California’s Fiscal Deregulation Not Used in Intended Manner

An examination of the effects of fiscal deregulation on local school districts has been carried out by researchers from the Rand Corporation, UC Berkeley, UC David and San Diego State University. It particularly examined what specific resource allocations were changed at district level as a result of their new fiscal freedom.

Fiscal deregulation in California school districts was advanced in 2008 by then Governor Schwarzenegger with the aim of improving the quality of teaching and instruction. Governor Jerry Brown has since sought to expand deregulation but has met with strong opposition.

“Yet, even with their new funding flexibility, most local districts did not use the funds for new initiatives,” said Brian Stecher, a RAND senior social scientist and a co-author of the study. “In an era of repeated budget cuts, most districts’ top priorities were preserving fiscal solvency, retaining staff and maintaining existing instructional programs.”

In 2007 40% of California’s state K-12 funds were allocated through ‘categorical aid’ programs which heavily restrict how the money can be used. In 2008 funding was reduced by 20% but most restrictions were removed.

“The unrelenting rounds of cuts for California’s schools meant that this experiment in fiscal deregulation was utilized to keep school districts solvent,” said study co-author Bruce Fuller, director of the Policy Analysis for California Education (PACE), an independent policy research center based at UC Berkeley, the University of Southern California and Stanford University. “Hopes of some advocates that local control would spur widespread innovation or a new focus on classroom improvements simply proved unrealistic.”

The study recommends that if Brown and the state legislature which to see education funds used for particular education programs then they should ease confusion at local level by clarifying the purpose of fiscal flexibility granted to districts.

“This study suggests that districts used flexibility in different ways depending on their local circumstances,” said Thomas Timar, director of the UC Davis Center for Applied Policy in Education. “If the legislature decides to experiment with additional flexibility, they should require monitoring or evaluation so we can learn how that flexibility is used and why.”

The report, “Deregulating School Aid in California: How Districts Responded to Flexibility in Tier 3 Categorical Funds in 2010–2011,” is available here. It is published jointly by RAND and Policy Analysis for California Education. The research is supported by the William and Flora Hewlett Foundation, the Dirk and Charlene Kabcenell Foundation, and the Stuart Foundation.

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