LAO 2006-07 Budget Analysis: Education

Analysis of the 2006-07 Budget Bill

Legislative Analyst's Office
February 2006

Other Issues

Test the Impact of a CAHSEE Block Grant

We recommend the Legislature adopt trailer bill language that would allow up to ten districts to test comprehensive approaches to assisting students to pass the California High School Exit Examination.

The California High School Exit Examination (CAHSEE) was enacted in 1999 and requires students to pass both the English language arts and mathematics portions of the test as a condition of graduating from high school. As enacted, students in the class of 2004 were the first to be required to pass CAHSEE. In 2001, legislation was passed to delay the required passage of the test to graduate until the class of 2006. Thus, this yearís seniors are the first class required to pass CAHSEE to graduate from high school.

The Governorís budget proposes $40†million in support of local efforts to help students pass CAHSEE in 2006-07. This amount would double the $20†million provided for this purpose in the current year. State law directs the California Department of Education (CDE) to distribute funds first to schools with the highest proportion of students who have failed both parts of the test. In the budget year, districts would receive up to $631 for each eligible student. The Education Code gives districts wide latitude in the use of these funds. It requires only that districts use funds to supplement existing services and administer a diagnostic assessment to identify each studentís area of academic strengths and weaknesses. Given the number of eleventh and twelfth grade students trying to pass the test, we believe the increase in this flexible funding is reasonable.

The $40†million builds on the existing grades 7 through 12 supplemental instruction program, which has as its mission ensuring that students pass CAHSEE. The budget bill includes $177†million for this program in 2006-07. State law allows schools to provide supplemental instruction before or after school, during the summer, or on Saturday so long as the instruction is in addition to the regular school day. Districts receive $3.87 per student for each hour of instruction. This amount is sufficient to support a class of one teacher with about 25 to 30 students.

Many Factors Affecting Student Success on CAHSEE

The CDE maintains a contract with an external evaluator to assess the quality of the test, passing rates, and the impact of the CAHSEE requirement on dropout and graduation rates. The department hired the Human Resources Research Organization (HumRRO) to fulfill this directive. Its most recent report, published September 30, 2005, explores a number of local factors that affect student success.

The HumRRO reports identifies ways the state can make supplemental instruction more effective. Specifically, the findings suggest that the stateís supplemental instruction program for students in grades 7 through 12 is too narrow in its approach to helping lower performing students. The current funding program does not (1) provide the flexibility schools need to establish programs that address the specific needs of students or (2) encourage schools to integrate the testís academic requirements into the design and operation of core academic programs. Because of the importance of the test to students, we think the Legislature should consider other program structures for providing additional academic assistance.

Student Motivation and Parental Support. The reportís survey of teachers reveals that 59†percent of teachers cited low student motivation as a primary impediment to student learning. For students in remedial classes, 70†percent of teachers cited student engagement as a core issue. While teachers often tried in various ways to enlist parents in the effort to help students pass the test, they did not find those efforts effective.

The grades 7 through 12 supplemental instruction program does not directly address student motivation. Weak student engagement complicates the financing of local supplemental programs, however, because districts are reimbursed based on the number of student hours of attendance. Weak motivation results in low class attendance-a concern also raised by teachers in the HumRRO report. Since supplemental instruction funding is based on attendance, districts find it difficult to afford small remedial classes using only funds provided through the state funding formula.

Classes Too Broadly Focused. About a quarter of teachers and administrators surveyed by HumRRO reported that supplemental instruction services were not helping students as they had hoped. According to these educators, the primary cause of this problem is that current classes are too broadly focused, and are unable to meet the needs of students with more significant academic problems. Several groups of students-including English Learners and students with very low academic skills-were identified as being particularly affected by this problem.

We have identified two possible sources of this problem. First, as discussed above, districts may be unable to afford creating smaller, more focused classes because of the hourly reimbursement formula used by the program. Needing up to 30 students to pay for one teacher, schools simply may have too few students with a particular academic need to create more specialized classes. Second, teachers in the supplemental program may have little information about the needs of the individuals in the class. This is a common problem in categorical programs-the supplemental services funded by the program are not merged into the regular academic program. While the regular classroom teacher may have a clear picture of a studentís needs, that information is not communicated to the teacher of the supplemental program.

Teacher Experience and Credentials. The report finds that students are more likely to pass the mathematics portion of the test in tenth grade if they had a credentialed mathematics teacher. More than one-half of all high schools reported using noncredentialed mathematics teachers. In English language arts, students were more likely to pass the test if they had a teacher with five or more years of teaching experience. These findings emphasize the need for good teachers in the supplemental programs. The reimbursement formula of the stateís supplemental instructional program, however, provides little district flexibility to induce more-effective teachers to provide supplemental instruction. As discussed above, the current formula creates several hurdles for establishing small, focused classes. Thus, the current formula does not appear to give districts the option of offering the best teachers a higher compensation rate to teach these supplemental classes.

Articulation Between Middle and High Schools. The HumRRO found that strong articulation-joint planning on student placement, curriculum, and instructional issues-between high schools and their feeder schools is associated with higher pass rates. The report found, however, that about 20†percent of high schools surveyed do no articulation and about one-half do joint planning only in some cases. The issue of articulation is important because students are expected to develop most of the knowledge and skills tested on CAHSEE by the end of middle schools. Teachers reported to HumRRO that one-third of students arrive in high school without the prerequisite skills in mathematics (29†percent) and English (39†percent) needed to pass the test. Articulation can help improve the effectiveness of middle schools by giving teachers time to identify curricular areas that need greater attention or develop instructional units and local assessments in areas tested by CAHSEE.

