When Congress initially addressed special education in 1975, it required the federal government to provide 5% of the estimated average excess cost of special education to states.56 It was the intention of the Legislature that, over time, the federal government would cover 40% of the average excess costs by 1981. That goal has never been met. In California, federal funds paid only 5.2% of school expenditures for special education in the 1992-93 school year.57 The rest of the monies spent on special education come from the state, 69.8%, and local school districts, 25%.58
Although there is agreement among legislators and special education advocates and experts that the special education funding system in California is in need of revision, or replacement, the state system has not been revamped in the last 16 years-old. To date, all attempts at reforming the system have failed. At the present time, there is a new proposal which would reform special education finance and the proposal is gaining support among policy makers. The new system would replace the existing one with a program that provided each district with a flat special education allocation based on its total enrollment. The proposal also calls for the development of accountability standards to insure that the needs of all children are met.59 Yet until such time as a new approach to special education funding is implemented, it is necessary to understand the current method of funding.
The funding and governance structure for special education revolves around an entity called the Special Education Local Plan Area (SELPA). These are regional structures, created in part to ensure implementation of state and federal law.60 SELPAs were also created in order to assure some economy of scale. They provide a mechanism for small school districts to pool their resources. A large district like LAUSD may have its own SELPA. The governance of a SELPA is left up to the participating entities, thereby facilitating both flexibility and local control.
The Master Plan for Special Education is the state's comprehensive program for ensuring that all children with exceptional needs receive, free of charge, the education and services necessary to meet their unique needs. The Master Plan began as a pilot program in 1975-76 and underwent several major modifications between that year and 1979-80. Then beginning in 1980-81, the Master Plan was implemented statewide, with the enactment of SB 1870.61
The funding for special education uses entitlements that are based almost entirely on what each agency spent in 1979-80, the base year for the Master Plan funding model - and not on currently year expenditures. The major component of this entitlement is for instructional personal service units and this entitlement is intended to provide funding for teachers and aides. Separate appropriations are made for regionalized services and program specialists; the Low Incidence Fund; and, the Longer Day/Longer Year program for special day class ADA served by county offices of education.62
The calculation of state aid for special education takes into account the other sources of revenue for special education. In other words, the amount of state aid that a district or county office receives is equal to the sum of the various program entitlements minus applicable federal aid, revenue limit monies for Master Plan ADA, a fixed Local General Fund Contribution which is no greater than the "encroachment"63 in 1979-80 (for school districts), and applicable property taxes (for county offices of education).64
According to the Consultant's Report provided for the Chanda Smith v. LAUSD65 case, every school district and county office experiences an encroachment into general funds and/or county school service funds. The only exception is for county offices of education that are implementing bill back procedures for school district students.66
Each district and county office receives state aid under an entitlement-based formula for the services it provides. The first step in determining state aid under this formula is the calculation of the following entitlements: Instructional Program Entitlement; Administrative Unit Entitlement; and Non-RIS Preschool and Low Incidence Infant Entitlement.67 The administrative Unit, Non-RIS preschool and Low Incidence Infant Entitlements are all funded directly by state or federal aid. Special education instructional programs are funded by a variety of sources. Moreover, special education funding has a large deficit due to the under funded cost-of-living adjustments of the last 6 years.68
In 1994-95, LAUSD's special education budget was $549.4 million.69 As stated above, these monies are provided by a variety of sources. These sources, and their approximate distributions are broken down as follows: 1) state special education funding of approximately $243 million per year; 2) ADA monies based on the District's pupil count of certain identified students with disabilities in the amount of $61.5 million; 3) Federal special education grant funding under IDEA of approximately $20 million per year; and 4) funds supplied or charged against the district's general fund of approximately $39 million -- the District encroachment.70
As an example of the District's special education funds breakdown, below is a table representing the 1994-95 budget breakdown:
Program Description Direct Indirect Special Day Classes $191,500,000 Non-Public Schools72 $66,000,000 Resource Specialist Program $51,700,000 Designated Instructional Services $47,700,000 Pre-school Expansion Program $5,100,000 Low Incidence $2,300,000 Infant Program $1,100,000 Regionalized Services --Instructional $100,000 Special Education -- Other School Based $86,800,000 Administrative $9,400,000 Extended School Year $1,800,000 $98,000,000 Transportation of Pupils $61,700,000 Indirect Support Allocation $20,900,000 Program Specialists $1,700,000 Mentor Teacher Program $1,500,000 Reasonable Accommodation $100,000 Sub-totals $365,500,000 $183,900,000 Total Budget: $549,400,000
Section (f) of the Hayden Bill requires compliance with the Individuals with Disabilities Education Act. Although not stated in the Bill, any new district will also be required to comply with Section 504 of the Rehabilitation Act of 1973 (Section 504) and the California Master Plan for special education. The prospective impact of Section (f) of the Hayden Bill on LAUSD special education funding in the event of a breakup or break-off is unclear.
