Funding Change Leaves Schools in a Lurch


An oversight by the LA County Office of Education resulted in an unexpected $8.86 million loss for the Santa Monica-Malibu Unified School District.

The mistake stems back to the school district’s status within the State of California. In the past, it qualified for funding from the state as a state aid district. Its status then shifted sometime during the 2017-18 school year to a basic aid—also known as an excess tax—district. 

Based on the Local Control Funding Formula, the state of California determines how much money a school district needs through grants based on student attendance and other factors.

Most school districts in California are funded with a mix of local property taxes and state aid. In contrast, a basic aid district meets its funding requirements with property taxes. 

The only other basic aid district in Los Angeles County is Beverly Hills Unified School District. Typically, these districts are found in wealthy areas.

Based on its original state aid designation, SMMUSD was given $8.6 million through the Education Revenue Augmentation Fund (ERAF). The state-controlled fund collects money through tax revenue from cities and counties in order to aid school districts in meeting their funding requirements. 

The district expected and planned for the money. The funds were then accounted for in subsequent budgets and reports, including in the 2017-18 adopted budget and interim reports—which were approved by the county’s Office of Education (LACOE). The issue was brought up to the school district on Nov. 9, but district officials were not made aware if and when they would lose the money.

“At that time, LACOE representatives verbally informed the district that LACOE had erroneously allocated approximately $8.6 million in ERAF [state funds] to which the district was not entitled,” a report prepared by SMMUSD Assistant Superintendent of Business and Fiscal Services Melody Canady stated. “However, at no time did the inclusion of ERAF funds in the district’s budgets and reports trigger any warning that Basic Aid district are not entitled to ERAF in accordance to tax code.”

The report said LACOE approved reports, which included the $8.6 million, on five separate occasions.  

Representatives for LACOE who spoke to the school district said they would contact the LA County Department of Auditor-Controller to “facilitate negotiations” and would follow up with a future call. 

Then, according to SMMUSD staff, the county entities withdrew $8,861,301.26—more than initially discussed in November.

In an email to The Malibu Times on March 19, Margo Minecki, the public information officer for LACOE, said, “The Los Angeles County Office of Education has been in close contact with Santa Monica-Malibu USD on this matter and our understanding is the issue has been resolved.”

School district officials disagreed.

“LACOE has been in contact with us and they have informed us that this is out of their hands. This is [sic] does not mean we are in agreement with their perspective. I honestly do not have anymore information today than I did on March 7th,” Canady wrote in a message to The Malibu Times on March 19.

The issue was brought before the SMMUSD School Board on March 7, when the board was set to approve the second interim report, which takes into account the change in funds. The district plans on using money from its reserves to offset the impact, and intends to develop “a plan to reduce and/or eliminate deficit spending,” per the interim report. (Deficit spending refers to spending more than the district is taking in, revenue-wise.) The report was approved in a 5-1 vote, with Board Member Laurie Lieberman not present.

The school district is asking LACOE and the Auditor-Controller for a “detailed calculation” of the $8.86 million as well as a number of explanations, including: why SMMUSD received the initial $6.8 million despite its basic aid status in the 2017-18 school year, why the amount withdrawn was higher than what was initially discussed and why it is required to return the full funding given it transitioned to basic aid in the middle of the school year.