A more systematic approach to articulation also could affect the grade 7 through 12 supplemental instructional programs in two ways. First, by making core instructional services aligned with the skills needed to pass CAHSEE, articulation could reduce the need for supplemental remedial classes in high school. Second, high school administrators also could help improve the responsiveness of middle school supplemental instruction in helping students gain the skills needed to pass the test by identifying the areas that commonly give students the greatest difficulties.

Test Different Approaches

The CAHSEE represents an important part of the stateís accountability system because it is increasing the focus on high school students who lack fundamental mathematics and English skills. Given the importance of CAHSEE to students-and the importance of an educated populace to our society and economy-we think the state needs to explore other approaches that more effectively support schools in this area. One way to develop new approaches is to allow a small number of district flexibility to try promising ideas for helping struggling students. Pilots have several benefits-they allow the state to test the most promising of the new approaches, are relatively easy to evaluate, and do not disrupt the flow of program services for all other districts.

For these reasons, we recommend the Legislature adopt trailer bill language that would allow up to ten districts to use supplemental instruction funds as part of a comprehensive approach to assisting students to pass CAHSEE. Our proposal would give participating districts more flexibility over the use of supplemental instruction funds. The pilots would be funded through the existing grades 7 through 12 supplemental instruction program. Rather than claim these funds based on student-hours of attendance, however, a participating district would receive the amount it claimed for supplemental instruction in 2005-06 plus an adjustment for growth and inflation. These funds would comprise a block grant that would be available to support a wide variety of school and district activities to help students pass CAHSEE. In addition to the block grant funds, schools would remain eligible for a share of the $40†million proposed for students who have already failed the test. These funds are sufficiently flexible that pilot districts would be able to merge these additional funds into the comprehensive pilot program.

Under our pilot approach, CDE would evaluate district proposals and select up to ten of the most promising models. We suggest that evaluation criteria of district pilot proposals focus on the overall district program to increase CAHSEE pass rates. Evaluation criteria could include (1) improving supplemental instructionís connection to each studentís core academic classes, (2) engaging parents in supporting their children to pass the test, (3) addressing articulation and planning between the high schools and middle schools in a district, and (4) increasing the impact of existing core classes in meeting the needs of students.

We also recommend requiring participating districts to match the supplemental instruction funds with Title 1 or Economic Impact Aid funds. These programs also are designed to meet the needs of lower performing students, and by adding these resources to the supplemental instruction funds, the pilots would reinforce the need to integrate supplemental instruction into the districtsí programs and ensure that support for the pilot adequately addressed the needs of both middle and high school students.

Finally, we also suggest requiring CDE to evaluate the pilot programs. We think the pilots would need at least three years to establish the merits of this approach. Because it would take at least a year to solicit and choose districts who volunteer for the pilot program, no evaluation funds would be needed in the budget year. However, we think about $200,000 a year would provide sufficient funding for a good evaluation. (The evaluation could be financed from federal funds.).

Instructional Materials

We recommend the Legislature eliminate the $40†million augmentation in Proposition†98 funds for instructional materials. This recommendation takes into account the large increase in instructional materials funding schools will receive from State Lottery funds.

The Governorís budget proposes almost $402†million in Proposition†98 funding for the instructional materials block grant, a roughly $40†million or 11†percent increase over the level provided in the current year. K-12 schools also receive funding from the State Lottery-an estimated $190†million in both the current and budget year-allocated for instructional materials.

Instructional Materials Receives Large and Unexpected Funding Increases in 2004-05 and 2005-06. As shown in Figure†1, funding for instructional materials increased by 66†percent in 2004-05, due to augmentations in both the block grant program and lottery funds. Total funding for instructional materials is projected to increase an additional 14†percent in 2005-06, to a total of around $550†million.


Figure 1

Instructional Materials Funding

(Dollars in Millions)






Instructional Materials Block Grant





Lottery funds for
Instructional materials










Year-to-year change





a  LAO estimates based on lottery revenue projections.

b  In addition to the figure shown here, $168 million in one-time funding was provided in this year.


Most of this current-year funding increase is from lottery funds. Proposition†20, passed by the voters in 2000, requires that 50†percent of the growth in lottery revenues be directed toward the purchase of instructional materials for K-12 school districts and community colleges. Based on information provided by the California Lottery Commission, the administration estimates that lottery revenues for education will increase by just over $100†million in 2005-06. Schools and community colleges can expect to receive half of this increase for instructional materials, equating to a $40†million increase for K-12 education. The Governorís budget assumes this funding level will continue in 2006-07. So, over the two years (2005-06 and 2006-07), schools will receive around $80†million of unexpected funds for instructional materials. This is coupled with a higher-than-anticipated increase of $35†million in lottery funds for 2004-05. Projections for lottery revenues were much lower when the Legislature made its 2005-06 budget decisions. Thus, the 2006-07 budget is the first opportunity for the state to reassess schoolsí material needs after this recent lottery windfall.

Eliminate Budget-Year Augmentation. Given that the instructional materials program has received significant increases in the past two years, we believe further augmentation in 2006-07 is unnecessary. We recommend the Legislature reject the Governorís proposed instructional materials augmentation of roughly $40†million and reduce the Proposition†98 appropriation by this amount. Because the Governorís budget spends above the Proposition†98 guarantee, this would score as savings to the state. If the Legislature chooses instead to redirect these funds to other Proposition†98 purposes, we offer in the ďEconomic Impact AidĒ section of this chapter a possible use of these savings.

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