Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Accountability and Low-Performing Schools

In this section we discuss the state's school accountability system. Although the system involves all schools throughout the state, this discussion places emphasis on aspects of the system concerned with improving performance at so-called "low-performing" schools, as well as challenges posed for the state's accountability efforts by recent changes in federal Elementary and Secondary Education Act (ESEA) reauthorization.

Public Schools Accountability Act and Related Programs

The Public Schools Accountability Act (PSAA)—Chapter 3x , Statutes of 1999, (SB 1x, Alpert)—created a statewide school-level accountability system which (1) rewards schools for academic improvement, (2) provides external intervention for lower-performing schools, and (3) potentially sanctions schools which continue to fail after receiving external assistance. Figure 1 shows the major features of the PSAA.

The Academic Performance Index (API) is the cornerstone of the PSAA. Its purpose is to measure a school's academic performance and the growth in performance over time. The API is still a work in progress and is likely to change annually for the next several years. Starting with the 2002 API, the State Department of Education (SDE) will include the English-language arts California Standards Test in the API for the first time. Soon other California Standards Tests in mathematics, science, and social science will be added to the API.

Some programs—such as the Governor's Performance Awards—were created as part of the PSAA. Other programs we discuss below—such as the Certificated Staff Performance Awards—while not formally part of the PSAA, are part of the state's overall accountability efforts and are linked to the PSAA by using the API as a determining measure.

API Reward Programs

The SDE provides rewards to schools and teachers based on a school's ability to annually improve its API score. Under the Governor's Performance Awards, schools that make their schoolwide and "significant sub-group" API growth targets receive awards on a per-pupil basis. The Governor's budget provides $157 million for the Governor's Performance Awards—the same amount appropriated in the 2001-02 Budget Act. (In the Third Extraordinary Session, the Legislature reduced the current-year amount of funding to $144.3 million.)

The second reward program, the Certificated Staff Performance Awards, provides awards of $5,000, $10,000, or $25,000 to certificated staff at low performing schools which increased API scores the most over a one-year period. In 2000-01, teachers and principals at 304 schools received awards. The Governor's November Revision proposed to reduce funding for the Certificated Staff Performance Awards program from $100 million to $50 million, keeping the size of the rewards the same but reducing the number of staff receiving awards by one-half. In the Third Extraordinary Session, the Legislature deleted all current-year funding for the Certificated Staff Performance Awards. The Governor's budget proposes $50 million for the program for 2002-03. (Below, we discuss whether the Legislature should consider eliminating the Certificated Staff Performance Awards for the budget year.)

Programs Based on the API and Targeted to Low Performing Schools

As shown in Figure 2, the Governor's budget proposes $641 million for programs targeted at assisting low-performing schools (as identified by their low API scores). Generally, the goals of these programs are either to (1) intervene in low-performing schools to initiate a schoolwide reform effort or (2) improve the quality or supply of teachers at lower performing schools. (Later, we discuss the low-performing school intervention programs in detail, and propose changes the Legislature could make to develop a comprehensive system to address school intervention and sanctions for low-performing schools.)

Eliminate the Certificated Staff Performance Award Program

We recommend that the Legislature eliminate the Certificated Staff Performance Award Program because the program may reward short-term fluctuations in test scores, and it does not provide additional services to students. (Reduce Item 6110-133-0001 by $50 million.)

Chapter 52, Statutes of 1999 (AB 1114, Steinberg), created the Certificated Staff Performance Incentive Act to provide annual rewards of $5,000 to $25,000 to certificated staff at schools meeting two criteria:

• The school is in the bottom half of the API.
• The school "significantly" exceeds its annual API growth target.

The Governor's budget provides $50 million for the program for 2002-03. In the November Revision, the Governor proposed reducing the cur rent-year appropriation for this program from $100 million to $50 million by cutting the number of rewards in half. In the Third Extraordinary Session, the Legislature suspended this program on a one-time basis, eliminating program funding for 2001-02.

Background

In summer 2001, certificated staff at schools that had the highest percentage growth in their 2000 API received awards ranging from $5,000 to $25,000 per person. Since the monetary value of rewards is so high, it is even more important for awards to be distributed to schools based on "real" academic improvement rather than short-term fluctuations in test scores. We have several concerns with this program.

