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High-needs students

Ideas for improving California’s school funding formula come with billion-dollar costs; here’s why

Public Policy Institute of California report cites costs of controversial proposals like building in regional costs

John Fensterwald

Published

December 17, 2025

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A teacher leads fourth graders in a lesson at William Jefferson Clinton Elementary in Compton on Feb. 6, 2025.

Top Takeaways

• California’s education funding formula, created in 2013, is under review.
• Analysts have put dollar amounts to proposed funding formula reforms, according to a new report by the PPIC.
• Declining student enrollment may provide $7.5 billion in savings for reform.

California’s school funding law hasn’t proven as equitable or effective as legislators envisioned when they passed the Local Control Funding Formula in 2013.

So lawmakers and education advocates have been discussing several ideas to fix it, including adjusting the funding formula to reflect regional costs, doubling state aid for low-income students who are also homeless or English learners and switching from district funding based on daily student attendance to funding based on total enrollment.

But until now, no one has taken a deep dive to examine how much these ideas will cost. A new report by the nonprofit Public Policy Institute of California (PPIC), a San Francisco-based research center, examines the main ideas, each with trade-offs. 

To read more

• To reach the online version of “California’s School Funding Formula: Assessing Alternatives and Trade-Offs,” go here
• For a summary, go here
• For a PDF version, go here
• For the technical appendix, go here

“The gains aren’t as significant as people might assume,” said Carrie Hahnel, senior associate partner at Bellwether, a national nonprofit education research and consulting organization, who co-wrote a 2021 study of the funding. “So this is helpful for advocates who have been asking for things like duplicated weights (for students with multiple needs) or shifting from attendance- to enrollment-based funding to see exactly how much that’s going to cost and which districts are going to benefit from it.”

The report comes at a time when many school officials worry that record TK-12 spending from a post-Covid surge in state revenues will falter. Meanwhile, declining student enrollment in most districts, potential teacher strikes for higher pay, and probable staff layoffs in many districts are heightening tensions that could reinforce urgency to modify the funding formula or chill efforts to do so.

How the formula works

The Local Control Funding Formula, passed through the efforts of then-Gov. Jerry Brown, was novel in its commitment to uniformly increasing funding for four underserved student groups: 

• English learners
• Low-income students
• Homeless students
• Students in foster care

A district receives a supplement of 20% of base funding for every student who fits one of those categories. Districts with large concentrations of those students receive significantly more on top of the supplement and base funding.

The funding formula accounts for about 70% of the districts’ general budget. Because of income taxes on the wealthy and a booming economy, funding for the formula has nearly doubled since 2013, to about $15,000 per student, according to the report.

Since phasing in the formula, there has been improved achievement for low-income and other high-needs groups by some measures, among them higher graduation rates and the percentage of students meeting course requirements, known as A-G, for admission to California State University and the University of California. A study by the PPIC in 2023 found statistically significant improved scores on standardized tests by students in high schools where nearly all students qualify for extra funding. Their schools received about 50% more money than those with very few qualifying students.

Still, the achievement gaps between high- and low-poverty schools, and between Black or Hispanic students, and between white or Asian students have remained stubbornly wide.  

“Despite (the formula’s) improvements to California’s school funding system, lagging test scores, rising achievement gaps, and stubbornly high chronic absenteeism suggest something more is needed,” the report states.

PPIC takes no position on whether the formula should be adjusted or changed. Instead, authors Julien Lafortune, Iwunze Ugo and Brett Guinan conclude: “To some, this is evidence that the level of funding growth thus far has been inadequate, while others cite these facts as evidence that funding alone will not be enough to address the state’s challenges and that state allocations or district practices should be changed.”

Stagnant achievement gaps have fed calls to take a closer look at the formula. Assemblymember David Alvarez, D-San Diego, who chairs the education subcommittee of the Assembly Budget Committee, this year introduced legislation that includes key ideas in PPIC’s new report. He plans to hold hearings in 2026 with the goal of reaching a consensus on priorities for legislation.

