California School Funding Review

In late 2003, Sacramento Bee staff writer Deb Kollars did an extensive amount of writing on school funding. She prepared a 4 part series on funding of schools focused on Sacramento area as well as a review of statewide funding issues. This series of articles were sparked by the educational funding crisis across California in 2003. That year that saw the recall of Governor Davis and the election of Governor Schwarzenegger. While Governor Schwarzenegger attempted to address the fundamental issue of school funding in 2004, efforts were restarted to examine school funding in 2006 with the education study titled Getting Down to Facts: A Research Project to Inform Solutions to California's Education Problems. This 2010 study compared how California's education funding compares to other states in terms of efficiency. In December, 2012, the Supreme Court issued a ruling the ability of the Legislature to eliminate redevelopment agencies. In providing background for the ruling, the history of property taxes as a source of funding and its relationship to the State's obligation to fund public education is detailed. In 2013, Governor Brown with legislation was able to change the funding process and move to a weighted student formula through a process called Local Control Funding Formula.

The Articles

School Funding Rife with Inequities

Driven by outdated formulas, stifling inertia and special interest politics, the largest state in the nation has managed to turn a $29 billion responsibility for basic school funding into an obstacle course of inequities.

Mergers and Acquisitions - California School Districts

In the late 1980s, several school districts made some crafty moves. They merged and unmerged. Played games with their salary schedules. And, despite a clampdown, they continue to collect extra tax money. California Department of Education published this chapter on school districts mergers in 2009.

Of special interest is how Dublin Unified ended up with the highest Base Revenue Limit in Alameda county.

Three Little Pigs

Three sources of money, known in some Capitol circles as the "Three Little Pigs," bring millions to some districts, nothing to others. Their odd histories and rules have even led to tax dollars going to districts that don't qualify for the money.

Size Does Matter

The tiniest schools are being enriched through special deals and obscure pockets of money tied to their unique circumstances. And some larger school systems also are quietly cashing in, thanks to political pacts made in the Legislature.

Reform 2003 Style

Gov. Arnold Schwarzenegger's top education adviser is calling for expanding its proposals for education reform to include a new kind of student funding formula.

Other States Have Similar

California is not the only state struggling to fund school equitably.

Maryland - Got It Right?

Did Maryland get it right with its reform of school funding?

Education Revenue Augmentation Funds

In mid 1990s, to make up for state revenue shortfalls, the Education Revenue Augmentation Fund was created to transfer property taxes from cities and special disticts to schools.

Obstacle course

Basic school funding rife with inequities

By Deb Kollars, Sacramento Bee, November 30, 2003

Imagine you need to teach five first-graders to read. And you have $100 to spend on books. But instead of dividing evenly and spending $20 on each, you spend $35 on one, $11.50 on another, and $13, $18 and $22.50 on the other three.

The differences have nothing to do with the children's learning abilities or the cost of the books. You've just been doing it that way for so long you can't remember all the reasons why.

That is essentially how California goes about paying for the most basic educational needs of more than 6 million public school children.

Driven by outdated formulas, stifling inertia and special interest politics, the largest state in the nation has managed to turn a $29 billion responsibility into an obstacle course of inequities. The financing system, which doles out per-student allotments for every child in the state, churns on year after year -- despite laws, court cases and the widely held belief that school funding should be fair and equitable.

The system is so complex and at times illogical that ordinary citizens can't comprehend it, school experts can't defend it and even district finance officials can't quite explain it.

"They ought to take the whole thing and throw it out and start over," said an assistant superintendent from Fremont, Ron Kuntz.

That sentiment was encountered again and again during an in-depth investigation of "revenue limits," the bureaucratic name for the basic money provided for each student in California.

Schools get many kinds of money for specific purposes, such as helping poor children. Revenue limit money, on the other hand, represents the meat and potatoes of school funding -- the cash stream that pays for everything from teachers to heating bills to construction paper.

The Bee spent three months analyzing a vast collection of 2002-03 computer data files that the state Department of Education maintains for school funding purposes, as well as an underlying tangle of formulas, calculations and legal citations created over the past 30 years.

The experience resembled the peeling of the proverbial onion, complete with odors -- some political, some musty with age. Among the layers:

• Contrary to common perceptions, California has no single per-child funding amount. Instead, it has nearly a thousand revenue limits -- one for each district in the state. The numbers are not based on any carefully thought out notion of what it takes to provide a good education, but rather on a long-ago moment in history with little relevance to current needs.
• These basic per-child dollar amounts are generally expected to be equal in California because of a legendary court case, Serrano v. Priest. Yet they vary widely -- from as little as $4,345 to more than $8,200 a student.
• Beyond these basic per-pupil amounts are other hidden tiers of revenue limit funding that can boost a school's allotment by as much as $10,000 to $100,000 per student in some places. The Elk Grove Unified School District, for instance, gets nearly $8 million every year through a little-known formula called "Meals for Needy Pupils," while other equally deserving districts in the area get far less, or nothing at all.
• Fifteen years ago, a scattering of districts took part in a clever series of mergers and annexations that gave them higher revenue limits. The state closed the legal loopholes, but the schools that pulled off the mergers continue to benefit.
• Some districts have managed to get sweetheart deals from the Legislature that give them more revenue limit money than others.

In Plumas County, the sole district receives extra cash from the state to make up for declining federal timber money, even though the U.S. government has been chipping in to make up for the loss. In Santa Cruz County, two districts get extra money for their seventh-and eighth-graders that many other districts don't receive.

And one school system in San Diego County receives public funding for students it doesn't even educate. In this special deal, about 100 students from the Fallbrook Union High School District are allowed to attend school in neighboring Capistrano Unified, because it is closer to their homes.

Normally, schools would follow a standard transfer process in which the receiving school would count the kids as its own and get the basic state dollars for them. But in this case, not only does Capistrano get money for the students, so does Fallbrook. Last year, the unusual arrangement brought an extra half-million dollars to Fallbrook for the phantom students.

"It's a very strange system, to say the least," said Carleen Wing Chandler, Capistrano's deputy superintendent for business.

These are but a few of the different rules, different treatments, different dollar amounts that make up the revenue limit process in California education.

Other states have plenty of politics and permutations in their school funding machines. But none is more mired in stale history, politics and irrationality than California's, said James Guthrie, a former professor of education at the University of California, Berkeley, who now teaches at Vanderbilt University in Tennessee.

"I don't know of any other state like it," Guthrie said.

California's system is so arcane and rife with confusion, it is no wonder, many superintendents and school business managers said, that people feel mistrustful of and alienated from their schools.

"There are so many strings and layers it's just ludicrous," said Frank Brunetti, superintendent of the Orinda Union School District in Contra Costa County. "It's grossly inequitable. It isn't connected to anything that's rational. And yet it just lives on and on."

Jack O'Connell, the state's superintendent of public instruction and a Democrat, acknowledged the system needs repair. He rarely hears complaints about revenue limits, though, and predicted there would be a lot more noise if anyone tried to change the status quo.

"People fear changes," he said. "They prefer the stable known quantity."

However, others believe that the ascendancy of California's new Republican governor, Arnold Schwarzenegger, has created an atmosphere in the Legislature that may be more open to change.

"Clearly, this recall election signifies that the public desires a change in the status quo, and that includes education," said Bruce McPherson, a Republican state senator from Santa Cruz and vice chairman of the Senate Education Committee.

Over the next year, school finance will get a good hard look by a new statewide committee charged with finding a more sensible way to pay for schools. Called the Quality Education Commission, its job will be massive and tricky.

The revenue limit system represents the single biggest expenditure in the state. It makes up more than two-thirds of the state's $41 billion education tab, and 40 percent of the state's entire annual general fund budget.

The student-by-student funding approach has been around for 30 years. Before that, communities relied heavily on local property taxes to pay for their schools. It was a simpler process, but it created extreme spending differences among districts.

Court decisions, and later tax-cutting Proposition 13, led to the current process in which each district has a base revenue limit, or amount it receives per pupil. The state controls the amounts and pays based on student attendance rates.

When the amounts were set, nobody stopped and asked what would be a sensible sum to spend on each student. Rather, the figures were based on how much money each local district was taking in and spending in the benchmark year, 1972-73.

The new revenue limits -- one for each district -- were designed to give the state a foundation for taking over the funding of schools. The goal was to adjust the limits over time to make them more equitable. Instead, revenue limits helped lock into place many historic differences in property wealth across the state.

The result today is that children in California are worth more or less to their schools depending solely on their addresses.

or example, a child who attends elementary school in McKittrick, a small town in Kern County with oil wells nearby, brings the district $8,270 a year in base revenue limit money -- the state's highest rate. If the student were to move to the Newcastle Elementary School District in Placer County, that district would receive about half as much.

"It's just grossly unfair," said Nancy McKenzie, business manager in Newcastle. Her district has the second lowest revenue limit in the state, $4,386 per child. Newcastle teachers earn as much as $10,000 a year less than those with similar experience in other districts with higher revenue limits. High school students teach some elementary P.E. classes because the district is so short on money.

In the four-county Sacramento region, revenue limits for the 54 districts range widely, from Newcastle's low to a high of $5,822 per student in the Silver Fork Elementary District in El Dorado County.

The disparities exist despite a major lawsuit filed in 1968 over school funding inequities.

The case, Serrano v. Priest, was the first in a wave of such lawsuits to sweep the nation. At the time, some districts in California were spending as much as $1,000 more per student than others -- an enormous difference in those days. The Serrano case argued this was unconstitutional. The courts agreed, and told the state to even things out.

Over the years, California leaders worked hard to bring equity to revenue limits, and spent a lot of money trying to get the job done.

It was tough because no one wanted to play Robin Hood (see Texas), taking money from the richer districts and redistributing it to the poorer ones. Also, the state never had enough money to bring everyone up to the highest levels.

Instead, the state has done what it calls "equalization" -- the occasional pouring of extra money into the system to raise revenue limits across the board or to give more to those districts that fall below the averages.

It has been a complex undertaking in this diverse state, where 6 million students attend classes everywhere from mountaintops to major cities. Many of the formulas and funding layers that emerged were designed to address geographic and demographic differences among districts, said Rick Simpson, policy director for the speaker of the Assembly.

"Often, the complications were done to make things fairer," said Simpson, who wrote many of the laws and regulations.

The result is a mind-boggling maze of calculations: Separate allowances for isolated schools, called "Necessary Small Schools." A seven-step formula that provides some -- but not all -- continuation schools with extra money. Two different adjustments for beginning teacher salaries.

For years, state officials have defended the existing system as fair for the most part. But if you study the numbers, and listen to the financial tales of schools, the lopsided nature of the situation becomes obvious.

