for class size reduction, the grade 9-12 LCFF add-on for college and career readiness, home-to-school transportation, the mandated cost reimbursement block grant, and career-technical education grants, as well as one time funds that are appropriated from year to year for specific purposes, such as professional development. Because this level of disaggregation of state funds is not required by federal law, it may be a reimbursable state mandate. The committee may wish to consider the cost-benefit ratio of reporting aggregate state funding versus disaggregated state funding.

In addition, the disaggregation of LCFF funds by base, supplemental, and concentration factor grants is problematic, because until LCFF targets are fully funded there is no agreed upon method to do this. Different methodologies result in different dollar amounts assigned to each of the three components of the LCFF. For these reasons, and to address the primary objective of the bill, staff recommends that bill be amended to require the disaggregation of only LCFF funds, and only after the LCFF targets have been fully funded.

Input vs. output based accountability. The LCFF and the accompanying system of accountability and continuous improvement were adopted in response to the perceived failure of the prior, input-based accountability system. Prior to the LCFF, school districts received general purpose funding in the form of revenue limits and categorical program funds for a large number of categorical programs. Categorical program funding was required to be spent for the specific purposes—and in accordance with the rules—of each program. Accountability was based on whether funds were spent for their intended purposes and in accordance with program rules; hence the term, "input-based accountability." School districts and education advocates argued that this system was failing to achieve desired results, because it restricted decision making and prioritizing at the local level, resulted in "one size fits all" policies, and accountability was based on compliance with input rules rather than results.

Accordingly, the state switched to an output-based accountabity system with the enactment of the LCFF and the requirement for local education agencies (LEAs) to spend their LCFF dollars in accordance with a locally-developed local control and accountability plan (LCAP). The LCAP requires LEAs to focus on outputs in several priority areas, including academic performance, school climate, performance on Advanced Placement exams, suspension/expulsion rates, and graduation/dropout rates. The online California School Accountability Dashboard allows LEAs and the public to assess and monitor the performance of districts and individual schools on the basis of these output criteria. The LCAPs and Dashboard are the primary instruments for LEAs to hold themselves accountable (and for their communities to hold them accountable) for pupil outcomes. The Dashboard will also be used to identify struggling districts that need assistance from a county office of education or the California Collaborative for Educational Excellence. By required disaggregated reporting of the expenditure of state funds at the LEA and school levels, this bill represents a return to an input-based accountability, while still holding LEAs accountable for outputs.

Arguments in support. Letters of support and information provided by the author's office focus on the requirement to disaggregate LCFF funding, rather than the federal conformance provisions, and argue that "we still do not know if the additional grants generated by English language learners, low-income youth, and foster youth enrollment are actually resulting in additional expenditures at the schools they attend." Supporters argue that the disaggregation of LCFF funds required by this bill "will finally enable the transparent reporting of supplemental and concentration grant expenditures for each local education and each school in California."

REGISTERED SUPPORT / OPPOSITION:

Support

Abriendo Puertas/Opening Doors

Alliance for a Better Community

Autism Deserves Equal Coverage

California Alliance of African American Educators

California Association for Bilingual Educators

California Charter Schools Association

Californians Together

Catholic Charities

Center for Leadership Equity and Research

Cesar Chavez Foundation

Children's Defense Fund

Congregations Organized for Prophetic Engagement

Cope Family Center

Court Appointed Special Education Advocates of Santa Cruz County

Educate78

Education Trust-West

Educators for Excellence

EdVoice

Equal Justice Society

Families in Schools

Families Now

Family Paths, Inc.

Fathers & Families of San Joaquin

Fight Crime: Invest in Kids

Fresno Metro Ministry

Future is Now

Girls, Inc.

GO Public Schools

The GreenHouse

Half Moon Bay Brewing Co.

Hispanic Foundation of Silicon Valley

InnerCity Struggle

Kids' Own Wisdom

LA Voice

Legal Services for Children

Mission Readiness

Morgan Family Foundation

National Center for Youth Law

North Bay Leadership Council

Our Family Coalition

Peninsula Family Service

Parent Institute for Quality Education

Parent Revolution

Partnership for Los Angeles Schools

Peninsula Family Service

Pro-Kid

Public Counsel

Public Profit

Reading and Beyond

Ready Nation

Restorative Schools Vision Project

San Bernardino School District African American Advisory Council

San Carlos Chamber of Commerce

South Stockton Schools Initiative

Speak UP

Students Matter

Teach for America – California

Teach Plus

The Inn at Mavericks

United Nations of Consciousness

United Way of Greater Los Angeles

Women's Empowerment

Youth Policy Institute

Opposition

None received

Analysis Prepared by: Rick Pratt / ED. / (916) 319-2087