Savings from declining enrollment

PPIC bases its calculations on the assumption that additional revenue would be needed to hold districts harmless from formula adjustments that would adversely affect them. The source could be the savings the state will get from paying school districts less as a result of declining enrollment. Statewide enrollment is projected to drop from 5.8 million to 5.5 million students over the next five years, saving $7.5 billion — $1,500 per student, according to the report, which the governor and Legislature could choose to throw back into the funding formula or use for other educational purposes.

Phasing in the formula fixes is one option. Here’s a summary of the main proposals:

Factor in regional costs

Rationale: The cost of living is a lot higher in coastal California, particularly the San Francisco Bay Area, with teachers and staff facing higher rents and home prices, which makes it harder to recruit and retain them. However, a regional cost factor, though briefly debated, wasn’t included in the funding formula.

Cost: $2.5 billion using a teacher wage index distributed by the county, adding 5.4% to the formula. 
Winners: Populous coastal districts with high costs; some big winners would be the Alameda Unified School District, Cupertino Union School District and Evergreen Elementary School District in San Jose, which get little funding beyond the base grant under the formula. 

Losers: Inland, rural districts like Madera and San Joaquin, with large proportions of high-needs students. 

The trade-offs in shifting dollars from less populated regions to urban areas would be uneven. Inland rural and suburban districts would see a $400-per-student funding decrease, according to the report; coastal districts would gain an average of only $50 per student, according to PPIC. 

Rural districts will argue they, too, face severe challenges attracting teachers to their regions.

Fund by enrollment

Rationale: Districts with high proportions of low-income students and English learners tend to have lower attendance rates and therefore lose anywhere from 7% to 10% in potential yearly revenue, compared with districts with attendance rates of 94% to 96% that lose on average only 4% to 6%. High post-Covid spikes in chronic absences, combined with declining enrollments, have compounded the problem.

The switch to enrollment-based funding would increase the number of students being funded, but proportionately reduce the per-student amount. 

Winners: Districts with the lowest attendance rates would receive $260 more per student (1.8%) under the current formula.

Losers: Districts currently with the highest daily attendance would see a drop of $220 per student (1.5%), according to the PPIC, and would likely oppose any reduction in base funding, which they complain is already too low. 

California is one of the dozen states funded by attendance. The Legislative Analyst’s Office plans to release a study soon that examines the impact on student attendance when states switch to funding by enrollment.

Fund duplicate needs

Rationale: Under the current formula, students qualify for the same percentage of extra funding, regardless of whether they are low-income and English learners or English learners in foster care. Some other states allocate extra money for multiple needs. This is especially relevant when homeless children or English learners are concentrated in poor neighborhoods. According to the report, one-quarter of low-income students are English learners.

Cost: $1.7 billion (2.4%) overall, or $279 per student on average.

Winners: Districts in which more than 7 of 8 students qualify for extra money would see an average increase of $659 per student; districts with fewer than 4 in 10 high-needs students would receive only $43.

Even out the funding spike

Rationale: The formula’s extra concentration funding starts when 55% of students in a district qualify as high-needs. Like a jet taking off a runway, extra funding rises sharply as the proportion increases to 100%. Districts whose high-needs students make up around 50% of enrollment complain they are given short shrift. 

Cost: $1.5 billion, estimates the PPIC, by gradually sharing concentration funding and “smoothing the funding curve.”  

Winners: Moderate-need districts with 45% to 65% of high-needs students would gain the most, the report said, receiving an average of $669 per student (4.9%) in more funding. 

Concentration funding is currently applied to districts whose high-needs students comprise 55% of enrollment. The proposal would smooth out the “kink” at 55% and provide additional funding, particularly for districts with between 45% and 65% of high-needs students.Source: Public Policy Institute of California’s “California’s School Funding Formula: Assessing Alternatives and Trade-Offs”

It’s too soon to predict how the case for modifying the funding formula will play out. The California School Boards Association is making raising base funding its high priority. Gov. Gavin Newsom may advocate for using all or part of the $7.5 billion “declining enrollment dividend” to shore up funding for community schools, teacher residencies, or student mental health. Others, Hahnel said, may lobby for putting more money into Career Technical Education progams. 

The coming debate promises to be intense.

EdSource

K-12 Education

Expect more phonics lessons in California schools under law Newsom signed

by Carolyn JonesOctober 20, 2025

Students in class at Lake Marie Elementary School in Whittier, on Nov. 17, 2022. Photo by Lauren Justice for Cal Matters

In summary

The law comes on the heels of a host of other literacy initiatives, including mandatory dyslexia screening and universal transitional kindergarten.