In the original Serrano judgment, issued in 1974, Los Angeles Superior Court Judge Bernard Jefferson's guidelines were simple, tough and clear: The funding differences between districts should be "insignificant differences, which mean amounts considerably less than $100 per pupil."

The judge's findings referred only to basic funding based on property wealth. It did not include other federal or local sources, nor the dozens of state funds -- called categoricals -- dedicated to specific purposes such as helping English learners or teaching gifted children.

Several years later, the state convinced another judge that the $100 threshold should be raised for inflation. As a result, the state has held that differences of up to about $350 still meet the Serrano ruling.

The courts also agreed that districts could be divided into six groups when determining whether they fell within the $350 band: large and small high school districts, large and small elementary districts, and large and small unified systems -- which serve all grades.

Using the six groups made it much easier for the state to pass the equity test, at least on paper. If districts of all six types were lumped together when comparing their revenue limits, the range of differences would be far more pronounced because high school systems tend to have higher rates while elementary districts have some of the lowest.

If you look at things as narrowly as possible, as the state has done -- using the six groups and the $350 bands -- the case can be made that most schools are equally funded. Here is the rationalization: Although dozens of districts are outside the six different $350 bands, the bulk of districts, educating more than 95 percent of all students, lie within them.

That still leaves almost 200,000 students outside the allowable differences, getting either more or less than everyone else in basic funding.

It is a touchy issue across the state. The system allows the outliers, such as the McKittrick Elementary District in Kern County, to remain blissfully well-funded and able to provide higher teacher salaries and more educational offerings. Meanwhile, nearby districts with lower revenue limits often find it hard to compete, and wind up losing teachers and students to the richer systems.

Clinging to this narrow version of equity fails to account for the many other hidden layers of funding included in the revenue limit process, which can bring millions to some districts while shortchanging others.

It tolerates high school districts getting far more money on average for students in grades seven through 12, even though elementary districts may also serve seventh-and eighth-graders and unified districts serve all the upper grades.

And most importantly, it ignores the significant impact that differences of $300, $200 or even less per student can have on districts -- the very thing the judge in the Serrano case found unacceptable in his ruling.

The Walnut Valley Unified School District in Los Angeles County knows this firsthand. It has 15,000 children and a base revenue limit of $4,637 -- the lowest rate among unified districts in the state. Yet it falls within what is considered the band of equity.

Diane Hockersmith, Walnut Valley's chief business official, urges people to do the math when they hear that the difference between one district and another is "only" a few hundred dollars.

"When you multiply $300 by 15,000 kids, that's $4.5 million," she said. "Do you know what we could do with $4.5 million more every year? This system is just not fair."

Even a difference of a few dollars per student can add up.

Locally, the Sacramento City Unified School District receives $4,709 for each student, $23 less than the neighboring and similarly sized San Juan Unified School District. If you multiply by Sacramento City's 50,000 students, it's a difference of $1.16 million a year -- enough to pay salaries and benefits for 15 more teachers or to buy 15,000 new textbooks.

Note:Alameda received $4,688 for the comparable period.)

Of course, districts get extra money from categoricals and other sources, which often can make up for differences in revenue limit dollars. But for every district that gets more from other places, it is easy to find another that gets less.

Elk Grove's superintendent, Dave Gordon, shakes his head at the confusing mess.

"I try to explain this stuff to parent groups and it's impossible," Gordon said. "I'll be in a room filled with very intelligent people and I'll have to say to them, 'I'm sorry, but this is utterly unfathomable.' "

The system also is highly unfair if schools are to be judged against each other on their academic progress, said McKenzie, the business manager in Newcastle.

Education researchers disagree on whether more money automatically leads to better schooling for children. A new study by the Public Policy Institute of California has found little evidence that higher spending equates to higher performance. It pointed out that the greatest indicator of how well children do academically is family wealth, not district wealth.

But to McKenzie and others, the threshold amount the state provides for all students should be equal.

"If the state is going to expect us all to meet the standards and score well on the tests, then it should start by providing us with equal funding at this most basic level before making comparisons," she said.

Over the years, the differences in base revenue limits have led districts to engage in some creative financial gymnastics.

The Education Code is littered with special entries, granted by the Legislature, that give certain districts more money through the revenue limit process than others.

Some districts even have their own special line on the standard "Form K-12," the 34-page nightmare that all districts must survive to get their basic revenue limit funding every year.

Two districts in Santa Cruz County are among those with special status on this form. Live Oak Elementary and Soquel Union Elementary persuaded the Legislature more than a decade ago to give them more money for their seventh-and eighth-graders.

The two districts were experiencing an unfair situation common in California. They were educating children all the way through eighth grade. Yet they were getting the same money for their middle school kids as for their elementary school kids, which was substantially less than a neighboring high school system serving grades seven through 12.

In 1989, Live Oak leaders made their case to the Legislature. Two years later, Soquel did the same. And every year since, the two have been given the difference in revenue limit money for their seventh-and eighth-graders -- about $450 per student in the most recent years. The result is that their basic district funding has been enhanced: $233,000 last year in Soquel and $202,000 in Live Oak.

Meanwhile, the legislative fix has done nothing to help all the other elementary and unified districts in the same predicament.

Steven Herrington, Live Oak's superintendent, said the districts use the money to pay for expanded elective programs in middle schools. Students have class options such as wood shop and video production that they might not have otherwise, Herrington said.

"Our argument was that the students in Santa Cruz County did not have equal access to secondary programs," he said.

Capistrano Unified School District in Orange County also has its own line on the revenue limit form. But in this case, the biggest beneficiary is a neighboring district not even mentioned on the form.

The adjustment involves about 100 students from the Fallbrook High School system in San Diego County, who attend high school in the Capistrano district because it is closer.

Fallbrook has a revenue limit of $5,473 -- nearly $800 per student higher than Capistrano's. In this strange deal, Capistrano doesn't quite get the Fallbrook rate for the Fallbrook kids, but through a multistep formula receives $5,385 apiece for taking them on.

Capistrano's deputy superintendent, Wing Chandler, laughed when asked where the formula came from.

"I have no idea," she said.

But that's not the only extra money involved in the arrangement.

The transferring Fallbrook students live on a Marine Corps base, and the federal government pays schools extra money for children living on bases.

So Fallbrook counts the students who go to Capistrano on its reports to both the state and federal governments, and continues to get the extra federal dollars for those students, plus its regular state revenue limit share. It adds up to an extra $560,000 for Fallbrook -- all for kids who don't even go to school there.

Chester Gannett, assistant superintendent for business in Fallbrook, pointed out that Fallbrook pays about $30,000 to Capistrano for the students, but acknowledged that "a big chunk of the money stays here."

Like Wing Chandler, he doesn't understand the thinking behind the agreement, which was approved by the Legislature almost 20 years ago.

"I've only been here five years so it's all ancient history to me," Gannett said.

State officials were surprised to learn about the double-funded kids.

Scott Hannan, director of school fiscal services for the state Department of Education, said an undetected "glitch" in the way the state tried to follow the confusing calculation led to the double funding. As a result of The Bee's inquiries, this year, he said, the state will stop giving Capistrano the money for the 100 students. Fallbrook will continue to claim the students on its reports but will have to start fully reimbursing Capistrano for those students.

"We've been overpaying Capistrano, but it's Fallbrook that will ultimately lose funding," Hannan said.

While the Capistrano-style adjustments touch just one or two districts at a time, other major revenue limit calculations affect hundreds of districts. In hundreds of ways.

Among the most blatantly unfair is the Meals for Needy Pupils adjustment.

"We used to call them the Three Little Pigs," Rick Simpson said when asked about this add-on. The other two, he said, were Continuation School funding and reimbursement for unemployment insurance.

About 375 of the state's nearly 1,000 districts receive the meals add-on, which applies to every free or reduced-price lunch or breakfast that an eligible district serves.

It is a per-meal amount based not on current needs, but on whether a school system had a property tax override for this purpose in 1978. Districts can spend the money however they wish. It comes on top of their state and federal reimbursements for subsidized meals.

The Meals for Needy Pupils allocations range from $162 per meal in the Taft Union High School District in Kern County, to a penny per meal in the Fresno Unified School District. In Taft, it meant an extra $12.5 million last year, or about $14,000 per student. Fresno, which is almost 10 times as large and has double the rate of poverty, got $182,000.

Locally, The Bee's data analysis showed that 11 of 54 districts in the Sacramento region get additional Meals for Needy Pupils income. At the high end is Elk Grove Unified, which received $7.9 million in 2002-03, thanks to its $2.07 per meal allocation. Sacramento City Unified, at 13 cents a meal, brought in an extra $750,000.

The unevenness of the revenue limit system is so extreme that many district officials readily admit to manipulating numbers to the extent they legally can.

Always, they do it in the name of kids.

"We all work like crazy to find the loopholes, to find the optimum opportunity for our kids," said Marc Johnson, the superintendent of Sanger Unified School District in Fresno County.

Johnson knows well the power of loopholes.

In the late 1980s, several districts in Fresno and Madera counties engaged in a series of mergers and annexations that gave them significantly higher revenue limits. The same games were being played in several other places in the state, and soon state officials were naming them: The Chawanakee Shuffle. The Minarets Minuet. The Dublin Dance. The Panama Polka.

As a result, Fresno County has districts with some of the highest -- and lowest -- revenue limits in the state. Sanger Unified, which receives $4,706 per pupil, scrapes by with fewer teachers, custodians, counselors and course offerings than nearby Sierra Unified, which was one of the districts doing the annexation dances in the 1980s.

In Sierra, students generate $6,761 apiece -- $2,055 more than Sanger. And the Sierra kids get more: more small classes, more periods in the day, more library services, more music offerings, even a late round of bus runs to take kids home from all their extra activities.

It both troubles and pleases Sierra's superintendent, Don Witzansky.

"I agree it isn't fair," Witzansky said. "But it was legal and doable at the time. And by God I'm glad they did it."

Johnson and others in the low revenue limit boat said they do not want to take money from Sierra or other places that have more. Instead, they want state leaders to do the tough job of redesigning the entire system -- getting rid of outdated and unfair funding practices and providing not only equal but also adequate dollar amounts for all students.

They know change would be a tough and messy process. But it would be no messier than what they're living with now.

Districts merge their way to cash

By Deb Kollars, Sacramento Bee, December 1, 2003

Back in the late 1980s, while most schools in California were going about business as usual, several school districts made some crafty moves. They merged and unmerged. Played games with their salary schedules. And managed to score such high amounts of tax money for their students that the state finally had to clamp down.

