Feb 02 2018

Money and Freedom: The Impact of California’s School Finance Reform

School Finance Series

With California home to one in every eight students in the U.S., it is with great interest that policymakers, advocates, the equity community, and researchers have followed the implementation and impact of the Local Control Funding Formula (LCFF), the state’s groundbreaking school finance reform. This brief summarizes the findings from one of the first studies to provide evidence of LCFF’s impacts on student outcomes.  Specifically, the authors’ analysis found strong evidence that increases in school spending under LCFF have led to significant corresponding increases in high school graduation rates and academic achievement, particularly among students from low-income families.

Adopted in 2013, LCFF allocates funds based on pupil needs and eliminates many limitations on the use of funds, allowing “local control” over spending decisions. In addition to base grants, which are based on Average Daily Attendance (ADA) and grade level, local education agencies (school districts and charter schools) receive “supplemental” and “concentration” grants, based on the number and percentage of English language learners, students in foster care, and students from low-income families. Along with this new funding formula has come a significant influx of new K-12 spending. When LCFF is fully funded (likely in the next fiscal year), California will have increased its K-12 commitment by $18 billion. 

Key Findings

In this study, researchers Rucker C. Johnson, Associate Professor of Public Policy at the University of California, Berkeley's Goldman School of Public Policy, and LPI Senior Researcher Sean Tanner found LCFF-induced increases in district revenue has a “strongly significant” impact on average high school graduation rates for all students in the state.  For example, a $1,000 increase in district per-pupil revenue from the state for grades 10–12 leads to a 5.3 percentage-point increase in high school graduation rates, on average, among all students. Authors found similar graduation-rate improvement for students from low-income families and by race/ethnicity: a $1,000 increase in per-pupil revenue from the state causes a 6.1 percentage-point increase for children from low-income families, 5.3 percentage-point increase for Black children, 4.2 percentage-point increase for non-Hispanic White children, and a 4.5 percentage-point increase for Hispanic children.

A $1,000 increase in district per-pupil revenue from the state for grades 10–12 leads to a 5.3 percentage-point increase in high school graduation rates, on average, among all students.

Researchers analyzed the scores of California eleventh graders on the state’s standardized tests of numeracy and literacy (both the STAR and Smarter Balanced assessments), normed to reflect scores on the National Assessment of Educational Progress (NAEP), to understand the impact of increased spending and flexibility under LCFF on test scores. Here, too, they report a positive relationship between LCFF and improved outcomes for students. Specifically, the results of the analysis show average gains in mathematics and, to a smaller extent, in reading for all students. The effects for high school mathematics are particularly strong for students from low-income families.

Researchers also found that the LCFF-induced increases in district revenue led to a significant reduction in the average school-level student-to-teacher ratio and significant increases in per-pupil expenditures, average teacher salaries, and instructional expenditures. Although the overall composition of the broad categories of spending appears not to have shifted dramatically in these first 3 years of LCFF, researchers did see significant increases in public pre-k spending per 4-year-old in the district and noted that increased district revenue disproportionately increased the proportion of expenditures on special education.


The findings on outcomes are particularly noteworthy in light of the fact that LCFF is a recent reform and has been gradually rolled out to become nearly fully funded and implemented in the past year. The country is watching as it is anticipated that, if successful, the new school finance measure may lead other states to adopt similar legislation. Time will tell. In the interim, this new research evidence suggests that money targeted to the needs of students, and allocated by local districts to meet those needs, can make a difference in student outcomes.

Money and Freedom: The Impact of California’s School Finance Reform (research brief) by Rucker Johnson and Sean Tanner is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

This research was funded in part by the Raikes Foundation. Core operating support for the Learning Policy Institute is provided by the Sandler Foundation, the William and Flora Hewlett Foundation, and the Ford Foundation.

About Getting Down to Facts II

California’s education system has seen substantial policy shifts over the past decade potentially benefiting the state’s 6.2 million students. Getting Down To Facts II (GDTF II) is an in-depth research report that serves as a “state of the state,” with the goal of providing a common set of facts to inform discussions and education policy development going forward. Learn more >