Questionable Ongoing Impact. We tracked the year 2000 Certificated Staff Performance Award schools to assess their results in 2001. Figure 3 summarizes the performance of award schools compared to all other schools in the state. It shows that 43 percent of Certificated Staff Performance Award schools met their API growth targets in 2001, and, one-third of the schools had declining API scores. In comparison, 58 percent of non-Certificated Staff Performance Award schools made their API growth targets, and one-quarter of schools had declining API scores. The data reveal that Certificated Staff Performance Award schools performed worse in 2001 than schools not in the program. In 2001, the data suggest that many of the school staff receiving Certificated Staff Performance Awards did so based on short-term fluctuations in their school's test scores, rather than substantial academic improvement.

Minimal Incentive. The incentive effect of the Certificated Staff Performance Awards may be minimal because the probability of receiving an award is so small. Teachers may view receiving a Certificated Staff Performance Award like winning the lottery, and not as a reward for their hard work because there is so little direct connection between the reward and their actions.

Inadequate Discretion. The Certificated Staff Performance Awards can only be used for teacher bonuses, and cannot be used at the school site for other improvements in educational services. In contrast, the Governor's Performance Awards (GPA) provides funding to more schools, and schools can focus the funds on a variety of improvements in educational services to students. Schools know the exact level of achievement gain necessary to receive an award. The local school-site council can then direct the funds to uses that will continue to improve the quality of education at the school site.

We recommend eliminating the Certificated Staff Performance Award program, and saving $50 million for other education purposes because:

• The Certificated Staff Performance Awards may go to schools based on short-term fluctuations in test scores and not long-term academic growth.
• The small number of awards is not likely to create a strong incentive for teachers and principals.
• There is little discretion over the use of the rewards, and the funds cannot be spent on additional educational services to students.

Accordingly, we recommend reducing Item 6110-133-0001 by $50 million.

Aligning State and Federal Accountability Systems

In addition to the accountability requirements of state law, SDE is required by federal law to administer a federal accountability system for schools receiving federal Title I funds. The major differences between the PSAA and reauthorized federal Title I accountability include:

• Measuring Academic Improvement. The PSAA focuses on improving the average performance of all schools, while Title I accountability focuses on improving the performance of all students at recipient schools.
• Low Performing School Intervention. The state programs are voluntary and provide supplemental funding, while Title I interventions are required of any school receiving Title I dollars.

Below, we discuss challenges for the state posed by recent federal changes and ways the state can harmonize its accountability system with the new requirements.

New Federal Title I Accountability Requirements

Recently, the federal government reauthorized the ESEA. For 2002-03, the federal government provides California with $1.78 billion of Title I program funds that focus on improving the quality of education for socio-economically disadvantaged students. This represents an increase of $411 million (30 percent) from 2001-02. (The Governor's budget does not reflect the higher funding level provided by reauthorization, and only assumes a $60 million increase for Title I.)

The reauthorization makes major changes to the federal government's Title I school accountability system. The SDE is required to develop a statewide Title I plan in which it addresses how California will implement the major provisions of the reauthorized Title I. We encourage the Legislature to play an active role in making policy decisions that will be required in writing the state plan. Below are some of the major accountability provisions, and how they affect California:

• Require State Academic Content Standards. Reauthorization requires each state to adopt academic content standards in language arts, mathematics, and science (starting in 2005-06). California has already developed and implemented rigorous academic content standards and, thus, meets the requirement. The Fordham Foundation recently conducted an analysis of the quality of all 50 states' academic content standards, and determined that California's standards in language arts, mathematics, science and history were the best in the United States.
• Require Assessment of All Students in Grades 3 Through 8. Reauthorization requires each state to develop an assessment based on the state academic content standards in language arts and mathematics in grades 3 through 8. California meets this requirement by administering the California Standards Tests.
• Define Student Proficiency Based on the Standards-Aligned Assessment. One of the most important decisions the state will face in developing its Title I plan is the determination of "proficiency" for Title I purposes. The State Board of Education (SBE) recently established achievement levels on the language arts assessment, but is still developing achievement levels for the mathematics assessment. Figure 4 shows the achievement levels for 4th and 8th grade students in language arts. (We note that the achievement level "proficient" in Figure 4 will not necessarily equate with the state's determination of proficiency for Title I purposes.) The figure shows that around one-third of all students currently perform "below basic" or "far below basic." For economically disadvantaged students, around one-half of students are below or far below basic. Part of the reason that so few students are scoring well is that our state standards are among the most rigorous in the United States. However, California students on average continue to achieve below students in most other states on the National Assessment of Education Progress, a national exam that compares student achievement across states and over time. 

