Diverting funds intended for California’s high-needs students for other spending “dampens” the potential to significantly close the achievement gap between high-poverty and low-poverty students, according to new research from the Public Policy Institute of California (PPIC) as reported by EdSource.

School districts on average are directing only 55 cents of every dollar of extra funding from the Local Control Funding Formula to the schools that high-needs students who generate the money attend, research fellow Julien Lafortune found.

For the report, he examined school-level financial data reported to the state for all districts with more than 250 students and with more than 10 schools. The money that didn’t reach the high-needs students wasn’t necessarily “wasted,” he said; instead of being targeted, it was spread evenly among all students across a district.

PPIC’s research also indicates that the funding formula is having a positive effect on improving test scores and college eligibility, particularly in districts that receive the most funding.

As of this year, districts in which targeted students make up at least 60% of enrollment (about the statewide average for high-needs students) receive an extra 15% in funding. Districts in which targeted students make up 80% of enrollment receive about a third more in additional funding.

The money is paying off, particularly in the districts with the highest-needs students, Lafortune found, raising tests scores on the Smarter Balanced standardized tests in math and English language arts and enabling more students to meet the course requirements for admission to California State University and University of California.

In the highest-need districts — those with 80% or more students targeted with extra funding — the share of students meeting or exceeding standards increased by 10 and 9 percentage points in English language arts and math, respectively; while at lower-need districts, the share increased 4 and 5 points from 2014-15 through 2018-19. Low-income districts narrowed the achievement gap by 6 percentage points in English language arts and four percentage points in math.

However, the overall statewide progress in narrowing the gap between all low-income students and non-low-income students was less: only 2.5 percentage points in English language arts and 0.6 percentage points in math.

Previous studies of Local Control and Accountability Plans found some districts had underused or misdirected the money. A state auditors analyses of three districts’ spending concluded the funding formula law “has not ensured that funding is benefiting students as intended.”

This year, Gov. Gavin Newsom adopted one of the auditor’s key recommendations, eliminating a loophole that allowed districts to spend leftover money for high-needs students however they wanted the following year.

The money has been difficult to track in schools with high-needs students. However, through a requirement under the federal Every Student Succeeds Act, California for the first time is reporting accurate spending data by school; previously, California calculated teacher salaries, the largest component of school spending, using a districtwide average, not actual salaries. The new mandate is not a complete remedy since it remains difficult to make spending comparisons among districts. However, it does reveal which high-needs schools are disparately funded.

In the report, Lafortune recommends spreading the additional funding more evenly by lowering the threshold for districts to receive concentration funding and funding concentration dollars by school instead of by district, ensuring that the money would go to students who generated the extra funding.

In a prior study two years ago, Lafortune documented that districts were using the additional funding to hire counselors and teacher aides for low-income schools, but they also had disproportionate numbers of novice teachers. He once again recommends that the Legislature address this issue.