The legal loopholes were closed. But the districts that pulled off the mergers are still collecting the benefits. In some places, it is as much as $1,000 to $2,000 more for every student, every year.

The districts are in pockets throughout the state: outside of Fresno, in Kern County, east of San Francisco Bay. Their tales emerged during a Bee investigation of California's basic funding system for public schools.

The in-depth review found that the $29 billion system, which doles out per-student amounts called "revenue limits," is filled with deep inequities. The dollar amounts are supposed to be similar, but can range widely, from as low as $4,345 to $8,270 a student.

The disparities are so widespread that superintendents and school business officials likened the system to the federal tax code in its confusion and special benefits for a few.

The process began quietly, with a merger here, an annexation there. All were legal. Soon they dominoed. State officials grew alarmed and began giving them names: The Chawanakee Shuffle. The Minarets Minuet. The Dublin Dance. The Panama Polka.

The Panama Polka referred to a merger near Bakersfield in Kern County. It involved a good-sized district, Panama Union, which had 9,000 students, and a tiny district called Buena Vista, which had just 30 children. Panama had a low revenue limit of $2,750 per student, while Buena Vista's was $4,400.

In this case, the little fish ate the big fish, with Buena Vista annexing Panama. The unconventional approach was chosen because, by law, the district doing the annexing was the one whose revenue limit applied. Under a wrinkle in the law, the higher rate wound up applying to 6,000 of the 9,000 Panama students.

The deal touched off a firestorm. When it was just 30 Buena Vista kids getting more money, people didn't give it much thought. But suddenly there was a new, larger district in the vicinity getting $1,600 more for most students.

Leaders from the Bakersfield City School District were angry about the inequity, and worried they would lose students to the richer district. Bakersfield sued, but didn't succeed in changing the higher revenue limits. Bitter feelings still remain.

"The difference came to something like $60,000 per classroom back then," said Peter Parra, a Bakersfield school board member at the time who is now chairman of the Kern County Board of Supervisors. "We cared because we had 26,000 children who were not getting an equal education."

Douglas Miller was Panama's second in command back then and is now superintendent of the merged Panama-Buena Vista Union School District. The merger, he said, came about because both districts were growing and the smaller one needed the expertise of the larger.

"The higher revenue limit was a benefit," Miller said. "But it wasn't the reason for the merger." Only the students in the system at the time got the higher revenue limit, he said. As the system grew, new enrollments were funded at a lower "blended" rate.

In the Bay Area, another round of unifications was taking place, this one with some especially clever moves involving salaries and benefits.

At the time, the state Education Code said that when districts joined together, and their salary and benefits packages were different, the state had to provide enough money to give all of the merged employees the higher levels of pay and benefits.

In one of the East Bay unifications, the Murray Elementary District and the Amador Valley Joint Union High School District were forming a new system called the Dublin Unified School District.

Shortly before they merged, the two districts took steps to get the most money they could. The high school district took the money it was spending on a benefits package and shifted it to the salary schedule. The elementary district put more money on the benefits side, in lieu of a pay raise that year.

When the two merged, all the employees got the higher levels of pay and benefits.

"Basically, everyone understood they would all go up," said Jack Taylor, Dublin Unified's coordinator of student services. "It was an Education Code section that allowed us to do that."

The two districts had similar revenue limits, but the added dollars for salaries and benefits pushed their per-student amounts up by more than 30 percent, Taylor said. Today, Dublin has the highest revenue limit in Alameda County and one of the highest in the state at $5,704 per pupil.

The most convoluted series of mergers took place out of the spotlight, in the rolling foothills east of Fresno. There, districts actually merged and then unmerged as part of their elaborate dance.

It started with a tiny elementary district called Chawanakee. It had only a dozen kids, and a big hydroelectric plant within its boundaries. As a result, the district enjoyed local tax income that gave it a revenue limit of close to $5,000 per student.

In the late 1980s, Chawanakee decided to merge with a nearby district named North Fork, which had 400 children and a lower funding rate.

Tiny Chawanakee annexed the bigger North Fork, and suddenly education spending doubled for all those children. Word soon got around.

"That was more money than people had ever heard about in their lives," said Tom Griffin, the attorney who helped choreograph the Chawanakee Shuffle and later served as a school board member for the Sacramento City Unified School District. "You had all these other districts in the area who wanted in on it. It expanded like an amoeba."

One after another, the annexations came. Griffin did the legal work.

"We were just taking advantage of the law," he said. "They should have named one of those districts after me."

When two districts, Auberry and Sierra Elementary, joined Chawanakee, they made an odd pact: They would stay only a year, then leave Chawanakee with the higher funding rate and form their own merged district. A couple of name changes later, they became known as the Sierra Unified School District.

The weirdest chapter in the Chawanakee tale involved the Minarets Joint Union High School District. Minarets had a part-time superintendent, just a handful of students, and collected about $1 million in taxes each year. It was so much money that the district was able to save $9 million toward a new high school. But the school never got built and last spring, Minarets was dissolved, leaving Chawanakee with its territory and most of the excess cash.

By 1990, state officials were worried that the pattern of mergers was getting out of hand, costing the state millions and contributing to inequities. They tightened the laws so that when districts unified or merged, their revenue limits had to reflect a blend of previous rates, not the highest.

In the years since, the historic maneuverings have continued to make their mark.

In Fresno County, Sierra Unified receives more basic funding per student -- $6,761 -- than any other county district. At the low end among unified districts in Fresno County is Sanger Unified, which receives $4,706 for each student, more than $2,000 less than Sierra.

The funding difference plays out in ways large and small.

Sierra Unified sits in a scenic nook of the Sierra foothills northeast of Fresno. It has about 2,500 students. Sanger Unified is larger, serving a growing town just east of Fresno. It has about 8,000 children.

Neither is a wealthy community. In Sierra, the depressed logging industry has made life hard for many families. In Sanger, agriculture and packinghouses provide most of the jobs, and unemployment runs high. Half the Sierra students and two-thirds of those in Sanger are eligible for free or reduced-price school lunches.

From the minute they arrive in the mornings, the two groups of children encounter different worlds.

Sierra has smaller class sizes for all ages. Sanger can afford them only in the primary grades.

Sierra has seven periods a day at its high school. Sanger has six.

Sierra has more counselors, more specialty teachers and more than enough textbooks. Sanger has some classes with no books at all.

Even the two district offices stand in contrast. Sierra's is new with modern furnishings, and the $800,000 bill for the project was paid in cash this year. Sanger's is about 25 years old with patches in the carpet.

Sparseness is a way of life in Sanger Unified, said Marc Johnson, who recently became Sanger's superintendent. For the last three years, he and two other assistant superintendents had run the system with no superintendent, he said, because the school board wanted to save money.

Wilson Elementary is Sanger's largest grade school, with 700 children. It is a shady and neatly kept campus that has less of just about everything.

The kids have enough textbooks to go around, but the school can't afford the workbooks to go with them. There are not enough classrooms, so three third-grade classes share the old cafeteria. The outdoor sprinkler system is so ancient that the maintenance staff must change and rotate sprinkler heads by hand every day.

Wilson does not have a vocal music program. Band is offered in sixth grade, but only for a few students.

"I had 25 or 30 kids who wanted to play, but I could only find instruments for about a dozen," said Jerry Rose, the music teacher, who splits his days among three elementary schools and the middle school. "I have two flutes, five clarinets, four trumpets, and I'm working on getting two trombones and two more flutes."

Nick Taylor is the principal of this financially starved campus. Nothing gets him down.

When he wanted to start an after-school football program, he paid for it through candy sales. When the Folkloric Dance Club needed dresses, the school had a jog-a-thon to raise the money.

And when a teacher needed decent furniture for her classroom, he gave her the desk and chair from his office, then brought in his own from home.

"We're fighters here," Taylor said. "I refuse to make excuses for why we can't achieve our goals. Somehow we find a way."

Across town, Sanger Unified's high school is a sparkling new campus that opened in 2000. It was built with a separate pot of local bond money.

The grounds are spacious and newly landscaped. Classrooms are modern and bright. But inside, in dozens of ways, the 2,000 students have less.

Walk on campus in the afternoon, and you will not hear a music class anywhere.

Check the athletic schedule, and you will not find Sanger High School playing in special tournaments.

To save on personnel costs, the district recently offered an early retirement package to 18 staff members. Among those who left was one of the high school's Spanish teachers. A replacement was not hired, which meant about 70 students were turned away when they tried to enroll in Spanish this fall.

"We switched some to French, but French got full, too," Principal Daniel Chacon said. "So a lot of them had to take something other than a language."

The school's six-period day, which is fairly standard across the state, limits access to electives. Janeth Gutierrez, a junior, said she couldn't get into a third-year French class because it conflicted with a medical course she needed for her health careers specialty.

"It's a different culture from mine, and I wanted to learn the language," she said. "I was looking forward to another year."

In a nearby classroom, another group of students got along this fall without biology texts because of a shortage in book funds. Most students said they didn't mind; they get tired of hauling heavy textbooks around.

But the teacher, Juanita Lorenzana, was frustrated. She didn't have enough books for a single class. If she wanted to give homework, she had to photocopy worksheets from other sources.

"I prefer to give homework every day. These kids need the structure," she said. "But without books, it is hard to do."

The tight finances in Sanger are not unusual in California. Sanger's basic funding per pupil is close to the state average. Districts everywhere are facing similar lean times.

But not Sierra Unified.

With its $2,000 more per student per year, nobody in this system is going without books or changing sprinkler heads by hand.

Sierra's superintendent, Don Witzansky, credits the days of the mergers. He pointed to a map showing the various districts in the area.

"Here's Chawanakee. They started it all," he said. "We are able to offer so much more to our kids. That was the vision of the boards when they put this together."

Sierra's salary schedule for teachers is close to Sanger's. Both start at about $34,000 a year. Sierra's tops out at about $65,000, Sanger's at $70,000. But that's where the similarities end.

Sierra's two main elementary schools have three kinds of specialists: science, music and P.E. Most elementary schools in California are lucky to have one.

Students receive daily music and choral instruction, beginning in first grade. In fourth and fifth grade, they also can play in the band. Typically, 60 or so children in each grade take part.

Every other week, the kids receive daily science lessons with specialist Larry Gasaway. His classroom is a scientific wonderland, filled with bird nests and bones and rockets.

On a recent morning, Auberry fifth-grader Elizabeth Palmer started her day by playing bells in the band, learning the difference between quarter notes and half notes.

From there she went to Gasaway's science room, where the students were answering a question: Does air have weight? The lesson involved balloons and lots of popping.

"I don't use textbooks," Gasaway explained. "Everything is hands-on. The kids love it."