• Require All Students to Be Proficient in Language Arts and Mathematics Within 12 Years. The reauthorization requires states to improve the academic achievement of all students to a state-defined proficiency level incrementally over the next 12 years. Given that California has around one-third of students performing at the below basic and far below basic level, the state must improve the quality of education to meet the required higher standards.
• Require Schools to Make "Adequate Yearly Progress." Reauthorized Title I requires that a state have a single accountability system that fulfills the federal requirement that all students achieve at a proficient level over 12 years. In the Title I state plan, California must define "adequate yearly progress" (AYP), a measure of school improvement from year-to-year, to ensure that schools will reach the required proficiency level at the end of 12 years. For the last three years, SDE has defined AYP as achieving the API growth target annually. As California redefines the AYP to conform to federal law, California also will have to redefine how the API is calculated.
• Mandate Interventions and Sanctions for Schools Not Making AYP. If a school does not make its AYP for two consecutive years, the school is deemed a "School Improvement" school, and must begin an intervention/sanction process. Interventions and sanctions become more severe for each year that a school does not make its required AYP. We discuss the timeline of federally required interventions and sanctions in detail below.

One Set of Accountability Standards Instead of Two

We recommend that the Legislature amend the Public Schools Accountability Act to align to the federal Title I accountability systems by (1) defining a minimum "proficiency" level for all students for Title I purposes, and (2) adjusting the Academic Performance Index calculation to measure the growth in the number of students meeting the Title I proficiency level. The benefits of this approach is that schools are held to one set of accountability standards instead of two.

The ESEA reauthorization requires states to have one accountability system meeting both federal and state requirements. We believe that there is value in having only one measure of academic progress that determines whether schools need external assistance or receive performance awards. Having two competing systems could send mixed messages if a school receives rewards or sanctions under one program, but different signals under the other. In addition, we believe that the federal government has established a comprehensive approach to monitoring, intervening, and potentially sanctioning low-performing schools. We recommend the Legislature amend the PSAA to correspond more closely to the federal Title I accountability system, as discussed below.

Defining Proficient for Federal Law and Its Impact on the PSAA. As mentioned above, one of the main differences between Title I accountability requirements and the states is how academic improvement is measured. Federal law requires states to improve the achievement of all students to a state-defined proficiency level over a 12-year period. A key difficulty in aligning the state and federal systems will be in redefining the API to measure the progress of students' achievement toward meeting the proficiency target. The Legislature and SDE should carefully consider this matter, as the definition of "proficient" implicitly defines the adequate yearly progress that schools must make to avoid interventions and sanctions. If the state is overly aggressive, and sets the Title I proficiency level too high, most schools will not make their AYP, and the state will eventually have to intervene in many schools, at considerable costs. If the proficiency level is set too low, schools won't be motivated to improve.

We suggest that the state define proficient for Title I purposes differently than the SBE has defined proficient when establishing cut scores for the California Standards Test. Figure 4 shows that only one-third of students currently meet the state's definition of proficient or above. In some of California's lower performing schools, only 5 percent to 10 percent of students currently perform at a proficient level. These lower performing schools would have to achieve unprecedented growth to move all students to a SBE-defined proficiency level over a 12-year period. Since federal law requires states to implement a single state accountability system that meets the Title I accountability requirements, we believe the Legislature will have to amend the PSAA to conform to federal law. Accordingly, we suggest that the SDE and the Legislature carefully consider how they define proficient for Title I purposes. Specifically, we recommend the Legislature amend the PSAA to (1) define a "proficient" level for Title I accountability purposes, and (2) adjust the API calculation to measure the growth in the number of students meeting the "proficiency" target.

Need to Track High School Graduation Rates. In addition to standards-aligned assessments in language arts and mathematics, federal Title I accountability requires states to track high school graduation rates. Currently, SDE is unable to accurately collect reliable graduation-rate data because SDE is unable to track individual students. The 2000-01 Budget Act provided $500,000 to the Office of the Secretary for Education (OSE) to contract for a study to determine how the state should collect data on (1) graduation rates, (2) student and teacher attendance rates, and (3) other potential academic indicators to support the API. The OSE plans to release this report soon. We discuss school and student-data issues in more detail in the California School Information Services section of this chapter.