Special education, like most categorical programs, is funded based on expenditures in a base year, and then adjusted based on cost of living adjustments. Funding is not determined strictly by the number of special education students located in the district. Districts that don't qualify the first year are often left out of the program, and over time, allocations to districts based on COLAs may have little to do with actual need and/or expenditures.73 The level of categorical aid received by a new district would have to be set. The legislature would have to determine the needs of the new district. It will be necessary for any new district to examine the steps taken by other newly formed districts across the state or to discuss the steps necessary with the state Department of Education to make sure the district's special education students are the funds necessary to provide the services required by law.
Additionally, the newly created district(s) will either remain part of the same SELPA currently providing services to LAUSD or, if more than one new district is created, the new districts may form their own SELPA to provide services to special education students. Again, these new districts will have to consult other districts to determine the correct procedures or consult the Department of Education.
VI. Federal Funding and State Categorical Aid
A. Federal Aid
Federal categorical aid guidelines and amounts have changed little over the past ten years.74 Approximately 230 school districts and county offices of education receive federal categorical funds. In 1994-95 the federal government provided approximately $2221.9 billion in aid for special programs or approximately 8% of total revenues for schools in California. The programs funded with this money include the Child Nutrition program, Chapter 1 and 2, child development, vocational education, Drug Free Schools, emergency immigration education, summer work experience, and manpower training programs.75 Additionally, the federal government provides Disaster Relief funding for the costs of the January 17, 1994 earthquake. Other federal revenue includes federal impact aid and support for special education.76 In the same year, 1994-95, federal expenditures for LAUSD amount to approximately 16.9% of the final budget.77
Whether federal aid will be affected by a reorganization of LAUSD will be dependent on the distribution of students within any new district. Every district created out of LAUSD will probably receive some federal aid. The funds are distributed in different ways. Some are awarded by application or competition, others on a formula based on the number of students or families that meet the eligibility criteria, still others by enrollment or according to the cost of a service - as well as by combinations of these.78 Any newly formed district will be responsible for finding out which federal funds are distributed in what ways and apply for or provide the required information in order to receive the federal funds the district is entitled to receive.
B. State Categorical Aid
Support for special programs or particular categories of children is a tradition of the California school finance system. California funds over 40 separate programs.79 In 1994-95 approximately $6 billion came from the state government as categorical aid. The programs funded by this money include, but are not limited to, special education, desegregation, child development, Economic Impact Aid, child nutrition, class size reduction, Gifted and Talented Education, and Healthy Start.80
All districts get some state or federal categorical aid. In some districts state and/or federal categorical aid account for as much as one-third of the district's total income. Each categorical program has its own set of rules and regulations that control how the money may be spent and, sometimes, on which children it may be spent.