Welcome to CalMatters, the only nonprofit newsroom devoted solely to covering issues that affect all Californians. Sign up for WhatMatters to receive the latest news and commentary on the most important issues in the Golden State.

California took a big step toward overhauling its reading curriculum last week when Gov. Gavin Newsom signed a bill pushing for phonics-based instruction in elementary and middle school classrooms.

The new law provides training for school principals and reading specialists in the “science of reading,” a method of literacy instruction focused on vocabulary, comprehension and sounding words out rather than learning words by sight. The approach has led to improved reading scores in Mississippi, Louisiana and districts like Los Angeles Unified, which adopted it several years ago.

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The law also updates the state’s list of textbooks, flash cards and other classroom reading materials to align with a phonics-based approach.

The law comes on the heels of a host of other literacy initiatives, including mandatory dyslexia screening and universal transitional kindergarten. Combined, the efforts will dramatically reshape the way children in California learn to read and hopefully lead to higher test scores, experts said.

“California has one of the best literacy policy frameworks in the country right now,” said Marshall Tuck, chief executive of the advocacy group EdVoice and a former candidate for state superintendent of public instruction. “We worked very hard on this and we’re thrilled to get to this point. Now we just have to see it through.”

After years of controversy, little opposition

The new law passed the Legislature unanimously and had little opposition. That’s in stark contrast to previous efforts to bring phonics to classrooms, which met steep resistance from English learner advocates and the state’s largest teachers union. English learner groups said that a phonics-based approach only works for children who are fluent in English; the California Teachers Association said teachers need flexibility to pick a reading program that works for their students.

But those groups threw their support behind the current bill after a few changes: Reading materials will be available in languages other than English, and using phonics-based instruction will be optional, not mandatory. Although the state is pushing all schools to adopt the new approach, some may choose to stay with their existing curriculum, which is permissible under the state’s school governance system that leaves most decisions up to local school boards.

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“What does this all mean? It means we’ll see,” said Todd Collins, an organizer of the California Reading Coalition and former Palo Alto Unified school board member. “But I’m hopeful. I think most school districts will get the message that they need to improve early literacy.”

Scores inching up

Collins’ group surveyed 300 California school districts in 2022 and found that 80% were not using a phonics-based approach to reading instruction. That’s changing, with some of the state’s largest districts adopting science-of-reading strategies and seeing good results. Los Angeles Unified, for example, saw its English language arts test scores jump 5.5 percentage points since it adopted a phonics-based curriculum in 2022. San Francisco Unified, Fresno Unified and Long Beach Unified have also seen improvements.

California’s reading scores are about the same as the national average, according to the latest Nation’s Report Card scores, and have been inching up since the pandemic. Last year, 49% of students met or exceeded the state’s English language arts standards — still below pre-pandemic levels but a big increase from the previous year.

Helping teachers

Among those who’ve pushed for the switch to phonics is Assemblywoman Blanca Rubio, a Democrat from West Covina who co-authored the bill. A former elementary teacher, Rubio hopes the new law will help classroom teachers as much as students and their families.

“It’s hard for teachers to see their kids feel defeated and frustrated,” Rubio said. “Now they’ll be equipped to really help their students succeed.”

She was inspired to author the bill, she said, in part because of her younger brother’s experience in school. He was wrongly placed in special education and never properly learned to read, she said, leading him to disengage from school and drop out in ninth grade. Countless other students have had the same experience, she said.

“I know how much it means to learn to read. It can shape someone’s whole life,” Rubio said. “That’s why we stuck with this.”

Another boost to reading instruction came in June, when Newsom included $200 million in the state budget to train teachers in the science of reading. The money should be enough to train every K-3 teacher in the state, Collins said. Credential programs are already training future teachers in the approach.

Tuck, of EdVoice, said the next step is ensuring the policy rolls out smoothly in schools. The new curriculum is a major shift for most schools, and teachers will need plenty of support.

“We can celebrate today, but tomorrow it’s back to work,” he said.

