The most compelling debate in the global poverty world over the past several years has revolved around whether simply transferring cash to the needy, without conditions, works better than delivering aid through some complicated development scheme. Global charities like GiveDirectly operate on this unconditional cash transfer model. New research out of Uganda shows that poor young people given a year’s salary (around $382), no strings attached, experienced substantial long-term benefits, using the money to help lift them out of poverty and stay there. The return on this investment was extremely high, regardless of the lack of oversight. Experimental interventions with direct cash rewards in New York City, while conditional, have shown results as well.
The nation’s most populous state will soon apply this theory to the contentious issue of public education. To solve the problem of the achievement gap between well-off and poor students, California will just give the poorer schools cash.
That’s the impulse behind California Governor Jerry Brown’s effort to change what he considers the Golden State’s inequitable and maddeningly complex K-12 education funding system. With a final state budget deal inked yesterday, Brown secured passage of a funding formula that devotes additional resources to schools that have high-need students.
Legislative Democrats put up some resistance to the plan—especially the part about giving money to schools with no strings attached, and with no chance for state-level control over how money gets spent. But in global development, the no-strings-attached dimension of these kinds of programs appears to be a powerful part of their success. Brown did not win this battle completely, and local school districts will have to meet some conditions to get and keep the extra money. But for the most part, California will embark on a major experiment: adapting the global poverty-reduction model of unconditional cash transfers to solve one of America’s most nagging problems—the challenge of giving every child the chance for a quality education.
There are plenty of communities of need; over one-quarter of California students are learning English, and a whopping 55 percent qualify for subsidized meals.
THE INCOME ACHIEVEMENT GAP—the difference in performance between students from high-income and low-income families—has been shown to be one of the most powerful divides in education, bigger even than race. According to research from Stanford University, the income achievement gap has grown over the past 40 years, with high-income students pulling away from their peers. “Poor students start further behind, and require additional resources to catch up,” said Deborah Verstegen, a professor from the University of Nevada-Reno specializing in education finance. “Kids from disadvantaged backgrounds may end up doing well, but they don’t start from the same line.”
Again and again, research turns up the same idea: the more disadvantaged the students at a school, the more money the school needs. And yet the American public education system tends toward precisely the opposite result: schools in wealthy neighborhoods, as everybody knows, tend to be more handsomely funded than schools in poor ones.
Many states have recognized this, and try to compensate by funneling more money to high-poverty schools. According to Verstegen’s research, between 30 and 37 states already supply additional resources to schools with low-income students, and also to English language learners, who often require special instruction and materials. But with property tax revenues still controlling a substantial chunk of education finance, schools in higher-income areas still typically have more resources than their poorer counterparts, and those good schools are increasingly residentially segregated.
California has unique circumstances in this regard. In the 1970s, multiple state Supreme Court rulings known as the Serrano decisions determined that school district funding disparities from property tax revenue violated the equal protection clause of the 14th Amendment. This forced the state to face the problem of unequal distribution in American education head-on, with a new financing system that shifted revenue to poorer districts to equalize per-pupil spending. But then Prop 13, the 1978 initiative that sharply reduced property taxes, cut 53 percent of school district revenue overnight. “The state came in and backfilled that lost revenue,” said Jonathan Kaplan, education policy analyst at the California Budget Project. “And being the primary funder, they put themselves in control of how the dollars got spent.”
True to form, the story of education in California is one of extremes: If the state is now letting the pendulum swing toward a stark form of local control over education, that’s partly because it has spent the past few decades under an extreme system of state-level control—one that assumed an aspect of baffling complexity over the years. Based on a layered formula that takes into account historical baselines, overlapping mandates, and conflicting “categorical” qualifications for money, the funding process is confounding even to school administrators. “You currently need people like me to explain the rationality of the state’s funding process, and I can’t explain it,” said Kaplan. “This makes it hard to allocate dollars relative to the needs of different student populations.” Analysis by Kaplan shows that school districts with larger shares of high-need students often receive less state education dollars, under the current system.
Jerry Brown argues that this situation represented a civil rights crisis, where long-standing inequities in funding never get remedied for the most vulnerable. His plan to fix it is called the Local Control Funding Formula. Under the plan, every school district in California would get a base grant for each pupil, which would cover 80 percent of total state education dollars. A supplemental grant (16 percent of total education funds) would give school districts 35 percent over the base for every disadvantaged student, be they English language learners or those qualifying for subsidized meals. Then, if a school district’s student body is comprised of over 50 percent disadvantaged students, they qualify for a concentration grant (four percent of total education funds), with another 35 percent boost for each disadvantaged student over the 50 percent threshold.