The early years in Sierra are good preparation for what lies ahead.

Sierra High School offers seven periods in the day. It gives students more time slots for electives that range from German to high-tech courses in agriculture.

Sierra High is more quaint than fancy, with wooden walkways and old-fashioned windows that give it a summer lodge feeling.

A new $2 million pool is about to open in the middle of campus. The district is using state "modernization" money to build it. Most schools spend such dollars for paint, new lighting, fixing sprinklers, or for other maintenance matters they have put off for years. Sierra, with its plusher budgets, has been able to keep up with its building needs. So when modernization money comes along, it can go to niceties such as the pool.

At Sierra High, books are everywhere. Students have one to take home for each subject. And classrooms have additional "class sets" so the kids don't have to lug books back and forth.

The school is small, with about 900 students. Yet it offers two levels of chorus, two levels of band, and orchestra with strings -- a rarity even in large high schools.

Jessica Young, a sophomore, is trying out the viola this year, and also plays in the band. "The band is a really warm place," she said. "It's a place where everybody fits in."

Sierra even goes the extra mile when it comes to getting kids places. Every day, around 5 p.m., it offers a second round of bus rides to take students home from their many activities.

Four buses make this last trip before dinner. Often they aren't even full. But it doesn't matter. If kids need it, they get it in Sierra Unified, thanks to the Chawanakee Shuffle.

Extra servings

'Add-ons' heap big bucks on some districts

By Deb Kollars, Sacramento Bee, December 2, 2003

Some schools in California get millions, some get a few dollars and some get no money at all through several good-sized layers of education funding with a casual little name.

Known around the Capitol as the "Three Little Pigs," the cash streams have endured like brick houses. Their odd histories and rules have led to widespread inequities, patterns of manipulation, and even tax dollars going to districts that don't deserve the money.

The three sources of money -- Meals for Needy Pupils, Continuation School funding and Unemployment Insurance reimbursement -- quietly flow out year after year as part of California's massive $29 billion system for giving schools their basic operating dollars. The system, called "revenue limits," doles out per-pupil allowances that range from $4,345 to $8,270, and average about $4,800 for every child. To get their money, districts must go through a lengthy series of calculations and adjustments every year.

That is where the "pigs" come in. In an analysis of state funding data for 2002-03, The Bee found wide discrepancies in how much money districts received from revenue limit adjustments, commonly known as "add-ons."

Locally, for example, the data showed that the Elk Grove Unified School District received nearly $8 million last year from the Meals for Needy Pupils add-on -- far more than any other system in the four-county region. The money has enabled Elk Grove to build a gleaming central kitchen that is the envy of other districts.

The San Juan Unified School District received just over $1 million in extra continuation school money last year -- more than any other district in the state and well beyond what San Juan was entitled to get because of a state accounting error.

Statewide, the differences were numerous and extreme.

Through the meals funding calculation, the Taft Union High School District in Kern County received $14,000 more for every student, while Newark Unified in Alameda County got 77 cents.

Under the Continuation Schools adjustment, the data showed two dozen districts received $10,000 to $100,000 more for each of their continuation students, while another two dozen districts received $50 or less for each teenager in the same kind of school. For Unemployment Insurance, the statewide range per student was $1 to $113.

The pattern has been going on for years.

"We used to call those the Three Little Pigs," said Rick Simpson, the Assembly's veteran education consultant. The point to the nickname was that these were odd calculations that did not constitute big enough pieces of the budget for anyone in power to worry about.

Capitol insiders have another term for what they consider inconsequential aspects to state spending: "Budget Dust."

But over time, the specks can add up. Together, the "Three Pigs" cost taxpayers about $180 million last year; 10 years at that rate, and the tab would hit nearly $2 billion.

The add-ons can mean big dollars for districts. But not for all of them. Only about a third of the state's 1,000 school districts receive the Meals for Needy Pupils money. It goes only to districts that had opted to collect extra property taxes in the 1977-78 school year to support a cafeteria program for poor children.

After Proposition 13 eliminated the ability of local school boards to levy such taxes, the state continued providing a matching amount of money to those districts through the revenue limit process. The money went out as a per-meal amount, and didn't change except for cost-of-living adjustments.

Each year, districts eligible for this add-on simply multiply their historic meal rate by the number of free or reduced- price meals they provide.

Districts get the meals money in addition to their standard reimbursements for subsidized breakfasts and lunches from the state and federal governments. They can spend it however they wish.

According to data from the Department of Education, last year's meals allocations ranged from a high of $162 per meal at the Taft High School District in Kern County to as low as a penny a meal at four districts, including Fresno Unified School District.

Fresno Unified's penny per meal brought in $182,000 to the fourth largest school system in the state. The add-on for Taft, a small district with about 900 students, amounted to $12.5 million last year in additional revenue limit income.

In Taft, the money helps pay for many extras, from small class sizes to rich vocational programs. It also enables the district to offer generous meals to kids at low prices: $1.25 for breakfasts and $2 for lunches.

"There are days we have shrimp, days we have fish or lasagne," said Taft's business manager, Chuck Hagstrom. "Our breakfasts and lunches are better than what you get at other schools, especially in terms of value."

The state doesn't always pay Taft its full meals amount because it is a "basic aid" district. It is one of about 60 California districts that generate so much money in local property taxes -- in Taft's case through oil wells -- that the state winds up giving them fewer state dollars.

But one way or another, through state or local taxing sources, Taft gets this gigantic entitlement every year. In the four-county Sacramento region, only 11 of the 54 districts get the extra meals money.

For the three largest local districts, which each have about 50,000 students, the meals dollars varied widely last year.

Elk Grove received $2.07 for each subsidized meal served -- the highest rate in the region -- totaling nearly $7.9 million. Sacramento City Unified received 13 cents ameal, for a total of $750,000. And San Juan Unified received 11 cents per meal, totaling $320,000.

Meanwhile, the lowest rate in the four-county region was Roseville Joint Union High School District's 2 cents a meal. It brought in $1,200 last year � about enough to buy every kid an extra banana.

Roseville and other districts, including Sacramento City and San Juan, roll the extra money into their general funds where it helps cover everything from salaries to school buses.

Elk Grove, on the other hand, has chosen to spend the money on its meal programs. One of the biggest enhancements has been its fancy new central kitchen.

Built nine years ago for $6 million, it is one of only a few such school-based enterprises in all of California. The district put another $2 million into an expansion two years ago.

very day at the center, massive quantities of food are washed, diced, sliced, mixed and cooked. And every day, refrigerated trucks roll out from the center, loaded with enough readyto- heat entrees and homemade cookies to feed 50,000 children. The food is delivered to small campus kitchens, which are equipped simply with refrigerators and warming ovens.

"They're like little airline kitchens," Superintendent Dave Gordon said. "Our schools are so crowded. This frees up more space that we can devote to classrooms."

The centralized approach allows the district to have much more control over food safety, said Delois Davis-McDuffie, director of food and nutrition services for Elk Grove. In addition, the central kitchen means healthier food for children. The kitchen prepares its own soups, pot pies, taco meat and ranch dressing -- all with an eye toward reducing salt and fats.

"Sometimes, well-meaning staff out at the sites may add more butter or more salt because they think it will taste better," she said. "This way, we know exactly what each student is getting."

Gordon is immensely proud of the central kitchen, as well as the nutrition education programs the district is able to offer thanks to the extra meals money.

ut he also was concerned that people might think his district gets more money than others. His transportation and special education costs, he said, run much higher than the allocations the state provides for these services, leaving the district's general fund to pick up the combined $18 million-ayear shortage.

"When you roll it all together, it's a wash," Gordon said. "What I'm proud of is that we've been entrepreneurial in building a central kitchen."

The revenue limit adjustment for continuation schools is just as uneven as the meals add-on. It is also a quartercentury old and rooted in history rather than current-day needs.

Continuation schools serve students who are not succeeding in regular high schools. Such schools offer smaller classes and more counseling, so the state gives them extra money to cover the higher costs.

However, as part of a complex response to Proposition 13, only those that opened after 1979 get the extra money. The way it is doled out has little to do with actual needs.

"It's totally nonsensical and indefensible," said Peter Birdsall, a longtime lobbyist for continuation schools.

The current continuation add-on is based on the number of students and teachers a school had the year it opened. When enrollments rise or fall, the amount stays the same, except for cost-of living increases. Sometimes just the schools with the add-ons get these increases. But sometimes all continuation schools -- including those that opened before 1979 -- get small cost-ofliving increases.

The result is that some schools in California receive as much as $100,000 extra per continuation student -- on top of their regular per-student funding -- while others receive only tiny allotments.

In the four-county Sacramento region, the River Delta Unified School District received $114,000 last year to educate about eight continuation students. That came to an extra $14,000 or so per continuation student for the district, on top of the $4,863 it received in basic revenue limit money for every student.

At the low end for the Sacramento region was the Woodland Joint Unified School District, which received about $9,400 in extra continuation money. With 225 continuation students, it meant Woodland got an extra $42 per student last year.

The San Juan Unified School District received $1.06 million last year -- more than anyone else in the state. However, more than half of that amount was an overpayment.

The error, The Bee found, was repeated six years in a row, despite attempts by San Juan to turn off the funding faucet.

For years, San Juan ran nine continuation schools that each brought in about $100,000 in extra funding. In 1996, under pressure from the state, the district shut down six of the schools that weren't measuring up academically.

District records show that San Juan notified the state about the school closures four times. But the money -- about $700,000 annually in recent years -- kept coming.

JoAnn Allee, San Juan's budget director, said she set aside the overpayments, fearing the district would one day have to pay it all back.

In August, Allee again wrote the California Department of Education about the overpayment, and finally got a response.

The department said it would stop the funding this year and San Juan will have to reimburse the state for the full $3.5 million it has accrued for the closed schools.

"This just shows you how difficult this stuff can be," Allee said. "It's just crazy trying to close the books at the end of every year."

Even more convoluted is the way the continuation add-on is playing out among the rest of San Juan's continuation schools.

The district still gets extra money for three continuation schools. One is Sierra Nueva, a campus for students who are pregnant or already parents. The other two, Palos Verde and Via Del Campo, have only about 40 students between them and were recently moved to the district's fourth and largest continuation school -- La Entrada.

La Entrada sits on a quiet stretch of Hemlock Street, just north of Madison Avenue. It has an enrollment of about 150 students, but generates no add-on money because it opened before 1979.

Ivory Rubin, La Entrada's principal, said that when the two smaller schools relocated to his site, he assumed the three programs would be combined. It would have provided more course options to students and made more efficient use of employees and space.

"Educationally, it would have made more sense," Rubin said.

