The persistent rise of COVID-19 cases means schools may stay closed and distance learning continues for the foreseeable future, a scenario that puts districts at risk of losing funding due to lost attendance. Typically, district funding is based on average daily attendance (ADA) throughout the year. To ensure stable K–12 funding, Governor Newsom and California’s legislature agreed on a budget that includes a “hold-harmless” provision, calculating attendance based on the prior 2019–20 school year.

The hold-harmless provision, however, creates winners and losers among districts: growing districts will lose funding per student, while districts with declining enrollment will gain funding per student. Moreover, districts with more high need students get more funding under the Local Control Funding Formula (LCFF), meaning that gains or losses will be even larger in higher-need districts.

Consider two districts of roughly similar size. Menifee Union Elementary School District in Riverside County (12,372 students) has grown over 12% in the past five years, and by about 3.5% in the past year. Similar growth in this upcoming school year could mean nearly $300 less per student. In contrast, Alum Rock Union Elementary School District in Santa Clara County (10,264 students) has declined about 17% over the past five years, and by about 4.5% in the past year. Alum Rock could see over $400 more per student due to the hold-harmless provision if enrollment continues to decline.

While most districts have seen declines in recent years, many districts are growing, and many regions project growth over the next decade (see interactive map). In the last year, 25% of districts had 2% or higher enrollment growth, and thus may lose hundreds of dollars per student under the budget deal. Conversely, 27% of districts declined at least 2% over the past year, and would gain funding.

How do these growing and shrinking districts compare? On average, both types of districts serve a similarly-sized disadvantaged student population (60% high-need in growing districts vs 62% high-need in declining ones). They are both also more likely to be in rural areas. Growing and declining districts alike tend to be small, with fewer than 1,000 students (57% and 58%, respectively), whereas districts with stable enrollment are typically much larger.

For growing districts, serving a larger number of students without additional funding will make fall reopening and managing the effects of the pandemic even more challenging. In contrast, declining districts will have greater flexibility and support in dealing with what are typically very difficult downsizing decisions.

In his signing message, the governor urged the legislature to pursue solutions to remedy this issue. While more complicated, a mechanism that funds new enrollment in growing districts while holding districts harmless for enrollment losses would ensure that per student funding does not drop. Amidst the uncertainty and fiscal pressure of the current crisis, policymakers should consider funding options that do not create winners and losers, exacerbating what have already been significant disruptions.