California’s Budget Can Benefit from More Choice

California is no stranger to bankruptcy. Several of its cities and its third largest county have filed for some of the largest bankruptcies in U.S. history, and California’s school districts are no exception. As of this time last year, 12 districts were likewise unable to pay their bills for the 2011-12 school year or the upcoming 2012-13 school year. Moreover, an additional 176 school districts were considered borderline financial concerns that might not meet certain financial commitments. All told, these districts represented over 2.6 million children.

Deep and rapid cuts were blamed for overspending, and surely the overall bankruptcy numbers included Silicon Valley start-ups that are almost guaranteed to fail from the outset, but let’s be honest with ourselves: when revenue is up, California spends it (and more), and when revenue is down, California runs larger deficits. Oh, and the state has run deficits every single year since 2000.

It makes sense, then, that the state’s leadership would seek to overhaul one of the most arcane K-12 funding models known to man, but how can it be tweaked in order to save the state money?

A recent editorial in the Los Angeles Times highlighted the importance of getting this next model right, saying that while it should save the state a substantial amount of money, it should also attend to the needs of every California student. A big task, to be sure. The editorial agrees with the simplicity of Gov. Jerry Brown’s new funding formula, which would eliminate outdated criteria and loopholes, but also raises some questions as to just how fairly this will fund California schools.

“…here’s the problem: Whereas districts with large numbers of disadvantaged students would see their funding rise steeply year by year, others would see only small increases. By 2018, when the new plan would be fully rolled out, many working-class and middle-class school districts would receive about $2,000 less per student than districts next door with large numbers of students who are impoverished or not yet fluent in English.”

California is 49th in the nation in per-pupil education funding when adjusted for the cost of living, so the term “disadvantaged” has a different meaning in California than it does in a state like Utah or Nevada (the only states ranked below it on that metric). For instance, what will happen in upwardly mobile working-class and lower-middle-class neighborhood schools when a larger share of state ed-money is targeted at interest groups just below those salary levels? The editorial said it best:

“The income cutoff for receiving subsidized lunches is about $42,000 for a family of four. A district filled with families earning above $42,000 but below $75,000 would probably face a lot of the same problems as a district with more families earning under $42,000, but it would receive no extra money as it struggled to catch up to former funding levels. Even by the 2019-20 school year, hundreds of these moderate- to middle-income school districts would still be far short of where they were in 2007-08…”

Clearly, California’s new funding model, however it will look, needs to incorporate all California students, not just Title I kids. Wealthy students are expected to be fine, assuming local property taxes will continue to comprise most of their school revenue (21% under current structure). Economically disadvantaged students will also benefit from this new, stream-lined funding formula, since it will offer a 35% boost to those FRL-qualified kids. But middle-class Americans are too often left out of huge decisions like this, and we strongly urge the California legislature to remember disenfranchised middle-class Californians when reforming their funding model. It will affect them, too.

This new funding model will also affect charter schools, which is the main reason we chose to write on this topic today.

A state with such a track record for charter friendliness might be expected to invest more resources into them; simply costing less makes charter schools easier on a state’s fiscal belt-line. California dramatically lowered the state funding discrepancy in the mid-2000s by as many as 5 percentage points, which fueled charter growth even into the Great Recession.  Many charter schools in California missed out on funding because they opted out of certain “in-lieu categorical” programs that funded the most per-pupil, but that was just bad management (unless they found a cheaper way to do it, which is equally likely).

The new funding model, however, will dispose of those labyrinthine categorical programs, removing one avenue toward funding equity. Also, following the Crash of 2008 charter schools receive between 7% and 17.7% less than district schools, so we are seeing the funding discrepancy widening again in California. Considering that 2010-11 base general purpose funding to charters was $5,659 (which was smaller than the district base grant and which is expected to decrease before it increases under new model), that doesn’t leave much wriggle room for charter schools. So, when the state postpones funding dates, requiring small charter schools to take out bridge loans just to cover teacher salaries, the funding model becomes a very central question. If we’re talking about “what’s fair” in California’s education funding, let’s start with school choice funding. If California isn’t going to fund charter schools fairly, at least start privatizing all the worst districts so it doesn’t cost the state so much to run bad schools. Besides, a charter school could just be the answer to turning a bad school around.

On a similar note, why not start leveraging the power of vouchers? Offer a scholarship tax credit to California kids worth up to the value of the base grant, which is the per-pupil amount that California would be paying anyway, regardless of categorical weights (like FRL and ELL). Considering that California’s final average expense per student for 2011-12 was $8,382, and the base general purpose funding grants just a year before were about $6000 for district-run schools, the state could save a significant amount of money by simply outsourcing its students for a paltry sum.

We don’t necessarily support this method since it shirks responsibility. We’d prefer charter schools to step up and reform the K-12 system from within, but if vouchers are the only way for California to settle its budget woes and properly educate kids, we’re all for it. There’s a reason Milton Friedman supported school choice so adamantly, and that reason looks like an “S” with two vertical lines drawn through it.

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