EdSource

Legislation

These are the education bills Gov. Newsom signed or vetoed

EdSource staff

Published

October 13, 2025

Gov. Gavin Newsom signs legislation related to student literacy, surrounded from left, Alberto Carvalho, superintendent of the Los Angeles Unified School District, Marshall Tuck, CEO of EdVoice, and Martha Hernandez, executive director of Californians Together, in Los Angeles on Oct. 9, 2025.

California legislators and representatives of education advocacy organizations and unions spent hundreds of hours negotiating education bills this legislative session.

Controversial legislation, which included changing the way students are taught to read, increasing charter school oversight, and confronting antisemitism at schools, had many lawmakers and advocates working nights and weekends to reach a consensus.

There were other key pieces of legislation, including bills that will phase out ultra-processed foods, prohibit schools from allowing immigration officers on campuses without a warrant, and make it easier for high school students to attend a California State University.

Gov. Gavin Newsom had until midnight Monday to sign legislation. 

Mental Health: Assembly Bill 727

Author: Assemblymember Mark González, D-Los Angeles

What will it do: Require student ID cards in California’s public middle schools, high schools and colleges to include the phone number for The Trevor Project, a leading crisis and suicide prevention hotline for LGBTQ youth.

Status: Signed

Newsom said: “Every student deserves to feel safe, supported, and seen for who they are. While some in Washington turn their backs on LGBTQ youth, California is choosing compassion over cruelty. AB 727 makes it clear: your identity doesn’t disqualify you from care and community — it’s exactly why we are fighting to make it easier to reach.”

— Diana Lambert

Commission on teacher credentialing: Assembly bill 1123

Author: Assemblymember Al Muratsuchi, D-Torrance

What will it do: Modifies the composition of the California Commission on Teacher Credentialing (CTC) to allow for early childhood education representation without expanding the total number of commissioners.

Status: Signed

Muratsuchi said: “The State of California issued the first Child Development Permits to early childhood educators in 1961, making it the first state to professionalize this critical workforce. But in the six decades since, early childhood education (ECE) professionals in California have never had a voting member on the commission, which governs their licensure and preparation.”

— Diana Lambert

ANTISEMITISM: Assembly Bill 715

Authors: Assemblymembers Rick Chavez Zbur, D-Hollywood, Dawn Addis, D-Morro Bay

What will it do: The bill aims to reduce antisemitism in schools by establishing a new Office of Civil Rights and an Antisemitism Prevention Coordinator, who can help track and report antisemitism in schools, as well as train and advise Local Educational Agencies. It also requires any adopted curriculum to be “factually accurate and align with the adopted curriculum.”  

Status: Signed

Newsom said: “California is taking action to confront hate in all its forms. At a time when antisemitism and bigotry are rising nationwide and globally, these laws make clear: our schools must be places of learning, not hate.”

— Mallika Seshadri

Literacy: Assembly Bill 1454

Authors: Assembly Speaker Robert Rivas, D-Salinas, and Assemblymembers Al Muratsuchi, D-Torrance, Blanca Rubio, D-Baldwin Park

What it will do:  It will provide missing links to California’s comprehensive early literacy reforms, which are effective in other states. The bill would provide teachers with evidence-based resources and training in reading instruction, including phonics in kindergarten and first grade. The State Board of Education would select a new list of instructional materials tied to what’s commonly called the science of reading. Districts must select from the list or justify their choices. The state would update reading instruction in administrators’ credentialing programs.

Status: Signed

Newsom said: “At a time when our federal government is focused on dismantling the U.S. Department of Education, in California, we’re doubling down on our efforts to support our schools, students, and teachers. Through significant investments in initiatives like community schools, universal meals, and literacy coaches — and legislative action like the bill I signed today — we’re working to provide students with the resources they need to succeed. And California’s promising test scores show our efforts are paying off.”

— John Fensterwald

nutrition: Assembly Bill 1264

Author: Assemblymember Jesse Gabriel, D-Encino

What it will do: The bill requires the Office of Environmental Health Hazard Assessment to adopt regulations for ultra-processed foods (UPFs), defined as any food or beverage high in saturated fats, sodium, or specific added sugars or sweeteners. It requires schools to begin phasing out harmful UPFs by Jan. 1, 2028. Starting July 1, 2035, the bill prohibits a school district, county superintendent of schools, or charter school from offering a “nutritionally adequate” breakfast or lunch that includes harmful ultra-processed foods or selling food or beverages with UPFs, except as part of a school fundraiser.

