No Such Thing As a Free Lunch: Analyzing the Effect of California’s Local Control Funding Formula School Finance Reform on Test Scores

Abstract

This study examines how the additional funds generated by the Local Control Funding Formula have affected California students’ test scores. Using district-level panel data from 2012 to 2019, I leverage variations in the school funding mechanism established by California’s 2013 school finance reform, known as the Local Control Funding Formula (LCFF). Drawing on fixed effects, difference-in-differences, and regression discontinuity kink designs, I compare test scores between districts that were differentially exposed to LCFF-induced changes in school funding. This analysis demonstrates a statistically significant yet minimal correlation between LCFF funding and test scores, indicating that substantial funding changes have negligible effects on achievement. Students exposed to an additional $1,000 in per-pupil revenues scored 0.0036 standard deviations higher in math and 0.0028 standard deviations higher in reading and language arts, which is an order of magnitude smaller than the 0.04 standard deviation increase that Jackson and Persico (2023) found. It appears as though merely augmenting government spending on education may no longer be a feasible approach for state policymakers. To enhance learning opportunities for high need students, policymakers should redirect their focus toward allocating resources in a targeted and more effective manner.