“This plan gives every student in California a better shot at success,” Governor Brown said at a recent rally. And once fully implemented, it would devote far more resources to students in need than current law, and relative to other states. The largest categorical program in California giving funding to English language learners, for example, totals $1 billion. This plan would give up to $12 billion. “It’s a substantial infusion of dollars for communities of need,” Jonathan Kaplan said. And there are plenty of communities of need; over one-quarter of California students are learning English, and a whopping 55 percent qualify for subsidized meals.
The funds would account for the increased resources needed to educate disadvantaged students—special instructors, materials, computers, at-home tutors, and other measures. The dollars represent an investment in at-risk populations that can, over the long term, curb drains on social services and even reduce crime, if it results in less high school dropouts. The concentrated grants in particular reflect research showing that concentrated areas of poverty add to education challenges and increase per-pupil costs. The federal No Child Left Behind legislation also allots grants to schools with a majority of low-income students.
The aspects of Brown’s funding proposal that establish strong “local control” over spending are the parts that most closely mirror the unconditional cash transfers of the global poverty world. Brown’s plan, contrary to the tight rein legislators in Sacramento currently use to control education choices in California, empowers local school boards to make decisions on how to spend the grants. Brown believes in the “principle of subsidiarity,” decentralizing state authorities down to the local governments, a reversal of recent policy in California. Taking away strings on the funding would allow for more flexibility and experimentation, turning school districts into laboratories of democracy. The downside is the loss of control, but Brown thinks that accountability would simply flow to the local level, to school boards and administrators.
This notion of trust mirrors the logic behind unconditional cash transfers. The individual poor person has a better sense, the theory goes, of how to lift themselves up than a U.N. development group or NGO. And the results reflect this, in the limited circumstances where unconditional cash transfers have been used.
THE DEMOCRATIC-CONTROLLED LEGISLATURE and the governor hashed out the education finance plan this week, as part of budget negotiations. While suburban lawmakers complained that Brown’s plan costs their school districts money (in reality, all districts will see more funding than last year; suburban districts just won’t get the same amounts they would under the current inequitable system), ultimately a compromise was struck by raising the base grant for all schools, paid for through delaying some debt payments and assuming higher revenue intake. The supplemental and concentration grants remain the same. So it appears as if Brown will get his victory with most of the plan intact.
But there was a big difference between the governor’s original January proposal and the revised one put forward just last month. The governor’s plan initially had very few accountability measures, preferring to pass that to the local school boards. But the May revision did include funding accountability measures, ensuring that the extra money actually gets spent on high-need students. More important, there is now academic accountability, which didn’t exist before. School districts must now reach certain growth rates on standardized tests over a period of years to remain eligible for grants. If they don’t, consequences could include the loss of grant money, and even a state agency taking over the local budget. It’s not yet clear at press time how stringent the consequences for missing the metrics will be. But if the accountability measures have teeth, this makes the funding formula more akin to a conditional cash transfer. Unconditional cash transfers put more trust in the recipients, empowering them to know the best ways to spend the cash.
Brown’s plan could have represented an opt-out of the more common education reform debates around standardized testing, student achievement and teacher performance. Instead of focusing on accountability-based measures, he could have just given the schools with the most needs more money, and watched how they responded. But with these last-minute measures of unresolved strength, the reform debate reappeared. While this reduces the purity of the project, Brown’s education plan may still give clues to whether providing more resources to high-need students shrinks the income achievement gap. And the lessons from that could be profound for education policy.
POSTSCRIPT: As the details of the budget agreement slowly come out, it's clear that the compromise does shift dollars away from schools with high concentrations of at-risk students, and toward suburban districts which feared losing out on additional money. Overall, K-12 schools will get an additional $500 million. But all of that goes toward increasing the base grant for every school. The supplemental grants will come in at only 20 percent of the base grant, not 35 percent, though because the base grant is higher, this will reflect a similar amount of money. The concentration grants are actually higher on a per-pupil basis (50 percent), but they now have a higher threshold; a district must have 55 percent of their students as either low-income or English language learners to qualify for the grant, up from 50 percent. In Governor Brown's budget, the breakdown of total education dollars for base, supplemental, and concentration grants was 80-16-4; now it's more like 84-10-6.
The compromise definitely robs poorer schools of funding to pay off suburban districts; the California Budget Project's Jonathan Kaplan says some figures show up to $3 billion transferred from grants for disadvantaged students to fund higher base grants for all schools. That's very disappointing, but the core principles sought by Governor Brown do remain in place. The antiquated system of education finance will be thrown out, replaced with one that, despite this compromise, still transfers more money to schools needing the most resources to educate disadvantaged students. Meanwhile, control will still largely flow to local school districts. The fate of the oversight and accountability measures remain unclear, so we don't yet know whether this represents a conditional or unconditional cash transfer. But it improves upon the status quo, and it still reflects the global poverty concept of simply giving those in need more money to lift themselves up.