But the three schools are being kept separate, on paper and in practice, so that the district doesn't lose the $200,000 add-on that the two smaller schools receive. To Janet Knoeppel, state president of the California Continuation Education Association, it is a transparent manipulation.

"By putting three continuation schools on one site, that's not three separate schools any more," she said. "It's one larger school."

The principal doesn't like it either. But he understands the thinking.

"The funding is a real and necessary resource to the district," Rubin said. Visiting the school -- or rather the schools -- can be a schizophrenic experience.

The students use the same parking lots, restrooms and cafeteria. They hang out together at lunch. The two campus monitors keep an eye on everyone. The same custodial crew cleans up behind them.

For their studies, however, the students from the two smaller schools attend most of their classes together in a separate section of the campus. The school is now known as Palos/Via. It has two teachers, an administrator and some support staff. Class sizes rarely go over a dozen students. But the Palos/Via kids also don't get P.E. because of their small numbers.

The La Entrada students, on the other hand, have larger class sizes, some up to 23 teenagers. They also have more course offerings, including regular P.E. classes with math teacher Pamela Richardson. On a recent morning, Richardson led a class of La Entrada students to a muddy field for a game of field hockey. She smiled when asked what she thought about the separation of the schools and the Palos/ Via kids not being able to take P.E.

"If you're in California education for any length of time, you just learn to go with the flow," she said, as she tried to teach hockey skills with a large rubber ball and set of plastic sticks designed for indoor use with a puck.

Several students said it felt odd to attend separate schools on the same campus. But none seemed particularly fazed.

"I told my dad," said Amanda Loucks, 15, who attends Palos/Via. "And he said, 'Is it out of control?' I told him no, it's fine."

For years, the California Continuation Education Association has tried to persuade the Legislature to solve the continuation funding mess.

"The inequities and problems are very serious," Knoeppel said.

A flat allocation based on the current size of a school would make the most sense, she said. She estimated that about $2,500 extra per continuation student would enable districts to pay for the smaller classes, specialized books and software, and extra counseling needed in quality continuation settings.

Currently, the state spends about $33 million for the continuation adjustments. If that amount were divided evenly among the 63,000 continuation students statewide, it would create a $500 per-student allocation. Though far short of what Knoeppel has in mind, it would be a step toward equity.

For the third "pig" -- Unemployment Insurance -- the state spends about $28 million a year. Nearly all districts get something from this layer of funding, which covers unemployment insurance costs for school employees.

It is yet another calculation involving a point in history. And another that can lead to erroneous payouts of tax dollars. To get this add-on, schools take the amount of unemployment insurance they were paying in 1975-76 and subtract it from the current year's cost.

The difference is their add-on. For example, San Juan spent $60,000 in the base year, and $336,000 in 2002-03, for an add-on of about $276,000. Sacramento City's add-on was similar.

On a per-student basis, the unemployment add-ons were neither as big nor as uneven as those for the Meals for Needy Pupils or Continuation Schools funding. In the four-county region, for example, the addons ranged from $12 per pupil in the Ophir Elementary District in Placer County to $2 per pupil in Penryn Elementary District in Placer County.

What was striking, however, was how the Unemployment Insurance costs had risen in some places compared with others. In most cases, the bigger increases came with rising enrollments.

But in one system, the Grant Joint Union High School District, there was a different culprit: a mistake.

Grant reported that its 1975-76 unemployment insurance costs were $15,000, and that they had risen to $137,000 last year -- an 800 percent increase. It brought Grant an extra $122,000, or $11 more per student, the second highest rate among Sacramentoarea districts. Costs rose 225 percent over the same time period in the nearby and similarly sized Rio Linda Union Elementary District.

Grant's budget director, Tracy Shackleton, said the amount was indeed high -- in fact, twice as high as it should have been.

Shackleton discovered the problem last spring, shortly after she arrived in the Grant district from the Folsom Cordova Unified School District.

Before she got there, the staff had not been following the right formulas in calculating the unemployment add-on, she said. The Sacramento County Office of Education, which reviews local district budgets, pointed out the error in an April memo to the district.

Shackleton filed a correction with the state in October, and the overpayment will be deducted from Grant's revenue limit income this year.

Such errors sometimes happen in such a confusing financing system, Shackleton said.

"I've been in school finance 15 years and I still don't understand half of it," she said. "The list of adjustments goes on and on and on. You just go through the forms and hope to God you got them all right."

Small is bountiful

Tiny, remote schools cash in big time

By Deb Kollars, Sacramento Bee, December 3, 2003

California's most remote and tiny schools are cashing in on special deals and obscure pockets of money tied to their unique circumstances.

The money is supposed to go only to the smallest schools in the smallest of districts. But larger systems also are quietly benefiting, thanks to political pacts made in the Legislature.

The schools are known as "Necessary Small Schools." They sit at the bottoms of canyons and the tops of mountains. Some have only four or five students.

They are a testament to the glorious geography of California. And to the free-for-all of school funding that has evolved. "We're all out there trying to hustle a buck," said Charles Milligan, a superintendent from Kern County whose district gets extra money for its smallest school through a 1998 deal in the Legislature. "Sometimes I feel like a hooker."

The state spends about $100 million for Necessary Small Schools every year. Many are in rugged areas and have higher than average transportation and staffing costs. In an average-sized school, a classroom might have 25 or 30 students, each triggering about $4,500 to $5,000 in basic per-pupil funding. But some schools are so small that attendance numbers don't generate enough to pay for a single teacher.

Often, Necessary Small Schools money brings just a few extra dollars to a district. But in some places, it can be a windfall, The Bee found in an analysis of the state's $29 billion "revenue limit" system, which provides basic funding for schools.

In Tuolomne County, for example, the Summerville Union High School District receives $1.13 million a year to pay for three minuscule high schools in the mountains that together serve only a dozen or so teenagers. It comes to about $95,000 more for each student -- 20 times what most schools in California receive in basic operating money.

Under the Education Code, elementary sites receiving Necessary Small Schools funding must have an average daily attendance no higher than 100. High schools can't go over 300.

The money is doled out through a formula based on the number of students and teachers. An elementary school with one teacher and fewer than 25 students gets about $100,000. One with two teachers and 25 to 48 students gets $200,000, and so forth.

Districts are supposed to get the money in place of the standard per-pupil amounts that go to most schools.

But in some communities, districts have worked the Necessary Small Schools system to get more than the laws and formulas intended, The Bee's investigation found. Some are small districts that managed to get more than others. Others are larger districts pleading poverty. Some even have their own obscure passages in the Education Code.

Under the law, districts are supposed to have fewer than 2,500 students to get the money. That limit presumes larger districts have more room and flexibility in their budgets to absorb the added costs of keeping small schools open.

Now and then, even large systems, including the San Juan Unified School District in Sacramento County, have had to face the unpleasant task of closing smaller schools for financial reasons.

But some large districts have found a different way around the predicament: They go to the Legislature and ask for Necessary Small Schools money.

Sometimes, those requests are denied. In 2000, Gov. Gray Davis vetoed a bill that would have extended the special treatment to three districts. He said giving them extra money would be "inequitable" and "establish an inappropriate precedent."

Other requests have been granted.

Since 1998, for example, Sierra Sands Unified School District in Kern County has gotten an extra $45,000 a year to keep a small school open. The money comes even though the district has about 6,000 students -- more than double the limit in the law.

Sierra Sands receives the extra money for Rand Elementary School, which serves eight children in grades kindergarten through three. Older children in the same community attend a bigger school 30 miles away, but the district didn't want 5-, 6-, and 7-year-olds making such a long trip every day.

Sierra Sands told legislators it needed the special treatment because another money source was drying up. Until that point, the district had been covering the remote school's costs by using extra federal dollars earmarked for families on a nearby naval base. Those extra dollars were projected to drop after 1997, the Legislature was told.

The district did experience a drop in federal funding, from about $800,000 in 1996 to about $650,000 the next year, The Bee found in a check of district and federal financial reports. But then federal cash flowing into the district started rising -- and fast.

Between 1999 and 2002, the district received more than $9 million.

The Sierra Sands figure jumped, in large part, because the federal government decided to make up for drops in funding from prior years, said Cathy Schagh, director of the federal Impact Aid Program for schools serving military children.

Milligan said the $45,000 extra in state funds that Sierra Sands gets for the small school all goes to educate those eight young children.

"It may be an anomaly," he said. "But without that extra funding we couldn't afford a teacher for that few students."

The Coachella Valley Unified School District, with about 14,000 students, got special legislation in 1993 granting it extra money for two small schools near the Salton Sea.

Coachella had been considering closing the schools because they were so expensive to run. But parents objected, saying their kids would have to travel 30 miles on a dangerous highway. The road had been the site of several tragedies, including a fatal accident involving a school bus with five children aboard.

The deal brought a significant amount of money -- about $750,000 a year in the most recent years -- to the district. At the time it was struck, Coachella also had recently received $7.3 million in state loans to help bail it out of bankruptcy.

The legislation carried a caveat: The special dollars would stop when a new and safer highway was completed. Last year, the new road was finished. And the state Department of Education turned off the spigot for the special funding.

But that's not the end of the story. After the new road was completed, the Coachella community complained it wasn't safe. It was built with stoplights at intersections, rather than overpasses, resulting in accidents. So district officials persuaded the Legislature to extend the extra funding until 2005, enabling them to keep the two popular little schools open.

"The road is still very unsafe," explained Carey Carlson, assistant superintendent of business services. "We try not to use it for school transportation."

Still other districts have used alternate lines of reasoning to get Necessary Small Schools money.

In 1993, the Plumas Unified School District made its case by saying it was losing federal timber money that had helped pay the higher costs of smaller schools. Plumas won special legislation that was renewed three times.

Currently, the allocation provides the district about $1 million a year in extra dollars, said Bob McElhaney, former director of business in Plumas. That million a year runs out next June.

Earlier this year, Assemblyman Rick Keene, a Republican who represents Plumas County, introduced a bill to keep the extra money coming for another three years. But it didn't make it out of the Assembly.

In the text of the bill, Plumas Unified was never identified by name -- a common ploy for hiding the identity of beneficiaries in special legislation.

Instead, it talked about "a unified school district that is the only school district in a county, that has received more than two million seven hundred thousand dollars ($2,700,000) in federal Forest Reserve funds in the 1992-93 school year and less than one million three hundred thousand dollars ($1,300,000) in federal Forest Reserve funds in the 1996-97 school year, and that has fewer than 4,501 units of average daily attendance."

In the bill analysis, staffers did name Plumas and laid out the financial hardship the district faced because of the falling forest money.