Low-Performing School Interventions and Sanctions

In accountability systems, interventions are the first steps taken after a school has shown a lack of progress in meeting its goals. In this section we discuss the state and federal intervention programs. We identify some of the differences among the programs, and propose aligning the planning requirements for the four existing intervention programs to reduce the burden on schools of developing multiple action plans.

Schools participating in the intervention programs must begin to improve the academic performance of their students or face more severe interventions and sanctions. The first set of schools participating in these programs will potentially face state or federal sanctions in the fall of 2002. We identify funding sources to finance the costs of the more severe interventions and sanctions. We then provide an estimate of the number of schools that may have to face the more severe interventions and sanctions. Finally, we discuss the infrastructure that the state must develop to prepare to sanction low performing schools that continue to fail to improve.

Background

The SDE administers four low performing school intervention programs—the state High Priority Grant Program (HP) for Low-Performing Schools, the state Immediate Intervention for Underperforming Schools (II/USP), the federal Comprehensive School Reform Demonstration (CSRD) program, and the federal Title I accountability—School Improvement program. Figure 5 summarizes these programs and shows their similarities and differences.

Aligning Existing Intervention Programs

We recommend the Legislature align the planning requirements for the existing intervention programs to focus the attention of schools and school districts on core components of the action plans. We further recommend the Legislature amend statute to allow federal plans to meet the planning requirements of state programs.

Figure 5 shows the different planning requirements for the state and federal intervention programs. There are similarities among the four sets of planning requirements, but there are also many differences. It is possible that a school could participate in all four programs, and be required to develop four different school plans. Because the intent of the programs is similar, we recommend that the Legislature streamline the planning process, by allowing a school to submit only one plan regardless of the program in which the school is involved.

Since the Legislature cannot change the requirements of the federal CSRD or School Improvement programs, we recommend the Legislature allow a CSRD application or a School Improvement corrective action plan to meet the planning requirements of II/USP or HP. In addition, we recommend that the Legislature consolidate the planning requirements of the two state programs, and focus on the most important reform requirements. We recommend the Legislature streamline the intervention planning process by (1) allowing federal plans to meet the requirements of state plans, and (2) consolidating the planning requirements for the state interventions.

Funding Available for Additional Intervention and Sanctions

The Legislature may have up to $55.6 million of federal Title I, Part A funding for School Improvement purposes, including school intervention and sanction activities, if a state waiver request is successful.

New accountability provisions of Title I, Part A require that states reserve 2 percent of Part A allocations for School Improvement purposes in 2002-03. As mentioned above, the Governor's budget does not reflect the $411 million increase in Title I funding for 2002-03. California must use $29.1 million of this unbudgeted amount for School Improvement purposes to meet the 2 percent requirement in the budget year. We believe that the additional costs of supporting interventions and sanctions may exceed $29.1 million, and we have identified additional federal resources that could be redirected for this purpose (see below).

Other Potential Funding Depends on Federal Waiver. We recommend in the "Assessments" section of this chapter that the Legislature direct SDE to seek a waiver from the federal Department of Education (DOE) to redirect $26.5 million of funds provided for federal assessment requirements instead to Title I School Improvement efforts. If DOE approves the waiver, the Legislature would have $55.6 million in federal funds available for School Improvement efforts. Below, we provide recommendations on how the Legislature should utilize the additional funding to assist schools that will be subject to sanctions in 2002-03.

Schools at Risk of Sanctions under Federal Title I

We recommend the Legislature enact legislation to include School Improvement schools subject to federal sanctions in the sanctioning process under state law, in order to align the state and federal accountability systems.

As noted earlier, Title I schools that do not make AYP (currently defined as making API growth targets) for two consecutive years are deemed "School Improvement" schools under federal law. Figure 6 shows the intervention and sanction timeline for a school assigned School Improvement status. As part of Title I reauthorization, Congress made numerous changes to this process including:

• Expanding school choice provisions for School Improvement. 
• Requiring schools to use Title I funding for public or private
• tutoring.
• Providing more serious sanctions for schools that continue to fail.

Although the reauthorization restructures the intervention process, the clock does not start over for schools that were identified for School Improvement in the past. Figure 7 summarizes the number of California schools in School Improvement, and the year in which they started the program. Schools that make their AYP for two out of three years exit the School Improvement program. Currently, 1,281 California schools are still in the program at one of the stages identified in Figure 6. Many of these School Improvement schools will have to use their Title I funds to provide greater school choice and offer tutoring after school vouchers in 2002-03. Some of the schools will face school district corrective actions. In addition, SDE has identified that as many as 18 schools could face Title I sanctions in fall 2002. The number of schools facing Title I sanctions is likely to grow in subsequent years.

