California policymakers—both in Sacramento and at the local level—have long disagreed about how state funds should be allocated to schools. Some prefer policies that target funds for particular purposes (“categorical funding”), while others advocate giving schools and districts more flexibility. The percentage of state education funding that is earmarked for specific purposes and regulated from Sacramento grew from about 25 percent of state education funding in 1980–81 to nearly 40 percent in 2007–08 (Imazeki, 2012), and California has more categorical programs than most states (“Finance Snapshots,” 2005). Yet, this balance remains a contentious issue among policymakers,...

We used the findings from our 2009–10 case studies to help design the survey on districts’ use of Tier 3 flexibility that we administered statewide in 2010–11. In this chapter we describe the procedures we followed to design and implement the survey and to analyze the results.

As part of our case studies we interviewed district superintendents, central office staff, school board members, school principals, union representatives, and other stakeholders. These experiences led us to believe that district CFOs or persons with equivalent responsibility would be the best source of information for the key questions we had regarding...

The legislation that created Tier 3 flexibility was enacted quickly with limited discussion or consultation with local school districts. Initially, districts were uncertain about some of the rules and regulations that applied to them, and they sought information from a variety of sources (Fuller et al., 2011). For example, the law stated unambiguously that Tier 3 flexibility would sunset in 2013 unless the legislature chose to extend that date, but not all districts seemed to be aware of its short-term nature. The legislation is also clear that districts are free to allocate Tier 3 funds in any way they choose....

This chapter describes CFO reports of how districts acted to reallocate Tier 3 program funds or “sweep” them into their general fund, including which programs experienced the sharpest reallocation of funds and how district responses to fiscal flexibility varied based on student demographics and other district characteristics. We also present information on districts’ accounting practices regarding Tier 3 revenues and expenditures in 2010–11.

Two opposing views dominate the policy debate over fiscal deregulation in California. On the one hand, advocates of increased flexibility argue that deregulation of categorical aid will empower district and school-level educators to rethink priorities and...

This chapter examines the question of how district leaders made budget decisions in the wake of Tier 3 flexibility. We examine CFO reports of who was involved in budget decisionmaking and how their choices were influenced by various factors, including the desire to realign spending with district priorities, the press of local constituencies, feedback from school principals, and information from outside agencies (e.g., advice regarding fiscal strategies).

Advocates of greater fiscal flexibility argue by decentralizing fiscal decisionmaking greater engagement of local stakeholders will occur and dollars will be allocated more efficiently (e.g., school principals might be given greater control over...

This chapter details how CFOs viewed the consequences of Tier 3 flexibility. We focus on two fundamental questions: (1) Did flexibility enable districts to survive drastic budget cuts by allowing them to target funds on local priorities? (2) Did budget and program reductions cause conflict among stakeholders and school officials? We also sought to learn whether the answers to these questions differed systematically among districts with contrasting attributes. For instance, were significant differences apparent among urban, suburban, and rural districts?

The ten-district study we conducted in 2010 revealed that sharp budget reductions and the uncertain fiscal conditions that they created...

During the past three years, school funding policies enacted in Sacramento have been unusually unpredictable, even by California standards. It is difficult for districts to adapt to the changing fiscal situation, and CFOs have been challenged to help districts maintain their fiscal health in the face of such volatility. Under these circumstances, CFO predictions of budget actions in the coming year are likely to involve some speculation. Nevertheless, we asked respondents to report on their district’s financial plans for school year 2011–12, and their responses suggest a moderate level of pessimism about future educational funding in California.

Roughly one-half...

The legislature enacted Tier 3 flexibility in the middle of the 2008–09 school year, simultaneously making substantial cuts in state funding of categorical programs. The legislation aggregated 40 categorical programs into one group, called Tier 3, and gave districts flexibility to use those funds, which had previously been targeted to particular students, materials, or program models, in any way they wanted. As we described in our ten-district study, central district office staff scrambled to respond, endeavoring to understand new rules and address their pressing budgetary and programmatic needs.

Two years after the Tier 3 reform was enacted, we conducted...