But one bit of information was left out of the legislative record: Plumas was in its third of six years of receiving nearly $2 million extra annually from the federal government to make up for the lost timber dollars.

McElhaney said every dollar from every possible source is needed to keep Plumas schools going. The district's enrollment is declining, and the costs to run its many isolated schools are high.

"In our high school, we can only provide the barest core classes," he said. "We're lucky to be able to offer one or two electives. We have an overall budget of $24 million, and we had to cut $3 million this year."

The district that really stuck out when The Bee analyzed the Necessary Small Schools money was the Summerville Union High School District in Tuolomne County. It received $1.13 million last year to educate about a dozen students in three remote high schools.

One of the schools is at the bottom of a canyon, at the south fork of the Stanislaus River. One is in a tiny town called Long Barn, in an old school building.

And the newest opened just last year in a mountain community called Pine Crest. It serves about five students who live in the often snowy region. Other teenagers who live there have chosen to travel 35 miles to the district's regular high school because they want access to its larger selection of classes and activities.

Summerville didn't get the large amount through deals in the Legislature, but rather by taking advantage of a generous nook in the regulations.

Under the formula for high schools, if you have fewer than 20 students and one or two teachers, you get about $83,000 for each teacher. But if you have three certificated staff members, you hit the jackpot: $377,000 for that school. Even if a person works only part time at a school, he or she can be counted as a whole person for funding purposes.

In Summerville, each of the three little high schools has two full-time teachers. The district also counts the administrator who oversees the three schools -- not once but three times, triggering the $377,000 allocation for each school.

The administrator's name is Michael McLaurin and he has quite a workload: In addition to overseeing the three little high schools, he also runs two continuation schools, an independent study program and adult education. Plus, he teaches part time at one of the continuation schools for struggling students.

McLaurin, who grew up in the mountain region, said it is a huge challenge to offer a cohesive education in such a spread-out setting. The schools may be expensive, but they are necessary, he said.

"I don't know how much money is too much," he said. "I don't know if it's the most efficient way. But when you're living with these extremities, things just aren't normal. That's all I can say."

In the Bay Area, the necessity of small schools has been questioned by one of two districts.

By law, districts are supposed to get their small school money in lieu of basic revenue limit funding for children in these schools. But the two districts -- Alum Rock Union Elementary and Patterson Joint Unified -- have been enjoying Necessary Small Schools money in addition to their base revenue limit funding for the past 10 years.

Thanks to the generosity of the Legislature, the two systems each have been receiving an extra $20,000 a year -- on top of their standard per-student amounts -- to help them run a pair of schools on Mount Hamilton, near a scientific observatory. Some students are the children of scientists; others live there because their families prefer the remote lifestyle.

The two districts even have their own line on the K-12 Revenue Limit form, which all districts in the state must fill out to get basic school dollars.

Alum Rock has 13,000 students in grades kindergarten through eight. Eleven children attend its small school on the mountain that generates the extra $20,000. It takes two hours to get there from any other schools or the district headquarters.

Evangeline Reyes, Alum Rock's director of fiscal services, said that even with the special allotment, the school comes up about $30,000 short, which the district covers with other funding. Last year, Alum Rock considered closing the school, but parents strongly objected, and the school remained open.

The Patterson district, which has 4,200 students, made the opposite decision and recently closed its tiny school. The high cost of running the school played a role, but the district also felt the handful of students would get a better education in a school with more teachers and services.

Steve Menge, an assistant superintendent for Patterson, said some parents were upset, especially the mother and father of a kindergarten girl with a long bus ride. But over time, he believes, the decision to close the small school will be viewed as a wise one.

"Sometimes trying to beat the system can shortchange the kids," he said.

Total overhaul sought in funding for schools

By Deb Kollars, Sacramento Bee, December 11, 2003

Gov. Arnold Schwarzenegger's top education adviser is calling for a complete and dramatic overhaul of the way California pays for public schools. Education Secretary Richard Riordan said Wednesday that in light of The Bee's recent investigation of school financing, the new Republican administration is expanding its proposals for education reform to include a new kind of student funding formula.

Under the approach Riordan has in mind, students would trigger uniform "weighted" dollar allotments for their schools, based on their learning needs, rather than the random and inequitable amounts they now generate for their districts.

Such a shift would mark the first time in three decades that California has fundamentally addressed one of the most convoluted, political and deeply entrenched aspects of state spending -- and the biggest, at $41 billion a year.

"We need to start from scratch and do a systematic reform of the entire system," said Riordan, the former mayor of Los Angeles, who has long been involved in school reform efforts.

Earlier this week, the education secretary visited the Edmonton school system in Alberta, Canada, which uses a weighted formula that provides all students a uniform amount of basic education money, then adds on a standard supplemental amount for those with greater needs, such as the poor. The system stands in stark contrast to California's, which has a thousand different base funding amounts for children -- one for every district -- and then adds uneven amounts of money for other needs.

Riordan said Edmonton puts much of the money directly into the hands of school principals, something he and Schwarzenegger would like to see in California to reduce bureaucracy and encourage greater personal accountability for student achievement.

Riordan stressed that the administration is in the early stages of exploring the idea of a weighted student funding formula.

"The governor will be studying it and looking at all the options," Riordan said.

The notion, he added, is consistent with the governor's overall goal of streamlining school funding.

Margita Thompson, press secretary for Schwarzenegger, said it is too soon for the governor to comment on the possible change in student funding. Given the state's deep financial problems, she said, all options for greater efficiency -- both short term and long term -- will get a good, hard look.

"Everything has to be on the table because the fiscal crisis is so severe," she said.

As a key step on the road to change, Riordan is advocating the appointments of two prominent education leaders to a panel that will spend the next year studying school finance in California. Called the Quality Education Commission, the group was supposed to have begun its work last July. But the appointments came slowly -- former Gov. Gray Davis completed his seven choices just before he left office.

Schwarzenegger canceled those appointments and is refilling the slots himself. Riordan is recommending the first two be Ted Mitchell, president of Occidental College, and David Davenport, research fellow at the Hoover Institution.

The Quality Education Commission was created in response to the state's new Master Plan for Education, released last year, which called for finding a more sensible way to pay for schools.

Mitchell said Wednesday that any significant changes to the system would require thorough study and research, and then consensus among the many layers and bodies invested in education, including the Governor's Office, the Legislature, the Department of Education and the state Board of Education.

"All will need to come together to form solutions that will be effective and durable," he said.

Such reform is badly needed, based on a yearlong investigation by The Bee, called "Paying for Schools." The newspaper's review covered three distinct areas of school finance -- known to insiders as categoricals, mandates and revenue limits -- and found them loaded with inequities, politicking, red tape, and confusing and outdated rules and formulas.

The three areas also have big price tags.

The state spends more than $11 billion a year on its categorical system, a confusing maze detailed in a collection of articles published in February. California has more than 100 of these special pots of money earmarked for specific purposes, such as teacher training, violence prevention, gifted education and services for poor children.

In addition, California spends a sizable but shifting amount on mandates, which reimburse schools for tasks imposed on them by the state. Over the past five years, nearly $1 billion has gone out for education mandates, including such routine things as teaching biology to sophomores, according to a Bee investigation published in May.

Finally, there is the $29 billion revenue limit system, which provides per-student dollar amounts for every child in the state to cover the basics of education: teachers and other staff, utility bills and supplies ranging from pencils to microscopes. The public may expect those amounts to be even, but they actually range from $4,300 to more than $8,200 a student. They are accompanied by layers of funding that increase the inequities, according to the most recent slice of the investigation, published Nov. 30-Dec. 3.

"The system is so mind-boggling," Riordan said. "It is impossible to understand."

During the campaign and again during his early weeks in office, Schwarzenegger took aim at the categorical mess, saying the separate pots should be eliminated to reduce bureaucracy and provide more strings-free money to districts.

That alone would be an enormous political battle. Some of the categories of funding date back 30 to 40 years and have constituencies who believe deeply in their purposes. Periodically, state politicians have attempted -- without success -- to rein in the unwieldy system. Just last year, Davis tried and failed.

Now, the new administration is talking about going much further in restructuring the underlying funding process.

Riordan said he wants to create a fairer financial foundation for schools by setting up the weighted student formula, as Edmonton and a number of U.S. states are doing.v

Oregon, for example, has used a weighted approach for the last 10 years. There, a typical student, regardless of where he or she lives, brings a school a standard $5,280 a year.

Six other groups of children with special needs trigger an additional sum for their districts in Oregon. A student not proficient in English receives an extra weight of .50, meaning the child brings in an extra $2,640 to a district. The other five weighted groups are: special education; pregnant and/or parenting students; those in poverty; kids in foster homes; and those classified as neglected or delinquent.

That approach "would put the money at the student level," Riordan said, adding that he also wants to get rid of many of the other complex funding streams of the revenue limit system. One antiquated source, called "Meals for Needy Pupils," brings millions of extra dollars to some districts every year while bypassing many others.

State Sen. Dede Alpert, D-San Diego, said Wednesday that the Quality Education Commission would play a critical role in reshaping school funding. The commission has been asked to develop a new "adequacy" model that determines what a quality education actually costs.

The new master plan recommended retaining a handful of categorical funding streams to address the needs of special populations of children -- which Alpert said would have the same effect as using a weighted approach.

"The weighted formula would be an interesting alternative," she said.

Scott Plotkin, executive director of the California School Boards Association, said he worries that weighted formulas might not address California's numerous demographic and geographic differences.

"My intuition doesn't support a simple, one-size-fits-all approach," he said, adding that he also was concerned about the administration latching onto a single approach to the exclusion of other promising options.

"But I am excited by the prospect of someone in high authority taking a look at the question," Plotkin said. "The existing system is filled with inequities."

The 13-member Quality Education Commission will begin meeting in late January at the earliest, said Mary Weaver, its interim director. The William and Flora Hewlett Foundation of Menlo Park and the Bill and Melinda Gates Foundation of Seattle have together donated $500,000 to pay for staffing, travel and other costs for the first year of the commission's work, she said.

The meetings will be public, and Web-based public forums also are planned.

Paying for schools

State isn't alone in school-finance quandary

By Deb Kollars, Sacramento Bee, November 30, 2003

As California's top leaders wade into the huge job of creating a more fair and straightforward school financing system, they won't be going it alone. In a number of states across the nation, lawmakers and school leaders are challenging the status quo and reforming the way they pay for their schools.

Their approaches vary. But their goals are the same: Simplify the process. Make it more efficient and fair. Find a sensible way to get more resources to those children with the greatest needs.

Last week, Gov. Arnold Schwarzenegger's education secretary, Richard Riordan, called for a complete overhaul of California's system, including the creation of a "weighted" student funding formula. After New Year's Day, a new panel, the Quality Education Commission, will begin tackling the numbers and the issues.

