How Decentralizing Finance May Advance Equity: Early Mechanisms, Differing School Budgets in Los Angeles

• In Event: To Devolve, Democratize, and Redistribute: Investigating Implementation of California's Historic Local-Control Funding Formula

Abstract

To decentralize budget control out to local school boards, California Gov. Jerry Brown pressed for passage of the Local Control Funding Formula (LCFF) in summer, 2013, consolidating categorical aid and committing billions of new dollars for disadvantaged students. The policy theory argues that these pupils (ELs, children from poor or foster-care households) require greater support if they are to reach state proficiency standards.

Research Questions
Our research team focuses on shifts in school-level budgets stemming from $820 million in new LCFF funding coming to the Los Angeles Unified School District (LAUSD) during the 2014-15 fiscal year, the first full year of implementation:
Q1: What were the major spending items (new positions and programs) contained in the $820 million in LCFF funding in 2014-15, reflecting what major priorities?
Q2. Did the LAUSD school board distribute dollars out to schools in proportion to the count of ‘weighted students’?
Q3. What share of school budgets consisted of LCFF funding in 2014-15? How did this vary among schools based on their neighborhood, school, and student characteristics?
Q4. Did schools receiving steeper gains in LCFF funding between 2013-14 and 2014-15 display movement on intermediate outcomes, such as greater reductions in class size, more adults working with English learners, and a higher teacher wage bill (proxying teacher experience)?

Method
We first followed LCFF dollars out to schools, which vary in their distribution of new funding across differing kinds of teaching and support posts and program efforts (ranging from tutoring for ELs and staffing for school libraries, to counselors for youths in foster care, and augmented funding for special education). We also conducted interviews with, and informally tracked decision-making among, senior staff inside LAUSD. We piloted interview protocols with school principals and three student focus groups.
Research Question 4 drives our explanatory analysis – seeking to understand how infusions of LCFF dollars and positions may shift intermediate outcomes at the school level (which may prove proximal to achievement gains.
To address Q4 we pool school-level budget data for 2013-14 and 2014-15. Then, to estimate short-term effects of gains in LCFF funding we apply first-differencing in a structural equation with an unobserved school effect. A standard model for estimating the effects of LCFF funding on school-level outcomes is
Y_it=θ_t+Z_it γ+δ(LCFF_it )+u_i+ϵ_it (1)
where i indexes school and t indexes time period. The θ_t denotes a time-varying intercept, and Z_it is a set of observed school characteristics that affect outcomes and may also be correlated with LCFF investments. The terms u_i and ϵ_it are, respectively, an unobserved school fixed-effect and a mean-zero error term. Given that we have budget data in 2013-14 and 2014-15, our first-differencing model is derived from:
Y_i1=θ_1+Z_i1 γ+δ(LCFF_i1 )+u_i+ϵ_i1 (2)
Y_i2=θ_2+Z_i2 γ+δ(LCFF_i2 )+u_i+ϵ_i2 (3)
Yielding:
(Y_i2-Y_i1 )=(θ_2-θ_1 )+γ(Z_i2-Z_i1 )+δ(LCFF_i2-LCFF_i1 )
+(u_i-u_i)+(ϵ_i2-ϵ_i1) (4)
The effect of the LCFF investment δ can be estimated by regressing the change in Y on the change in Z and the LCFF investment. This first-differencing design eliminates the possibly confounding influence of the many unobserved school characteristics u_i.

Authors

• Bruce Fuller, University of California - Berkeley

• Joonho Lee, University of California - Berkeley

• Laura Tobben