In 1992-93 the Legislature combined 38 of the state's programs into a single "mega-item." This change from 38 individually funded programs to one item gives districts a little flexibility in using the funds. Presently, the mega-item is made up of 30 programs and 10 programs remain outside of the mega-item. The programs that remain outside of the mega-item in 1995-96 are Child Development, Adult Education, Adults in Correctional Facilities, Regional Occupational Programs/Centers, and Special Education, the largest program of them all.81 The Governor may not veto any individual part of the mega-item in the budget.82
In 1995-96 the statutory provisions regarding the mega-item provided much more flexibility than they did in prior years.83 This year, up to 15% (up from 10% the previous year) of the amount allocated for one mega-item program may be transferred to any other mega-item program as long as the amount transferred does not augment the other program by more than 20% of the 1995-96 state aid for that program. The money may also be used to begin Healthy Start or Conflict Resolution programs.84
Enrollment growth is funded in only two programs -- Special education and Economic Impact Aid.85 This means that in most cases the per-pupil amount will drop according to how many more students are eligible. Moreover, decisions about how to spend categorical income are limited by regulations and guidelines. With few exceptions, expenditures must be accounted for and expended separately.86
As with federal aid, the impact of the Hayden Bill on state categorical funds is unclear. Whether state categorical aid will be affected by a reorganization of LAUSD will be dependent on the distribution of students within any new district. Every district created out of LAUSD will probably receive some state categorical aid. The funds are distributed in different ways. Some are awarded by application or competition, others on a formula based on the number of students or families that meet the eligibility criteria, still others by enrollment or according to the cost of a service - as well as by combinations of these.87 Any newly formed district will be responsible for finding out which state categorical funds are distributed in what ways and apply for or provide the required information in order to receive the federal funds the district is entitled to receive.
One specific category of state funding that is the most likely to be impacted by any reorganization of LAUSD is desegregation funding. Desegregation funding is driven by court orders or decisions, although the yearly funding is a joint decision of the Legislature and the Governor or Congress and the President. They also determine the size of any annual increases, even for those programs with statutory cost-of-living adjustments. LAUSD has two prominent desegregation programs -- magnet schools and Permits with Transportation (PWT). Funds are provided by the state which assist LAUSD in supporting these programs and providing transportation for students attending magnets or participating in the PWT program.
As discussed more fully in the Equal Access to Educational Opportunities Briefing Paper, the Hayden Bill requires that any newly formed district comply with the mandates of Crawford v. Board of Education of the City of Los Angeles.88 Whether or not a newly formed district will be able to comply with the Hayden Bill will be determined by whether or not the new district receives any desegregation funds and the amount of funds provided by the state for transportation costs. Any new district may have to make its case to the state as to why it should receive desegregation funds and how much it will need. The amount necessary will be dependent on a variety of issues such as how many magnet programs are present in the newly formed district, whether the newly formed district is required to maintain all of its magnet programs, how many students are receiving PWTs, which district is responsible for covering the costs of transportation if students are attending magnet schools across district lines and other issues not resolved by the Hayden Bill.89
VII. LAUSD and Rodriguez
Serrano v. Priest (I, II, and III)90 addressed the consequences of inequalities in interdistrict per pupil expenditures caused by the heavy reliance on the local property tax to fund education. These inequalities were due to differences among districts in property values per pupil, differences in tax rates and inequitable property assessment practices. Serrano did not consider intradistrict differences - how a school board distributes resources within a given district, among buildings within a school system or how a principal distributes resources within his or her school.91 As a result, wealthier schools within a given district may still be apportioned more money than poorer schools in the same district.