Under federal law, SDE is required to determine from a menu of options how School Improvement schools are sanctioned. The sanctions process established in PSAA would meet the federal sanction requirements. In order to avoid having two separate sanctioning processes, we recommend that the Legislature adopt legislation to apply the PSAA sanctioning process to School Improvement schools that are subject to sanctions under federal law.

SBE Definition Will Determine the Number of Schools Facing State Sanctions

The II/USP provides participating schools with $50,000 planning grants followed by $200 per-pupil implementation grants for two years. The first cohort of II/USP schools will complete their implementation grants in fall 2002. After the two implementation years, II/USP schools face one of three potential actions depending on the schools academic achievement:

• Meet API Growth Targets and Exit II/USP. If an II/USP school makes its API growth targets for two consecutive years, the school receives a Governor's Performance Award, and exits the program. In the Third Extraordinary Session, the Legislature provided $8 million in one-time prior-year Proposition 98 funds to allow II/USP schools to receive a third year of implementation grant funding if (1) they made their API growth targets for two consecutive years and (2) are in API decile 1.
• Make "Significant Growth" and Receive a Third Year of II/USP Implementation Funding. The II/USP schools that did not make their API growth targets in both years, but made "significant growth" as defined by the SBE, would receive a third-year II/USP implementation grant.
• Fail to Make "Significant Growth" and Face State Sanctions. The II/USP schools that do not make "significant growth" face one of two sanctions: (1) school districts must contract with a "school assistance and intervention team" to directly assist the school or (2) the State Superintendent shall assume all legal rights, duties and powers of the school district governing board with respect to that school.

At the February 2002 meeting, SBE defined "significant growth" as making positive growth in one of the two implementation years. Figure 8 shows the achievement of II/USP schools during their planning grant year, and first implementation grant year (1999-00 and 2000-01). In fall 2002, SDE will use similar data from the first and second implementation years to determine which schools make significant growth (2000-01 and 2001-02). The figure shows that:

• 30 percent of II/USP cohort I schools made API growth targets for both years.
• 42 percent of the schools had positive growth in 2000-01, and therefore made "significant growth" as defined by SBE.
• 28 percent of schools had declining API scores for 2000-01, and are at risk of state sanctions if their API score declines in 2001-02.

The Governor's budget assumes that 80 percent of II/USP cohort I schools will continue to receive a third-year implementation grant. If the data in Figure 8 are representative of how cohort I will do in 2000-01 and 2001-02, about two-thirds of schools (rather than 80 percent) would make significant growth and receive a third year of funding. Based on the available data, we estimate that II/USP is overbudgeted by $6 million. Below we recommend using the excess $6 million for costs of the sanctioning process.

Create School Assistance and Intervention Teams

We recommend the Legislature use excess Immediate Intervention for Underperforming Schools Program funds and Title I School Improvement funds to assist school districts in paying for "school assistance and intervention teams."

Chapter 749, Statutes of 2001 (AB 961, Steinberg) amended the PSAA to provide the Superintendent of Public Instruction (SPI) with an additional option for II/USP schools that are subject to sanctions. Under the amended law, the SPI may require a school district with an II/USP school that is subject to state sanctions to contract with a "school assistance and intervention team" to provide intensive support and expertise to implement school reform.

Create Regional School Assistance and Intervention Teams. Requiring school districts to contract with school assistance and intervention teams presumes that assistance and intervention teams exist. While some of the external evaluators currently assisting II/USP schools may be qualified to participate on these teams, we have concerns about the ability of SDE to have the teams operational by fall 2002. The SDE should begin work immediately with SBE to establish criteria for selecting educational experts to participate in assistance and intervention teams.

Of the $29.1 million the state must spend on School Improvement efforts, the state can use 5 percent or $1.5 million for state operations purposes. We recommend that the Legislature use some portion of the School Improvement state operations funds to establish and train school assistance and intervention teams.

Once those teams are established and trained, there would be costs to schools to pay for these services. Our analysis indicates that potential funding may be available from the II/USP. As discussed above, we estimate that funding for II/USP cohort I is overbudgeted by at least $6 million, but may be higher if more schools face state sanctions. Since the state will face costs to sanction schools, we recommend that the Legislature adopt budget bill language authorizing SDE use any excess II/USP funds to (1) assist school districts in paying for school assistance and intervention teams, and (2) assist school districts in paying for costs of other state sanctions. Most of the II/USP schools subject to sanctions are likely to also be School Improvement schools. To the extent that II/USP funds are insufficient to meet these purposes, we recommend the Legislature use funding that we have identified for School Improvement to assist school districts in paying the costs of the school assistance and intervention teams.

