In summary A critical state audit has made oversight of spending on disadvantaged students a first order of business for California lawmakers.

Galvanized by a state audit that criticized California’s lax oversight of school spending, legislators are ringing in the new decade with proposals that would require the state to follow the money that districts get to educate disadvantaged kids.

Assembly Bills 1834 and 1835, introduced this week, mark the latest effort by lawmakers to bolster transparency under the so-called Local Control Funding Formula, the landmark 2013 law that overhauled how the state funds public schools.

The bills by Democratic Assemblywomen Shirley Weber of San Diego and Sharon Quirk-Silva of Fullerton focus on the formula’s central tenet — that more money should go to students who face higher hurdles. And they take up the central complaint of the November audit: that it’s too hard to tell whether especially challenged districts are spending their money the way they’re supposed to.

The bills take up the central complaint of a November state audit: that it’s too hard to tell whether school districts are spending their money the way they’re supposed to.

If passed by the Legislature and signed by Gov. Gavin Newsom, the bills would make two key changes recommended by the audit.

The state Department of Education would be required to track how schools spend “supplemental” and “concentration” dollars meant for programs and services that benefit foster youth, English learners or economically disadvantaged students.

Districts also would have to report unspent dollars earmarked for disadvantaged students and use them for their original purpose, even if they roll over into the following year.

Weber said the state audit’s findings clearly spell out the need to tweak the funding formula, telling reporters Wednesday that “state officials cannot continue to fail California’s neediest students.”

“This is not an effort to micromanage and tell (schools) how they have to use the dollars,” Weber said. “But they should let us know how much money the schools are receiving, what programs are planned to put in place to help these particular students so that we can eventually close the achievement gap.”

The funding formula, commonly known as LCFF, aimed to close the state’s chronic achievement gap by steering additional dollars toward school districts with higher concentrations of disadvantaged kids. It also gives local boards and administrators more authority than in the past over school spending, and is widely viewed by educators, experts and advocates as an improvement over California’s previous school finance system. Supporters credit the law with helping to boost the state’s graduation rate and student test scores.

Assemblywoman Shirley Weber says oversight is needed to help close the achievement gap, not to “micromanage” schools. Photo by Steve Yeater for CalMatters

But in the seven years since Gov. Jerry Brown signed the law, the debate over transparency has been ongoing.

Brown resisted efforts to change the formula and cautioned patience in its implementation, but critics worried that money for disadvantaged kids might too easily end up being spent on basic across-the-board expenses, such as teacher salaries and growing pension obligations. Auditors found such examples in the districts they studied, and local officials indicated that the state doesn’t give schools enough in base funds to cover general expenses, increasing pressure to use supplemental and concentration funds to cover gaps.

Supporters of stronger oversight have long questioned whether the law could effectively close the achievement gap, as intended, without monitoring how districts use their supplemental and concentration money. The state’s incremental growth in test scores among Black, Hispanic and low-income students and other disadvantaged student groups demonstrates the need for more scrutiny, they say.

A spokeswoman for the State Board of Education said the board does not take positions on pending legislation. But in response to the LCFF audit, Karen Stapf Walters, the state board’s executive director, noted ongoing efforts to improve transparency.

Critics have worried from the outset that money for disadvantaged kids might end up being spent on basic expenses such as teacher pensions and salaries.

On Wednesday, for example, the board passed revisions to the rules governing Local Control Accountability Plans, aimed at making them easier to digest. Districts are required to update these strategic plans every year, and while they’re intended to give parents information on school spending and student outcomes, the documents have garnered criticism for being too dense and not user-friendly.

State Superintendent of Public Instruction Tony Thurmond also has put together an informal group of experts and educators to study ways to improve spending transparency following the audit’s publication.

Kindra Britt, director of communications for the state Department of Education, said in an email Wednesday that while the department did not yet have a stance on the two bills, “we agree with (Assemblywoman) Weber that we need to ensure that funds are going to our most vulnerable students, as was the intent of the LCFF.”

Weber and Quirk-Silva’s bills take specific aim at one of the audit’s findings: Because of the way the state implemented the funding law, supplemental and concentration dollars that go unspent by schools lose their designation the following year and essentially roll over to districts’ base funds the following school year.

As a result, auditors identified $320 million among the three large school districts they studied that should have been targeted toward disadvantaged students but were instead earmarked as general funds for basic expenses.

“Because we have failed to act, we have given school districts a perverse incentive to ignore the needs of our most disadvantaged students and appropriate those funds for other purposes,” Weber said.