If California succeeds in a transformation, it would make for the ultimate reform story. No other state has as many children or schools -- or an education finance system as big or convoluted.

California spends a staggering $41 billion a year to educate more than 6 million children from Mount Shasta to the Mexican border. A yearlong investigation by The Bee has found that from every angle, it is a funding system in need of repair.

The in-depth review focused on three significant areas of school finance that touch every school in the state. The three areas are loaded with serious problems, though not all are insurmountable, judging by what other states are doing.

The largest piece of the puzzle, at $29 billion, is called "revenue limits." Through this process, schools receive per-student dollar allotments that not only range widely, but also are wrapped in enough red tape and confusion to send the most stoic accountants into despair. Revenue limits pay for basic educational needs, such as teacher salaries, electricity bills and report cards. The revenue limit system also pays extra for some small rural schools.

Another $11 billion a year goes out through "categoricals," a web of special pots of money so numerous and muddled the state can't even keep track of how all the dollars are spent. Categoricals cover specific purposes, such as teaching English-language learners, preventing violence or buying library books.

Finally, there is the only-in-California world of "mandates." In this process, the state pays districts, after the fact, for such routine things as teaching the Gettysburg Address and preparing kids for earthquakes. Over the past five years, nearly a billion public dollars have gone out through this highly manipulated funding stream.

Under each of these three areas, The Bee came across enough obtuse formulas, political maneuverings, hidden histories and revealing public records to fill several dozen notebooks, a couple of hundred file folders and countless computer spreadsheets.

"No state is as complicated as California," said Allan Odden, a former University of Southern California professor of education now at the University of Wisconsin at Madison. "It is time to redraw the system."

Odden and others pointed to numerous states that are searching for solutions or already have simpler approaches in place. Many of the reform efforts have been triggered by lawsuits and court decisions demanding greater spending equity.

In a growing number of places, the idea of simple equity has been replaced by a more sophisticated notion: adequacy. Under this approach, states are putting less emphasis on simply dividing existing public dollars equally, and instead are trying to calculate what it costs to give a child a full and thorough education.

Nationally, there is no single recipe that would solve all of California's problems. But here are some strategies being tried in other states:

Maryland

Cutting categoricals

The state of Maryland went through an exhaustive two-year process, guided by outside experts, to streamline the way it pays for schools. A new system was adopted last year that called for increasing basic per-child "foundation" amounts over a six-year period, from about $4,300 to more than $6,100. One of the most significant changes in Maryland involved getting rid of state categorical programs.

Like many states, Maryland had seen a proliferation of categoricals during the 1990s as politicians tried to put their mark on public education. The small state wound up with about 50 categoricals -- half the number in California.

"Deep down, people knew this wasn't the best way to fund schools. It was so piecemeal and ad hoc," said John Rohrer, coordinator of fiscal and policy analysis for the Maryland Legislature.

Maryland got rid of about 30 of its categoricals, including class size reduction, gifted education, environmental programs and grants for library books. For some, such as gifted education, the state built into the basic foundation formula an allowance to cover these costs.

Maryland kept intact about 20 of the special pots, including bus transportation, teacher retirement, adult education and food services.

Three key categoricals were retained to help the state's most vulnerable children: those in special education, English learners and those living in poverty.

Allocations from these three pots come on top of the standard foundation amount for each child. Special education students each currently trigger an added $1,023; English learners, $1,368; and poor children, $1,341. The figures were based on research and designed to be simple, in contrast to California where extra money for such children goes out through complicated and often inequitable formulas.

The elimination of the 30 Maryland categoricals freed up more than $300 million a year that helped boost foundation funding for all students.

Wyoming

Studying small schools

Like California, Wyoming calls its tiny, remote schools "Necessary Small Schools." But while California relies on old, clumsy formulas and special political deals to pay for the schools, Wyoming is trying to establish a more sensible approach.

In 1995, Wyoming's Supreme Court directed the state to come up with a "cost-based" system for public education, based on models of average prototype schools. The formula, launched in 1998, included an upward adjustment for small schools to cover their higher costs.

Three years later, Wyoming was ordered by the courts to improve the small schools adjustment. Schools complained that the amounts varied and were not equitable. The state, in turn, was concerned that districts were opening new small schools not because children needed them, but to capture more money from the state.

"It went in a direction that didn't work," said Dave Nelson, school finance director for Wyoming's Legislative Services Office. "So we're redoing the adjustment now."

Wyoming spent the past two years gathering precise cost data from every small school in the state -- 257 of them -- on the number of teachers and staff, salary levels, transportation budgets, special education and other expenses. Eventually, each small school will be assigned a separate adjustment, based on its unique characteristics.

Florida

Adjusting by region

When people talk about equalizing basic student funding across a state, a concern often arises: What about differing costs of living in different areas of the state?

Florida for years has recognized -- and addressed -- such differences through its student funding formula. This is in stark contrast to California, where basic per-student funding amounts vary widely, yet have nothing to do with actual student needs or regional cost differences.

For 30 years, Florida has used an elaborate funding formula that starts with a uniform base allotment for each student. It was $3,537 in 2002-03. From there, the state adjusts for many factors, including grade levels, safety programs, English learners, and sparse enrollments.

A key adjustment is the "District Cost Differential." Every year, the state surveys the prices of goods, services and housing in every county in Florida. Each county, which also constitutes a single school district, then is assigned a cost differential that is applied to the base allotment. For example, heavily populated Miami-Dade County's price differential was 1.0543 last year, which raised the base student funding amount by nearly $200 a child.

"So you get more money if you live in an expensive county and less in a lower-cost rural area," said R. Craig Wood, professor of education finance at the University of Florida, Gainesville.

Florida's system is neither new nor universally loved. Some critics find it overly complex. Others complain the amounts are inadequate. But according to Wood, "It's a pretty good system in terms of equity."

Texas

Playing Robin Hood

In Texas, they do something that has long been considered impossible in California: The state takes from the rich and gives to the poor. Like California, Texas has about a thousand school districts and a complicated -- and controversial -- system of paying for schools. Like states across the nation, Texas is being sued by several school districts over funding issues, with more contemplating signing on to the lawsuits.

Texas currently sets a base amount, called the "basic allotment," of $2,537 per student. The number gets adjusted by geographic price differences, district size and the number of children who are poor, non-English speaking, disabled, gifted or enrolled in vocational programs.

The money comes from a combination of state and local taxing sources, with the state providing financial incentives for communities that tax themselves more heavily for education.

Since 1993, Texas has required those districts with the highest levels of property wealth per pupil to turn over some of their locally generated money to the state, which then redistributes it to districts struggling with lower property values.

In California, the only equalization attempts have involved the state providing extra dollars to bring lower districts up.

Next year, 134 Texas districts will face the Robin Hood-style dues.

"They don't like it, but we still do it," said Harrison Keller, senior policy analyst for education for the speaker of the House in Texas.

Oregon

Weighting allotments

For the past decade, Oregon has used an easy-to-understand weighted formula to distribute money to public schools. For the average student, the state provides $5,280 a year. Six other groups of children with special needs generate additional sums for their districts.

A special education student with an individualized learning plan receives an additional weight of 1 -- meaning he or she triggers twice the standard allotment. A student who is not proficient in English generates an additional weight of .50 -- meaning the child brings an extra $2,640 to a district.

Among the other add-on weights:

• Pregnant and/or parenting students: 1.0
• Students in poverty: .25
• Neglected or delinquent children: .25
• Children in foster homes: .25

Certain weights also are applied to different grade levels. High school students in high-school-only districts receive a .20 increase to the standard allotment, while kindergartners get just half of the standard allotment to reflect their shorter school days.

The dollar amounts follow each type of child to the district where he or she attends school. Districts can spend the money as they see fit.

The weighted student allotments weren't determined through hard research in Oregon, but rather through a combination of political haggling and national studies, said Brian Reeder, financial analyst for the Oregon Department of Education.

"The system in Oregon is fairly straightforward," Reeder said. "The level of funding is inadequate, but it's considered by most people to be fair."

Missouri

Increasing efficiency

To strengthen its school funding system, Missouri is looking at many options, including the politically unpopular possibility of consolidating its many small districts.

The state is facing an any-day-now lawsuit over both equity and adequacy in school funding. Leaders want to do a better job in both areas, but a state budget crisis limits their options.

Recently, the Legislature formed a joint interim committee to study the problem. University of Florida professor R. Craig Wood is weighing in with school financing advice. A preliminary study is due Feb. 15.

For a fairly small state, Missouri has a lot of separate districts -- 75 serving grades kindergarten through eight and another 450 for grades K-12. Wood has pointed out that tax dollars might go further if small districts merged, reducing administrative overhead and increasing buying power. Wood also has suggested that money might be used more efficiently if the state's two big districts -- St. Louis and Kansas City -- split into smaller units.

Missourians love their independent districts, and many politicians won't even say the word "C-word" -- consolidation -- out loud. But Wood and others want to at least explore the option.

"We are looking at expenditure patterns, achievement levels and district size," he said. "We want to determine: At what size do districts tend to achieve the most?"

Other options being discussed in Missouri include doing more centralized purchasing of supplies at the state level and encouraging small districts that want to retain their separate identities to merge their administrations.

Paying for schools

State could take lessons from Maryland

Basic school funding rife with inequities

By Deb Kollars, Sacramento Bee, November 30, 2003

The small state of Maryland offers some big lessons for California on what it takes to overhaul a school funding machine:

Take your time. Bring in outside experts and listen intently. Never underestimate the force of a personality. Count on compromising at the very last minute.

"We knew we had to do something different," said Barbara Hoffman of Baltimore, a former Democratic state senator viewed as the driving force behind the effort, which was completed last year. "We were spending over $2 billion a year on education and not getting a good product." Compared with the $41 billion California spends on public education, Maryland's school bill looks tiny. Yet in many ways, Maryland's reform experience was born of the same problems faced by California.

The state was wrestling with funding inequities among districts. School after school was begging for more money. Cash was going out based on special-interest politics. State leaders felt they were blindly pumping money into schools that were failing to educate children, especially the most disadvantaged.

Maryland had some things going for it that made reform easier than it would be in California. It has just 24 school districts. California has nearly a thousand. And it has had a long tradition of providing all districts the same basic per-student allotments, while California doles out a different per-student amount for every district.

By the end of the 1990s, three factors had converged to bring Maryland to its fork in the funding road: Special "categorical" programs had run amok. Student achievement was not up to standards. And a lawsuit was being threatened by citizens concerned that school funding was inadequate.