Clarifying PSAA and Federal Sanction Process

We recommend the Legislature clarify in statute how school finance, facility funding and other issues should operate before the Superintendent of Public Instruction takes over some low performing schools in fall 2002.

For any II/USP school that (1) fails to make significant growth, and (2) is not required to contract for school assistance and intervention teams, state law directs the SPI to assume all legal rights, duties, and powers of the school district governing board with respect to that school. The SPI must reassign the principal (subject to review), and take one of the following actions:

• Revise attendance options.
• Allow parents to apply to create a charter school at the existing site.
• Assign the management of the school to a college, university, county office of education, or other "appropriate" educational institution.
• Reassign other certificated employees.
• Renegotiate a new collective bargaining agreement at the expiration of the existing agreement.
• Reorganize the school.
• Close the school.

These sanction options venture into uncharted territory for SDE and the state. While SDE has begun some planning activities to prepare for the sanction process, there are some ambiguities in statute that we recommend the Legislature clarify through urgency legislation prior to the SPI assuming legal rights and duties for schools. Specifically, we recommend the Legislature address the following issues before the SPI takes over schools:

• District Versus School Finance. While the state sanctioning process requires the SPI to assume legal rights and duties for sanctioned schools, the PSAA does not specify how a school district's revenue would be affected when the SPI takes over a school. Presumably, when a school is sanctioned, the SPI would use some portion of the school district's revenue to operate the sanctioned school. However, given the complexities of the state's education finance system, it would not be obvious how much of a school district's revenues the SPI could use for the sanctioned school. Some clarification of the SPI's authority on such questions would be desirable.
• Facility Costs and Issues. When the SPI takes over a school, does the SPI also assume full responsibility for the condition of facilities? How would major facility needs be addressed?
• Legal Liabilities. What legal liabilities does the SPI assume from school districts once a school has been taken over?
• Exit Criteria. The statute does not establish a mechanism for the rights and duties to be transferred back to a local governing board. The Legislature may want to establish criteria for the school to return to local control.

Other issues the Legislature may want to clarify include:

• Timing of SPI Takeover. The statute requires the SPI to take over the school as soon as the school fails to make its growth target. Such a rapid transition may not be beneficial for students attending the school, and the Legislature may want to provide the SPI with planning time prior to taking the school over.
• Principal Review Process. The statute references a review process for principals to determine whether the principal should be reassigned. The Legislature may want to clarify how the review process would work, and what rights a principal has in that review.

Other Issues

Excess Comprehensive School Reform Demonstration Funds

We recommend that the Legislature adopt legislation to (1) allow State Board of Education-approved Comprehensive School Reform Demonstration (CSRD) applications to meet the requirements of Immediate Intervention for Underperforming Schools (II/USP) action plans, and (2) create a priority in the II/USP application process for schools that commit to apply for CSRD.

In the 2001-02 Analysis (see page E-102), our office raised the issue that federal CSRD funds were accumulating, and that the state needed to develop a plan to expend these funds in a timely fashion. The CSRD program provides competitive grants to low performing schools to initiate structural reforms, including improved resource allocation, instruction and curriculum, classroom management, and professional development. The CSRD program requires schools to contract with an "external evaluator" to assist in reforming the school. An external evaluator is an education expert who meets a specific set of criteria established by the SBE.

Since no policy changes were made during the 2001 legislative session to ensure that federal funds were used in a timely fashion, the state had to return approximately $2.5 million to the federal government in fall 2001. Figure 9 summarizes the excess CSRD funding currently available, and when the federal expenditures would expire. We estimate that California could lose up to an additional $22 million in CSRD funding in fall 2002.

