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In the past decade, California’s public schools have lost about 420,000 students – nearly the population of Oakland. For most districts in the state, fewer students mean fewer dollars, forcing districts to stretch already thin resources. But it doesn’t have to be that way if state leaders equip districts with the resources and freedom to open the door to more individualized, joyful, and relevant learning.

When enrollment drops, districts often slash programs, lay off staff and close schools. All this hurts students in the process. Yet fewer students can be an opening to improve learning. In fact, declining enrollment offers a rare chance to redesign schools to better incorporate research on how students learn best, paving the way for smaller learning communities, expanded personalized learning options and stronger relationships — all of which can lead to more individualized, joyful and relevant learning.

State leaders can help districts seize this moment by rethinking California’s practice of funding schools by daily attendance, not overall enrollment, which punishes districts for every absence. The current system worsens budget instability for those districts already experiencing long-term enrollment declines; it also  hits immigrant communities hardest in an era of heightened enforcement and fear.

Stanford professor Thomas Dee found that immigration enforcement in five Central Valley school districts led to a 22% increase in absenteeism compared to the same months in the prior years. Similar patterns emerged during federal immigration raids in Los Angeles Unified School District (LAUSD). The financial implications are significant: LAUSD loses approximately $60 million in state revenue for every one percentage point drop in average daily attendance. For a district already navigating declining enrollment, this revenue loss compounds fiscal strain and penalizes schools that serve communities most affected by immigration enforcement.

Stabilizing school budgets amid enrollment decline starts with a simple fix: fund districts by whom they enroll, not who shows up each day. This would recognize that school districts hire teachers and other staff and equip schools with computers and textbooks based on enrollment, not attendance. The California legislature offered a short-term safeguard by approving AB 1348, which would hold districts’ funding harmless if they experience sudden changes to average daily attendance due to immigration action.

The state can also increase its funding amounts under the Local Control Funding Formula to recognize that California is still falling short of providing adequate funding. Two other bills in the two-year legislative session, AB 1204 and AB 477, aim to increase school funding so that districts can pay teachers what they are worth, keep pace with rising costs, and remain nationally and globally competitive. 

But districts can’t afford to wait while these proposals move slowly through the legislature[. The fiscal challenges created by declining enrollment are already here, leaving districts like LAUSD with limited options for achieving financial stability as they serve fewer students. The district’s enrollment decline is acute. In a new report from the organization I lead, GPSN, we detail how LAUSD has lost more than 316,000 students – approximately 40% of its enrollment – since the 2002-03 school year. This trend stems from falling birth rates, demographic shifts and a housing crisis; it’s further exacerbated by the pandemic, wildfires and federal immigration raids. 

State policymakers could turn this fiscal challenge into an opportunity by enabling districts to experiment with new staffing models, flexible use of facilities and innovative instructional designs. These require local will, but also stable, equitable funding and regulatory flexibility, which are tools only the state can provide.

Without them, even the most promising local ideas will fall short. LAUSD’s per-pupil funding has risen, but costs and long-term obligations have grown faster, narrowing the district’s fiscal margin. The real challenge isn’t just fewer students, but the widening gap between needs and resources. Districts like LAUSD are being asked to do more with less in a system that remains inadequately funded. 

Education leaders nationwide are watching how California navigates this moment. Districts must redesign for the future as enrollment shrinks, and the state must ensure they have the means to do so. Enrollment decline may be inevitable, but a decline in student opportunity doesn’t have to happen.