An example of this was addressed in the settlement of Rodriguez v. Los Angeles Unified School District. The court found funding disparities - lower per pupil expenditures at larger schools - and differences in teacher experience levels, particularly in inner city schools.92 The district spent as much as $400 a year less per pupil in predominantly minority elementary schools than in predominantly nonminority elementary schools. The spending differences between urban and suburban schools broke down as follows: urban schools 44% of the schools spent above the district wide average, 56% spent below the district wide average. For suburban schools (Westside/South Bay), 69% spent above the district wide average and 31% spent below the district wide average. In the San Fernando Valley, 55% of the schools spent above, and 45% spent below the average.93
Prior to the lawsuit LAUSD allocated its general-norm resources to schools based on a formula.94 For example, for an elementary school, one teacher is assigned for every 29.5 students in Kindergarten, one teacher is assigned for every 32 students in grades 1 through 3 and so on. Principals, assistant principals and clerks are assigned in the same manner.95 That meant that the district spent more money on schools that had more experienced teachers because their salaries were higher. Exceptions were also made for smaller schools, meaning they also received more funds per student, because administrative costs were spread among fewer children and in most cases these schools were still allocated administrators even if they did not have the student population necessary to require their allocation. As a result of this method, those schools serving primarily poorer minority students, with greater numbers of inexperienced teachers, frequently received fewer funds than those schooling serving affluent, mostly white students with more experienced teachers.96
The court found that there was a need to equalize teacher experience in the schools within the school district.97 Beginning in the 1992-93 school year and thereafter, the district must take training and experience into account. Schools whose staffs are in the lower third of faculty training and experience will be assigned teachers with higher levels of training or experience and schools with higher levels of training and experience will be assigned teachers with less training or experience.98 A greater percentage of the 262 schools that stand to gain are located in inner-city areas.
As a unified school district, as opposed to a high school, elementary or junior high/middle school district, LAUSD does not fund all of its schools equally. Instead, the district funds elementary schools at approximately the same level as each other, high schools at approximately the same levels and junior high/middle schools at approximately the same levels.99
The Rodriguez case is the first court order in the U.S. requiring fiscal equality among schools within a district. Now, LAUSD must find ways to bring highest spending campuses in to line quickly without alienating the teachers union, which agreed only after being promised that no teachers would be forced to transfer schools.100
It is likely that these types of funding disparities exist in other districts as well. Of course, the question must be asked whether more experienced teachers are always, or even usually, inherently better teachers. If we assume that the only funding disparities that exist are be based on teacher salaries, then the import of these disparities must be examined more closely.101 Additionally, there is concern that the narrow focus in Rodriguez on teacher experience levels could coax young minority teachers out of inner-city areas where they are most needed102 and prevent these same teachers from having access to teaching jobs in inner-city areas. This is likely because in order for the District to comply with Rodriguez it will may have to place caps on the hiring of new and experienced teachers. A school that has not been spending enough (according to Rodriguez) on teachers will be required to hire more expensive (more experienced) teachers and will not be able to hire younger, less experienced, less expensive teachers. Similarly, a school which has been spending more on teacher salaries will have to hire less expensive teachers.
The prospective impact of the Hayden Bill on the Rodriguez Consent Decree in the event of any reorganization is unclear. To the extent Rodriguez focuses on teacher redistribution, any new district will be required to allocate teachers in such a way as to not violate collective bargaining agreements but also in compliance with the requirements of Rodriguez. Therefore, Rodriguez will primarily impact the internal funding structure of any newly created district and not the basic amount of funds received by the district.
On the other hand, outside of teacher redistribution, Rodriguez addresses the lack of adequate facilities on school campuses throughout LAUSD. One of the goals of Rodriguez is to "provide a classroom seat for all students in their local resident schools."103 At the present time, the lack of adequate space is addressed by busing students from overcrowded schools to under-attended schools. It is unclear what the implications of a reorganization would be on school overcrowding resulting from the cessation of busing which presently addresses this problem. Schools that are not overcrowded because some of their student population is bused to other schools would suddenly have to deal with a significant increase in their student population. There are no provisions in the Hayden Bill providing for money to build new schools to accommodate such an increase. Nor is it clear who would be required to cover transportation costs should the busing of these students continue between districts. Thus, any newly formed district may have to make its case to the Legislature that it should receive transportation monies and construction funds to provide for the placement of students within or outside of the district's boundaries.
VIII. Conclusion
As you have probably gathered by now, school finance in California is a complicated matter. The purpose of this paper has been an attempt to set forth many of these complexities and suggest some of the implications and key questions that will arise in the event of a reorganization of LAUSD. It is imperative that anyone who is interested in changing the existing structure of LAUSD understand the issues which will fundamentally impact the ability of a new district to educate the children living within its borders.
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UCLA Graduate School of Education & Information Studies