Status: Signed

Newsom said: “California has never waited for Washington or anyone else to lead on kids’ health — we’ve been out front for years, removing harmful additives and improving school nutrition. This first-in-the-nation law builds on that work to make sure every California student has access to healthy, delicious meals that help them thrive.”

— Vani Sanganeria

Immigration enforcement: Assembly Bill 49

Authors: Assemblymembers Al Muratsuchi, D-Torrance, Liz Ortega, D-Hayward, Celeste Rodriguez, D-Arleta; Sen. Lena Gonzalez, D-Long Beach

What it will do: The bill will prohibit schools from allowing immigration enforcement officers to enter a school campus or question a student unless they have a judicial warrant or court order. It will also prohibit schools from sharing information about a student, family or employee with immigration officials, unless the officials present a judicial warrant or court order. 

Status: Signed

Newsom said: “Public safety depends on trust between law enforcement and the communities they serve — but Trump and Miller have shattered that trust and spread fear across America. California is putting an end to it and making sure schools and hospitals remain what they should be: places of care, not chaos.”

— Zaidee Stavely

IMMIGRATION NOTIFICATIONS: SENATE Bill 98

Author: Sen. Sasha Renée Pérez, D-Pasadena

What it will do: The bill will require school districts, California State University, each California community college district, and each Cal Grant qualifying institution of higher education, as well as request the University of California, to issue a notification to all students, faculty and other campus community members when the presence of federal immigration enforcement is confirmed on campus. These notifications must include the date, time and location of enforcement on campus, as well as a link to additional resources for students and campus community members. 

Status: Signed

Pérez said: “The SAFE Act will inform and protect immigrant students and their families on school campuses. In the face of mass deportations, raids and immigration enforcement authorities showing up at schools, the SAFE Act can help inform and empower school communities to make the best decisions about their safety and their family’s safety.”

— Vani Sanganeria

truancy: Assembly Bill 461

Author: Assemblymember Patrick Ahrens, D-Cupertino

What it will do: This bill repeals the criminal misdemeanor offense under the existing truancy law, meaning that parents of truant students, age 6 or older, in grades K to eighth, can no longer be punished by fines or up to a year in county jail. Students can be labeled as truant after three unexcused absences of more than 30 minutes during one school year. It goes into effect Jan. 1.

Status: Signed

Ahrens said: “Thank you to Governor Newsom for signing my bill to repeal this failed policy of criminalizing struggling California families for their children missing school; families and kids need support, not criminal charges and fines, to improve school attendance. Fining or imprisoning parents did nothing to get kids the education and support they need.”

— Betty Márquez Rosales

Threats: Senate Bill 19

Authors: Sen. Susan Rubio, D-Baldwin Park

What it will do:  It makes it a crime to threaten to commit a violent act at a school, day care, university, workplace, house of worship or medical facility, on the internet or by other means. The law states that it does not matter if there was no intention to carry out the threat, if it caused people to fear for their safety.

Status: Signed

Newsom said: “California families deserve to feel safe when they drop their kids off at school, go to a doctor’s appointment, or practice their religion.”

— Zaidee Stavely

Family Preparedness: Assembly Bill 495

Author: Assemblymember Celeste Rodriguez, D-Arleta

What it will do: The bill expands the number of relatives who can sign a “caregiver’s authorization affidavit” and be able to enroll a child in school and make decisions about medical care provided in school on behalf of a child to include all adults related to a child by blood or adoption, within five generations, or “degrees of kinship.” This includes great- or great-great aunts or uncles, and spouses of these relatives, in addition to stepparents, stepsiblings and other relatives. It also authorizes a court to appoint a person nominated by a parent to have joint custody of a child if the parent is unavailable due to circumstances such as immigration detention or deportation, and makes it easier for the parent to terminate those rights when they are available again. In addition, the bill extends protections that exist in TK-12 schools to child care facilities and preschools, prohibiting them from collecting information or documents regarding citizenship or immigration status of children or their family members, and requiring them to report requests for information or access to the California Department of Education and the attorney general. 