Maryland's categorical mess was akin to that of California, where a tangle of more than 100 special funding streams for schools exists. Over the space of a decade, assorted governors and legislators in Maryland had set up one special pot of money after another, all designated for separate purposes close to their political hearts: Class-size reduction. Grants for new technology. A popular boost in teacher pay. Special dollars for Baltimore city schools. More money exclusively for Prince Georges County.

Soon, there were more than 50 of these individual money sources, many with elected officials' names attached. It led to more and more competition among officials of districts -- urban, rural, suburban -- who kept score of who was getting what and kept pleading for more money for their particular causes.

In many cases, the categoricals were set up for limited periods of time. As the 1990s ended, they started expiring, creating an anxious stir among legislators.

"There was such a proliferation of categoricals," recalled John Rohrer, coordinator of fiscal and policy analysis for Maryland's Department of Legislative Services. "A lot of the sunset dates were coming up. The Legislature started realizing, 'We need to address this.' "

At the same time, Maryland, like California and other states across the nation, had spent the decade pushing for stronger academic standards and greater accountability in public schools. State leaders were watching test scores closely and were not happy. Every year, in nearly every community, the numbers showed that poor and minority children were not achieving at acceptable levels.

Nancy Grasmick, Maryland's superintendent, was among those putting two and two together.

"It hit me: This is serious," Grasmick said. "The data was telling us that the same kids weren't making it, year after year after year. And it didn't matter if it was a district getting high funding or low funding."

"There was no consistency in the categoricals," she said. "This was about figuring out how to get more money to those kids, wherever they lived."

Finally, there was the specter of a new school-funding lawsuit. The state had gone through a rough one 20 years earlier over funding equity. This time people were talking about the need for adequate spending.

"We didn't want another lawsuit," Hoffman said. "The only people who win are the lawyers."

In 1999, Hoffman and several other key legislators joined forces to create a body with a lofty and hopeful name: The Commission on Education Finance, Equity and Excellence. Over time, it became known as the Thornton Commission, after the chairman of the group. It had 27 members, including legislators, college professors, business leaders and school board members, plus 13 staffers from the Legislature and the Maryland State Department of Education.

The group was charged with determining what an adequate amount of funding for schools should be, ensuring equity in the way it was distributed, streamlining the categorical maze and finding a way to tie the school finance system to the goal of higher student achievement.

"With the old formula, we had just been adding on and adding on to it," Hoffman said. "It was going to collapse of its own weight."

Superintendent Grasmick agreed.

"We were determined to take a slow, measured, professional approach," she said. "We didn't want it to be corrupted by politics."

The two women made a formidable pair. Hoffman had been in the Legislature for almost two decades. Grasmick had been superintendent since 1991. Each is small of stature but commanding in presence. Each holds the other in high regard.

"Nancy Grasmick is the original iron hand in the velvet glove," Hoffman said. "She's very feminine, but tough as nails. She is a blonde, blue-eyed, petite person who talks very quietly and slowly, and can tell you to your face how rotten you are."

"Barbara? She's a dynamo," the superintendent said of Hoffman. "She's very small, but she takes no prisoners. People greatly respected her knowledge base and her dedication."

Over the next two years, the Thornton Commission held hearings across the state. Members brought in a nationally respected school-finance consulting firm, Augenblick & Myers Inc. of Denver. The consultants studied data, applied established research methods, and came up with a model for what a prototypical quality education would cost in Maryland. Other national consultants also weighed in.

The Thornton Commission's final report came out in January 2002. It recommended many significant changes. Among them:

• That the state's basic "foundation" amount for each student be increased significantly to meet the newly established threshold for an "adequate" education.
• That the majority of categoricals be eliminated and the money be redistributed to districts to spend as they saw fit.
• That three major categorical programs be retained for the state's most vulnerable children: the poor, those with disabilities, and those with limited English skills.
• That education funding be linked to performance by requiring each local school system to create a master plan for improving student achievement, which would then be submitted to the state and closely monitored.
• That districts be required to do two new things: Offer full-day kindergarten to all children and pre-kindergarten programs to economically disadvantaged 4-year-olds.

The commission also addressed many other matters, including transportation funding and technical issues related to inequities in the state and local breakdown of school funding.

"We have had some wealth-related disparities, though they were not enormous," Rohrer said.

In all, the plan called for adding about $1 billion to the $2.9 billion the state was already spending for schools -- though not all at once. The commission recommended phasing in the increase over a five-year period.

In the spring of 2002, Hoffman, who had been Senate budget chairwoman for eight years, signed on as the primary sponsor of a bill that fully embraced the Thornton Commission's many recommendations. It came as the state was running out of money in a severe budget crisis.

Hoffman recalled the many who shook their heads: "People would say, 'How can you put this through when you don't know how to pay for it?' I'd say, 'Tell me how you're going to pay for all the juvenile delinquents in six or seven years if we don't do this.' "

As the 90-day legislative session neared its end, Hoffman struggled in her Senate Budget Committee to gather enough votes to move the bill. Two of the 13 committee members were holding out for more money for their schools in Montgomery County -- a large, wealthy suburban area.

One tense afternoon, the committee recessed and reconvened -- several times -- as the two sides wrestled toward a deal. Finally, Hoffman and others gave in and offered Montgomery County what it wanted: About $180 million extra.

"To get the votes, I had to make a compromise," Hoffman said.

From there, the bill passed the full Senate and House and became law. In the end, legislators decided to stretch the funding increases out over six years, rather than five. To cover the first year's cost, they increased the state's tobacco tax.

Before the phase-in began, schools were receiving about $4,300 in basic "foundation" funding per student. This year, the foundation amount grew to $4,766. It is scheduled to rise to $6,124 by 2008.

The state eliminated about 30 categoricals, including class-size reduction, gifted education, library books, environmental education and grants for magnet schools. It built into the basic foundation formula the money to cover such things as gifted education but now leaves it up to local districts to decide how best to spend these dollars. Killing the 30 categoricals freed up about $350 million that the state was able to apply to the foundation formula and other programs.

The state kept about 20 categoricals intact, including transportation, teacher retirement, adult education, food services and a program for failing schools.

Three key categoricals were kept to address the needs of three groups of children. For each special education student, schools receive $1,023 on top of their basic allotments. For students with limited English proficiency, schools receive $1,268 more. And for those in poverty, they get $1,341 more.

The figures were based on research rather than history or politics. The money follows the individual students, wherever they live, rather than going to districts in uneven annual lump sums, as do some categoricals for poor and minority children in California. The per-child allotments for the three special needs categoricals in Maryland are scheduled to more than double by 2008.

Rohrer said some people were upset by the loss of particular categorical programs, but a huge outcry did not materialize.

"The adequacy approach was so logical that it helped appease the loss of the categoricals," he said.

At this point, Maryland remains in a budget crisis, and it is unclear how the remaining years' increases will be covered.

But the good news, Rohrer said, is that the difficult years of study and decision-making are behind everyone. The state has a plan, people believe in it, he said, and somehow they intend to make it work.

Obstacle course

Basic school funding rife with inequities

By Deb Kollars, Sacramento Bee, November 30, 2003

Report urges streamlined school funding By Deb Kollars -- Bee Staff Writer Published 2:15 am PST Wednesday, December 24, 2003

California's system of providing basic operating dollars to public schools is uneven and flawed and should be streamlined by the Legislature, according to a report released Tuesday by the Legislative Analyst's Office. In particular, the new report calls for simplifying 10 separate funding streams that are inequitably distributed among school districts. The funding layers are buried in the state's huge and confusing "revenue limit" system, which doles out basic per-student dollar amounts for every public school student in the state.

"The system is awfully complex," said Paul Warren, the senior policy analyst who wrote the report. "Keeping it as simple as you can helps not only the schools but also the parents."

The legislative analyst's report comes less than two weeks after Richard Riordan, the state's new education secretary, called for a radical overhaul of California school financing. A Bee investigation of revenue limits, published Nov. 30-Dec. 3, found the $29 billion system to be a morass of outdated formulas, political deals and widespread disparities.

A new panel, called the Quality Education Commission, will spend the next year designing an improved financing system. Riordan wants the panel to explore providing schools with uniform "weighted" dollar allotments for students, based mostly on their learning needs.

The existing revenue limit system was created piecemeal over the past 30 years. It assigns a different basic per-student funding amount to every district in the state -- 983 school systems in all. The per-child amounts are expected by most people to be even, but they actually vary from about $4,300 per student to more than $8,200. They average about $4,900 per child.

Revenue limit money is considered general in purpose, and pays for basic educational needs such as teacher salaries and heating bills.

The state spends another $11 billion a year on categoricals -- pots devoted to specific purposes such as special education.

The revenue limit disparities have drawn the legislative analyst's scrutiny in the past, resulting in recommendations that the state equalize the basic per-student amounts.

Tuesday's report went further, analyzing the obscure layers of funding that flow out on top of the basic per-child amounts through the revenue limit system.

These additional funding calculations result in some districts' receiving thousands and even tens of thousands of dollars more per student than others.

Taken together, the report found, the many revenue limit sources bring a district such as Carmel Unified more than $10,000 per student while Davis Joint Unified gets less than half that amount.

Contributing to such inequities is a funding stream called "Meals for Needy Pupils." Statewide, 388 districts receive extra cash from this calculation -- but only if they were levying a property tax override in the late 1970s to pay for cafeteria programs. Today, districts that receive the money do not even have to spend it on meals or cafeterias.

Meals for Needy Pupils amounts vary widely. For example, the Elk Grove Unified School District receives nearly $8 million a year, while other districts receive little or nothing.

Other uneven adjustments noted in Tuesday's report involve funding for unemployment insurance, longer school days and year, continuation schools, beginning teacher salaries, and public employees retirement contributions. The report also singled out an unfair adjustment for transfer students that benefits just two school districts in Southern California: one in Fallbrook, the other in San Juan Capistrano.

The Legislative Analyst's Office said most of these additional revenue limit calculations should be considered "general purpose" in nature and eliminated as separate funding sources. Instead, to streamline the system, the assorted amounts that districts now receive should be rolled into their basic per-child dollar amounts.

Warren acknowledged that doing so would keep alive existing disparities. But, he said, to redistribute the dollars more evenly would hurt districts that have come to rely on those dollars.

"It would be like punishing them now because the state somehow did the wrong thing in setting it up 20 years ago," he said.

The report also raised questions about the special adjustment the state provides for "Necessary Small Schools." In some cases, such remote schools have five or fewer students and cost more than $10,000 per child per year. The state should consider more cost-effective options, the report said, such as serving such students through distance learning programs.

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Last modified: February, 2007

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