The Effects of California's School Finance Reform: Empirical Evidence from the Local Control Funding Formula (LCFF)

Most previous empirical studies of school finance reforms focus on those that took place before 19901. We employ a difference-in-difference model using school district-level panel data from 2009 to 2016 to examine the effects of California's unique and most recent statewide school finance reform-Local Control Funding Formula (LCFF), enacted in 2013. We find positive effects of LCFF on student achievement measured by percentage of graduates meeting university of California/California State University (UC/CSU) entrance requirements, and the effects are causal and non-random. Results suggest a delayed effect that became significantly positive two years after LCFF implementation. The positive effects likely result from LCFF-induced additional funding, while the effects of non-funding-related aspects of the reform tend to be arbitrary in the short run. In addition, we find that the marginal effect on student achievement tends to be higher in high-poverty school districts, relative to low-poverty school districts. The empirical results of a significantly positive effect of LCFF, especially in high-poverty school districts, support reduction of educational inequity as one LCFF target.