Does California skimp on public education? Put another way, is it true that students in California receive less support for their education than students do in other places?

The short answer is yes. As this lesson will explain, California has a long record as a skimpy funder of education, but context matters. California’s education budget is strongly influenced by the stock market. In the post-pandemic boom, wealthy taxpayers became wealthier, tax receipts increased, and education funding increased with it.

(1) California spending per student on education is basically normal.

In 2022, most analysts reckon that California’s education funding, compared to other states, at long last climbed to the level of essentially… ordinary. Not at the top. Somewhere in the middle, if you look at it one way. Or lower than ever, if you look at it another way.

How can funding be both ordinary and skimpy? Well, buckle up. Measuring and comparing is more complicated than it might seem.

The most basic way to compare states’ support for education is to look at the number of dollars spent on K-12 education each year and divide by the number of students enrolled:

The chart above makes it look as if education spending has increased at an ever-accelerating rate. Which it has… but not really. Over time, even low rates of inflation add up. Dollars are only good for what they can buy.

A somewhat fairer way of looking at education funding is to restate the value of expenditures in past years taking inflation into account. There’s more than one way to do it. The most basic, widely-used, general-purpose deflator is the venerable Consumer Price Index (CPI-U), which helps remove some of the distortion:

The upward bias in the chart above reveals a problem of measurement. The CPI describes change in the average cost of stuff-in-general, but the cost drivers for education have risen at much higher rates than the CPI. For example, the cost of earning a college degree (which teachers need) has risen faster than core inflation. So has the cost of health insurance, which school districts provide to teachers as part of their benefits.

In response to this problem, the St. Louis Federal Reserve developed a national alternative to the CPI, which California and other governments have adopted in law. (With all the poetic flair a government statistician could apparently muster, it’s known as the implicit price deflator for state and local government expenses).

What about regional cost differences?

Adjusting for nationwide average inflation helps make resource comparisons more meaningful over time, but it doesn’t address differences in regional costs. It costs more to hire a teacher in New York than in Utah, but it costs a lot more to live in New York than it does in Utah.

To compare the effective purchasing power of education systems, some analysts have attempted to adjust for local and regional differences in purchasing power. EdWeek uses this approach in its widely-quoted, annual Quality Counts scorecard. (Subscription required.) For each state, the EdWeek scorecard restates state-by-state dollars in order make them hypothetically comparable in terms of purchasing power. The numbers are often misunderstood or quoted out of context.

2) Economic effort: California doesn’t try very hard to fund education

A broader way to consider social priorities is to put dollars in context. For example, in 1960, overall spending on health care accounted for about 5% of the US Gross National Product (GDP). As medical progress improved and life expectancy improved with it, health care’s share expanded to about 20% of the economy. Military spending in the same period dropped from about 9% of the US economy to about 4%. Infrastructure spending in the US is about 1.5%.

When comparing the economies of US states, the measure most equivalent to GDP is total personal income.

Economists refer to the relative level of spending on a social priority as economic effort. In 1970, the average US state spent 4.0% of its economy on public K-12 education, a level of economic effort fairly comparable with other developed nations. This level of effort wilted over time — by 2021 the average state’s economic effort to fund education had declined to about 3.44%.

As usual, averages can conceal big differences. Some states (like New York) have invested sustained effort to fund public education. Relative to other states, California has consistently spent less of its total economy on public K-12 education. California has been a low-effort state when it comes to education:

(3) It costs more to educate students in California than it does in other states

Money is only good for what it can buy. Costs vary from place to place, and California is a high-cost state.

Most of the costs of education are people costs. It’s expensive to hire college-educated adults such as teachers, counselors, librarians, and administrators. Relative to other states, the cost of living in California is high, and districts must offer competitive salaries in the context of their local labor market. On an inflation-adjusted basis, teacher pay in America has essentially been flat for 50 years. (Ed100 Lesson 3.8 examines teacher pay in depth.)

(4) California has an average number of kids to educate

When it comes to demographics, California is often compared with Florida and Texas. All three states are large and have had rapid population growth, with a high proportion of students learning English. California has America's highest proportion of English Learners.

The age demographics of these states differ significantly, however, which can make comparisons among them a little confusing. Like Hawaii, Massachusetts, and Washington, D.C., Florida enjoys the benefit of an older tax base — it has relatively few children supported by relatively more taxpayers. Texas, by contrast, is more like Utah, a youthful state where funds for education must be spread among more students. California falls in between.

(5) California has very large class sizes and fewer support services

The math is inescapable. A state with average funding per student, an average number of students per taxpayer and higher-than-average pay for teachers must make do with fewer teachers.

Students experience this difference in the form of large class sizes, a topic we take up in detail in Lesson 4.2. Because teachers are crucial to student success, and because they are represented at the negotiating table, when times are tight school districts tend to avoid cutting teacher positions, instead sacrificing everything else they can first, including counselors and administrators. Wherever class sizes are chronically large, as they are in California, students have less of everything.

(6) California has somewhat high taxes overall

Public education relies on a combination of state and local taxes in each state. The mix differs a bit from one state to the next, and as Ed100 Lesson 8.3 will explain, California dramatically shifted away from property taxes after passage of Proposition 13 in 1978. Higher income taxes, particularly on high earners, partially filled the gap. According to research by the Tax Foundation, the total “tax burden” in California is a few percentage points higher than in most other states. WalletHub replicated this finding in 2020 using similar methodology.

California's highest-income earners are taxed at a higher rate than taxpayers in most other states. In total, though, the state's tax system is regressive, meaning that taxpayers with lower incomes carry a higher tax burden than wealthier taxpayers. Want to know even more? California's Legislative Analyst produced a report with a full rundown of California's Tax System in 2018.

A budget is an expression of values

Does California’s long pattern of low effort to fund public education mean that Californians place a relatively low value on it? It might. For example, since 1970 California has significantly increased spending on prisons and incarceration. To be clear, schools are a much bigger piece of the budget pie than prisons, but spending on prisons grew far faster than spending on schools.

Structurally skimpy

Long-time observers of California's education system often attribute the state's habit of weak effort to fund public education to Proposition 13, which flipped the education finance system from stable local funding (through property taxes) to volatile state-sourced funding (through income taxes).

An unintended consequence of Prop. 13 is that it weakened voters' political will to fund schools adequately. In general, voters are most likely to support taxes that help their immediate community. They are apt to doubt that taxes levied on a statewide basis will be spent well. By flipping the basic revenue model from local to statewide, California overturned its political underpinnings. The effort to fund public education in the state has never recovered.

Does funding for education matter?

Why is it important to know whether California skimps on education? Because it turns out that money really does matter. It seems obvious, but for a very long time education outcome data were so low-quality that it was quite difficult to prove a connection between money and learning. The connection was significantly clarified in a pair of 2018 studies titled Money and Freedom, which found that "money targeted to districts with the greatest student need has led to improvements in student outcomes."

Other research has corroborated the connection. For example, How Money Matters, a study by the Learning Policy Institute, concludes that "on average, aggregate per-pupil spending is positively associated with improved student outcomes."

If serious money were added, where would it go, and what might result? These questions are taken up in Ed100 chapter 10.

Clueless

Education is the largest function of government.

It's important to acknowledge that most Californians have no idea at all about their state's level of investment in education, either in absolute terms or relative terms. In a 2015 survey by the Public Policy Institute of California (PPIC), only 15% of Californians could correctly identify the biggest slice of the state's budget. Nearly half thought that the state spends more on prisons than any other function. Not even close.

Source: PPIC

California could do a lot more to fund public for K-12 education, but it is still the largest function of state and local government.

Updated August 2017
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