New High Risk Issue:

Providing a High Quality and Affordable Public Education Presents Significant Challenges

HIGHLIGHTS

Our review of education in California highlighted the following:

Nearly half of the $88 billion in California's General Fund expenditures are education-related expenses.

The State has over 6 million kindergarten through 12th grade (K-12) students and over 2 million higher education students.

Recent changes have created challenges for the education of K-12 students. The State intends to invest $25 billion over the next eight years to implement a new funding formula that will provide more local control over education spending. California's adoption of the common core state standards will change how local educational agencies (LEAs) educate K-12 students. Along with the potential benefits of adopting the common core state standards, its implementation presents challenges to LEAs. The State has committed $1.25 billion in fiscal year 2013-14 to help offset the LEAs' costs, but they will likely incur additional costs.

Future funding uncertainty, rising tuition levels, and budget constraints have impacted residents' access to California's public universities.

RESULTS IN BRIEF

The importance of California residents receiving a quality education, and the challenges associated with providing that education, have led the California State Auditor (state auditor) to add education to its list of high-risk issues. The State is responsible for educating more than 6 million students in kindergarten through 12th grade (K-12) and over 2 million higher education students.

In fiscal year 2011-12 California spent more of the State's General Fund on education-related expenses than on any other area—approximately $42 billion of the General Fund's $88 billion total expenditures. However, California's tremendous investment in education has not produced the desired outcomes. California spends less money per K-12 student than comparable states and has a lower high school graduation rate and a higher high school dropout rate than the national median. Moreover, rising tuition levels and budget constraints jeopardize residents' access to California's public universities.

Within education, recent changes have created potential challenges associated with economy, efficiency, and effectiveness. California recently changed the way it funds K-12 education. This new funding approach—called the local control funding formula (funding formula)—is intended to simplify how local educational agencies (LEAs)1 are funded and to provide them with more control over how to spend the state funds they receive, beginning in fiscal year 2013-14. The State intends to invest $25 billion in new funding over the next eight years to fully implement the new funding formula by fiscal year 2020-21, but reaching that level of funding will require significant and sustained growth in the State's revenues. Further, given the timing of the enactment of legislation related to the funding formula and the timeline it establishes for implementation, assessment of LEAs' performance under the new funding formula will not occur until late 2015.

Additionally, California has adopted the common core state standards (common core), which will change the way LEAs educate K-12 students. Adopted by 45 states and the District of Columbia, common core emphasizes critical thinking and analysis in core subjects. Proponents believe that common core will better prepare K-12 students for college and the workforce. Along with the potential benefits, however, are complexities and considerable challenges for California, as the implementation of common core requires extensive training for teachers, new curriculum and instructional materials, new assessments of student performance, and increased spending on technology. These requirements represent a considerable investment, and in fiscal year 2013-14 the State committed $1.25 billion to help LEAs offset the costs of implementing common core. However, more will certainly be needed. For example, Los Angeles Unified School District has chosen to invest $1 billion in technology upgrades to implement common core. Additionally, as California transitions to common core and determines the validity of new tests, it plans to suspend current tests for the 2013-14 academic year. Because this action may affect California's ability to satisfy certain federal requirements, the U.S. Department of Education has informed the State that noncompliance could cause California to lose federal funding sources that provided $3.5 billion to the State in fiscal year 2012-13.

California's public universities also face challenges related to funding and access to education. In fiscal year 2013-14 the governor proposed increasing the funding for the University of California (UC) and California State University (CSU), provided they freeze current tuition levels; agree to meet certain performance measures; and, at a minimum, maintain current enrollment levels. However, the two systems are uncertain as to whether they can freeze tuition levels and are in negotiations with the California Department of Finance to come to a resolution regarding future funding for higher education.

Further, residents seeking to attend a California public university may face several barriers. Due to past budget constraints, UC and CSU have curbed enrollment growth, despite the expectation that students who are California residents would have access to this level of education. Also, given the increased costs of attending CSU and UC since the 2000-01 academic year, residents may no longer be able to afford to attend these institutions. Finally, due to budget cuts, the California Community Colleges have reduced the number of classes offered, which affects students' ability to complete their education in a reasonable time frame.

Providing a quality and cost-effective education to the more than 8 million students in public schools and universities is vital to the economic future of California. In this report the state auditor has identified examples of several significant challenges associated with providing a quality and cost-effective education at the K-12 and higher education levels. To the extent that resources are available, the state auditor may undertake future projects that could include recommendations to improve education-related policies and programs and to implement those improvements. These future projects may include audits of the topics described in this report as well as other education-related issues.

1 LEAs are school districts, charter schools, and county offices of education.