Recently, the Legislature and SDE have taken actions to help ensure that no additional CSRD funding is reverted. Specifically:

• The SDE Expands CSRD Eligibility. Until recently, SDE policy only allowed schools participating in II/USP to apply for CSRD. In the fall of each year, SDE would (1) identify 430 schools for II/USP, (2) provide them each with $50,000 planning grants, and
• (3) allow them to develop either II/USP action plans or both an II/USP action plan and a CSRD application. In reaction to the accumulating CSRD funds, the SDE recently decided to expand eligibility for CSRD beyond II/USP schools. The SDE expanded eligibility for CSRD for spring 2002 to all Title I schools, and will prioritize schools in II/USP, HP, and Title I Program Improvement in the CSRD application process. The deadline for submitting a CSRD application is May 15, 2002.
• Legislature Provides Planning Grants for HP. In the Third Extraordinary Session, the Legislature provided $18 million for 2001-02 planning grants for schools participating in the HP grant program. The Legislature adopted budget bill language that prioritized eligibility for HP planning grant funds for schools that would commit to applying for CSRD funding in May 2002.

The recent actions taken by SDE and the Legislature may help ensure that the $22 million of federal funds at risk for 2002-03 are used effectively. However, we suggest that the Legislature closely track this issue to ensure that federal funds are not lost.

Other Actions to Ensure Full Use of Future CSRD Funds

Simplify CSRD Application Process. The Legislature could reduce the burden of the CSRD application process. Currently, CSRD applicants must meet the nine CSRD requirements, and complete a 22-requirement II/USP action plan. Since the general goals of the 22 requirements in the II/USP action plan are similar in nature to the nine requirements of the CSRD application, we recommend the Legislature enact legislation to allow an SBE-approved CSRD application to substitute for the requirements of the II/USP action plan. One missing component of the CSRD application is alignment to state academic content standards. We recommend the Legislature explicitly require that the CSRD application ensure that all components of their application are aligned to state academic content standards. We believe that by reducing the extra burden of the CSRD application process, the Legislature can encourage more schools to apply for CSRD.

Create Priority in II/USP Application Process for Schools That Commit to Apply for CSRD Funding. A long-term solution to ensure all CSRD funds are used and that General Fund savings are generated would be for the Legislature to give priority in selecting the fourth II/USP cohort to schools that commit to apply for CSRD. This strategy would help ensure (1) that CSRD funds are used in a timely fashion, and (2) that the state could either save General Fund support (Proposition 98) for other education purposes or increase the total number of schools in II/USP. Accordingly, we recommend the Legislature adopt legislation to give priority to schools that commit to apply for CSRD when selecting the future II/USP cohorts.

Inadequate Funding to Evaluate PSAA

We recommend that the Legislature (1) provide $500,000 from federal Comprehensive School Reform Demonstration funds to the State Department of Education to continue the contract for an evaluation of the Public Schools Accountability Act, and (2) adopt legislation to amend the statutory deadline for submitting the evaluation until June 30, 2003.

The PSAA requires SDE to contract for an external evaluation of PSAA—including the GPA program, II/USP, and the impact of these programs on student achievement. The 2001-02 Budget Act provided SDE with $500,000 to start to evaluate California's accountability system. The SDE has contracted with American Institute of Research (AIR) to conduct the multiyear evaluation.

We believe that the $500,000 is inadequate given the complexity of issues that the evaluation must address. When SDE requested proposals for the PSAA evaluation, it requested a multiyear evaluation costing up to $500,000 a year for two years. Not funding the second year of the evaluation would significantly reduce the value of the study.

Given the importance of the PSAA to the state's education system, and the extensive list of legislative requirements for the evaluation, we recommend that the Legislature appropriate $500,000 of federal CSRD funds to expand the PSAA evaluation to evaluate CSRD in greater depth. As discussed above, the state has an excess amount of CSRD funds, and has had difficulty spending those funds. The federal CSRD grant allows the state to use up to 5 percent of the grant amount to pay the costs of administering the program—including evaluation activities. Federal law requires the state to evaluate CSRD as part of administering the program. The AIR scope of work focuses mainly on II/USP and CSRD, and the effectiveness of these intervention strategy. Since the AIR study is evaluating CSRD, and since the federal funds are available for this purpose, we recommend that the Legislature provide $500,000 of CSRD funds to continue the PSAA evaluation.

Extend the Statutory Deadline for the Evaluation. The statute requires a preliminary report to be submitted in March 2002, a final report by June 2002, and biennial evaluations beginning in 2003. The SDE was not able to start the evaluation on time because of funding constraints. Since the evaluation just started, AIR will not be able to submit a meaningful evaluation by June 2002. We recommend the Legislature amend statute to extend by one year the statutory deadline for the evaluation such that preliminary findings are due March 31, 2003, and the final report is due June 30, 2003.