Community Funded Status Transition
Update: April 7, 2023
As we continue to monitor the Huntington Beach City School District’s (HBCSD) possible transition to a community-funded revenue model, we want to provide our community with currently known information.
Huntington Beach City School District (HBCSD) is and has historically been funded by state revenues, but in recent years, we have been monitoring our status as local property taxes will likely continue to outpace state funding in upcoming years.
About 100 out of the 1,000 school districts in California are funded primarily through local property taxes, also known as “community-funded” or “basic aid” districts.
The State calculates annual allocations for school districts using the Local Control Funding Formula (LCFF). Local property taxes are counted first, and if local property taxes are less than the LCFF funding target, the State provides the difference to meet the district's funding target. However, with community-funded districts, local property tax revenues are enough to cover the district's funding target. These districts keep their local property tax revenues for education purposes. Also worth noting, community-funded districts still receive some money from the state–about $120 per student–the minimum funding required by the State Constitution.
Typically, community-funded districts have relatively higher property tax bases. Still, it is important to note that districts determine their property tax revenue well into the fiscal year, and future projections are volatile. Community-funded districts usually maintain a reserve level higher than 3%, and HBCSD Board policy requires an additional 4% of annual expenditures to ensure financial stability and meet its obligations.
The chart below is a historical comparison of HBCSD's LCFF revenues. The blue line represents the State-funded status, and the green line depicts the estimated funding under community-funded status, assuming an annual property tax growth of 4%.
Based on the 2023-2024 Governor's proposed cost of living adjustment of 8.13%, the District would remain State-funded for one more year. However, the difference between the estimated local taxes and the State funding proposal in 2023-2024 is less than $25,000. Therefore, any increases to the estimated property taxes could flip the funding back to a community-funded model.
Our transition status remains fluid, and the district's 2023-24 funding model has yet to be determined. We will update revenue projections in June to incorporate the Governor’s May Revision of the 2023-24 proposed State budget. HBCSD’s budget reporting will include the latest District enrollment, attendance, estimated property taxes, and other factors that affect the funding calculation to determine if we transition to community-funded status in 2023-24 or 2024-25.
We will continue to update you as we move forward. Please review our User-Friendly Budget (March 2023 Edition) and visit our Fiscal Services website for more information. Thank you for your ongoing support, and we look forward to continuing to serve our community.
California State Education Funding
In California, school districts are funded by local property taxes and state aid under a calculation process known as Local Control Funding Formula (LCFF) created with the 2013-14 State Budget Act. The LCFF guarantees a base level of funding differentiated by grade and additional supplemental and concentration grants based on the number of low-income and English learner students in each district. This funding method is intended to correct historical funding inequities, increase flexibility and transparency, and simplify education funding. The LCFF process also introduced the annual Local Control Accountability Plan (LCAP), which emphasizes community engagement and student achievement goals when districts plan their budgets.
California has two types of districts as described by their funding: Community-Funded (also known as Basic Aid) and State-Funded (formerly known as Revenue Limit).
State-Funded - The majority of districts in California are state-funded. In State-Funded districts, local property taxes are less than the state’s per-student funding obligation and the state makes up the difference (state aid). State-Funded districts have little concern about local property tax levels because the state back-fills their funding up to the LCFF amount. State-Funded districts receive money based on enrollment, or average daily attendance, in their schools; for state-funded districts, the more students they have, the more funding they receive.
Community-Funded There are fewer than 100 school districts statewide comprising less than 4% of the state's average daily attendance (ADA). A Community-Funded district receives most of its funding from local property taxes because local property taxes exceed the state’s guaranteed per-student funding amount (equal to a district’s funding amount in 2012-13 when LCFF was initiated). LCFF calculation and Community-Funded districts can retain all their allotted property tax revenue. State contributions to a Community-Funded district’s budget are minimal. Community-Funded districts receive the same overall funding regardless of their school district enrollment since their funding is not tied to average daily attendance at their schools.
Community-Funded districts face a unique challenge because funding is unrelated to enrollment. While community-Funded districts typically have relatively higher property tax bases, districts do not know their estimated property tax revenue until well into the fiscal year, and future year projections are volatile. This is why Community-Funded districts usually maintain a reserve level higher than the state-required minimum of 3%. HBCSD has a board policy to maintain reserves of at least 5% of annual expenditures.