Status: Signed

Newsom said: “Our children deserve to feel safe at home, in school and in the community. We are putting on record that we stand by our families and their right to keep their private information safe, maintain parental rights and help families prepare in case of emergencies.”

— Zaidee Stavely

African American history: Senate Bill 510

Author: Sen. Laura Richardson, D-Torrance

What it will do: The bill requires that the Instructional Quality Commission consider including the historical contributions of African Americans in early California history when it revises the curriculum framework in history-social science or adopts new instructional materials.

Status: Signed

Richardson said: “This legislation is a step toward correcting historical omissions, empowering African American students with representation and educating all students to be more informed and socially conscious citizens.”

— Diana Lambert

CSU ADMISSION: Senate Bill 640

Author: Sen. Christopher Cabaldon, D-Napa

What it will do: The bill aims to make it easier for qualified California high school students to get admitted to California State University. Eligible high school students — those who have taken the required courses and maintained an appropriate grade point average — will receive mailers directly admitting them to participating CSU campuses.

Status: Signed

Cabaldon said: “It makes higher education the natural next step, not an intimidating maze of forms and fees. Every eligible student deserves that life-changing moment of opening an acceptance letter.”

— Amy DiPierro

CHARTER SCHOOL ACCOUNTABILITY: Senate Bill 414

Author: Sen. Angelique Ashby, D-Sacramento

What it would do: SB 414 will change the oversight, auditing and funding of nonclassroom-based charter schools, establish statewide contracting requirements to prevent misuse of public funds, and extend the moratorium on nonclassroom-based charters until June 30, 2026. The legislation also changes audit procedures for all school districts and charter schools, and creates an Education Inspector General’s Office to investigate allegations of fraud and financial mismanagement.

Status: Vetoed

Newsom said: “I deeply appreciate the efforts of the author and the negotiating parties to develop legislation that builds on these recommendations and the findings of the State Controller. However, this bill falls short. While the oversight and auditing provisions are meaningful, other sections are unworkable, would face legal challenges, and require hundreds of millions of dollars to implement. Additionally, provisions added late in the legislative process undermine important agreements my Administration made during my first term.”

— Diana Lambert

AVERAGE DAILY ATTENDANCE: Assembly Bill 1348

Author: Assemblymember Jasmeet Bains, D-Bakersfield

What it will do: School districts, county offices of education and charter schools can currently request average daily attendance (ADA) credit to make up for decreases in attendance reaching 10% of the student population that occur due to a specified list of reasons. This bill would have added immigration enforcement actions to that list, which includes fires, floods, epidemics, earthquakes, and more, until June 30, 2029. When such a request for ADA credit is made, students must also be offered independent study.

Status: Vetoed

Newsom said: “Current law already provides opportunities for local educational agencies to utilize attendance recovery and independent study programs to recoup lost attendance-based funding, while also ensuring students receive instruction and support. AB 1348 does not include sufficient safeguards to ensure that students who miss school due to immigration enforcement activities will receive alternative instructional opportunities. Additionally, this bill creates substantial cost pressures when state law is already designed to buffer school districts’ budgets from attendance fluctuations by allowing them to use a three-year rolling average of attendance when calculating school funding.”

— Betty Márquez Rosales

substitute teachers: Assembly Bill 1224

Authors: Assemblymembers Avelino Valencia, D-Anaheim, Robert Garcia, D-Rancho Cucamonga, Anamarie Ávila Farías, D-Concord

What it would do:  The legislation would help fill vacant teaching positions by doubling the number of days a substitute can teach in a single classroom from 30 to 60 in general education, and from 20 to 60 in special education. The legislation would go into effect on Jan. 1, 2026, and require school districts to report substitute usage in 2026-27.

Status: Vetoed

Newsom said: “Research demonstrates that substitute teachers tend to serve classrooms with a disproportionate number of students with disabilities, English learners, and students from low-income families. While this bill requires local educational agencies to offer mentorship, training and support to substitute teachers, it does not mandate their participation in these programs. As such, this bill would allow individuals to serve our highest-need students for as much as a third of a school year without minimally required training or mentorship.”

— Diana Lambert

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