Which school do you want to support?
The preceding lessons in this chapter have explained the structural reasons why California’s schools have money troubles. What might be done about it? The focus of this lesson is to explore the options for increasing funding for education in California.
But first a recap: In the 1970’s, California voters amended the state constitution, constraining the use of local property taxes as a revenue source. The legislature raised state income tax rates to compensate, but overall funding for education never recovered. California commits relatively little of its economic wealth toward education compared to other states and nations. Worse, the cost of providing education here is high.
As a result, student-teacher ratios in California are unusually high. This makes it even harder to address the needs of California's students, which are considerable: More children in California live in poverty than in most states; many are learning English; and many have special education needs.
Because education funding depends heavily on income taxes paid by the top 1% of taxpayers, it tends to boom and bust with the stock market. Even in the Pandemic, solid majorities of Californians say they would support taxes for schools in their own community, but under the rules created by voters in California's Proposition 13, a majority is not enough. It is very difficult to pass local taxes in this state.
These systemic challenges are not new, and there have been many attempts to address them. They fall into four categories:
Solutions have to start with an understanding of the problem. In about 2005, a coalition of education funders pooled their efforts to sponsor Getting Down to Facts, an ambitious research effort to give clear advice to the Education Excellence Committee, an expert panel appointed by then-governor Arnold Schwarzenegger to recommend policy changes consistent with the research. (Disclosure: Ed100 founder Jeff Camp served on this committee.)
Among its main recommendations, released in January 2008, the committee called for a thorough reinvention of California’s categorical school funding system, which most everyone agreed was awful. The committee proposed a model in which more money would go toward schools where more resources were needed to help students succeed. Much of this recommendation was accomplished in 2013 with passage of the Local Control Funding Formula (LCFF — see Lesson 8.5).
It took seven years for K-12 funding to recover after the Great Recession.
The committee also urged lawmakers to add several billion dollars to the state education budget. The opposite happened. When the “great recession” hit, K-12 funding was cut dramatically. Education budgets fell about 20% between 2008 and 2012. It took seven years for education funding to recover to its 2008 level, adjusted for inflation.
The budget process is zero-sum: there are winners and losers. For example, in 1988 voters passed Proposition 98, a measure that didn't increase taxes — but amended the constitution to require that lawmakers commit a greater portion of the state budget to education and local government.
A Bigger Slice?
Local property taxes are shared between education and local government, and counties play a key role in divvying up the money. Schools have not always received their due slice, a topic the Newsom administration promised to examine in 2021. It’s a weedy issue, but if you feel like following it look for news about Educational Revenue Augmentation Funds (ERAF).
At budget time, advocates for other causes (like social services or the environment) can be excused for regarding the education budget with a degree of envy. Proposition 98 has often served as a powerful advantage for education advocates; if a draft budget fails to meet the minimum bar of the "Prop 98 guarantee," lawmakers can expect a stern conversation and the occasional threat of a law suit.
Litigation (or the threat of it) over education budgets is not unique to California. Because education is a basic function of government, it tends to be mentioned in state constitutions. In some states, education advocates have successfully prompted increased spending through judicial pressure. Efforts to spur increased education spending (beyond the Prop 98 minumum) through education "equity and adequacy" litigation are common among the states, and in some places, notably New York, have spurred major increases in educational investment. Related cases have not been particularly fruitful in California. (See our blog for more.)
Litigation over the condition of education has worked sometimes. In 2004, then-Governor Schwarzenegger settled a class action case usually known as the Williams Case. The settlement established some minimum requirements and services that schools must provide, including up-to-date textbooks, qualified teachers, enough seats for students, and classrooms free of vermin. Follow-up research by the ACLU nine years later found that many of the problems were substantially resolved.
In 2018, the Getting Down to Facts project was extended and updated, including new research into the practical meaning of an adequate education. A team of researchers led by Jennifer Imazeki concluded that in the 2016-17 school year "providing an adequate education would have required California to spend $22.1 billion more... almost a third more than that year’s spending levels."
Of course, education advocates cannot just rely on initiatives and litigation to make the case that public education deserves its share of the budget pie. After all, other functions of government need funding, too. The California Budget Challenge is an informative, playful, nonpartisan, nonprofit website that helps to concretely explain budget tradeoffs for voters in California. It feels a bit like a game, and works well as a group activity.
A Bigger Pie?
The solution is not always zero-sum.
In 2012, California voters rescued schools from big cuts by passing Proposition 30, which raised taxes, though only on the state's wealthiest earners. The taxes were extended to 2030 when voters passed Prop 55 in 2016. Tax measures placed on the state ballot can be passed by a majority vote.
Surveys consistently show that Californians value education in the abstract, but they aren't always willing to pay for it. When it comes to opening their wallets, the public is more inclined to support local schools than the school system in general.
A Different Pie?
Local political will is not enough. When California voters passed Proposition 13 in 1978, they amended the California constitution to make it more difficult to pass local taxes. The theory is that voters, like Odysseus, should have the power to tie themselves to the mast to resist temptation. Prop 13 requires that local governments, including school districts, must get 2/3 voter approval to pass special taxes. Prop 13 also prohibited school districts from levying ad valorem taxes (property taxes based on the value of property), except to pay for general obligation bonds for facilities.
For California school districts, there is one main way to levy taxes: the parcel tax. Parcel taxes are based on the existence of a parcel of property rather than on its value, which gets around the Prop 13 prohibition of ad valorem taxes. The catch? Parcel taxes cannot be approved by a majority vote — they require 2/3 of votes cast to pass. It is very difficult to get 2/3 of voters to agree to anything, but some districts manage it. Lesson 8.10 goes into more detail about parcel taxes.
In any major conversation about education funding, the elephant in the room is Proposition 13, which we discuss in another lesson. Multiple efforts to amend this crucial measure have gone nowhere. It remains popular, especially among Californians who have owned property long enough for it to have gained in value. The Silicon Valley Community Foundation commissioned a major review of Prop 13 in 2013 to explain the issues and challenges.
Any time there is a hint of a possibility of a chance for change in the 2/3 rule for local taxes, it is a big deal. For example, a 2017 California Supreme Court ruling in a case about medical marijuana dispensaries appeared to suggest some wiggle room. If a measure originates as a citizen initiative, the ruling suggested, a majority should suffice to pass it.
California's funding for education is dramatically lower than other states, as described in Lessons 8.1 and 8.2. Big gaps require big solutions, but how big is big? For example, suppose a measure would raise $1 billion for California's public K-12 schools. Sounds like a lot of money, right?
$1 billion is equivalent to $160 per student
In a system with 6.2 million K-12 public school students, $1 billion is equivalent to $160 per student. This rule of thumb can help put things in perspective. Sure, a billion is a big number in the abstract, but California's funding gap per student is many billions short of adequate.
Policy Options for More Education Funding
Require the regular reassessment of commercial property at fair market value while leaving in place existing protections for residential property. A version of this idea appeared on the ballot in 2020 as Proposition 15. If passed, it would have raised $11 billion for the general fund including $4.5 billion for K-14 education. It was defeated.
Reassess the taxable value of very high-value property. As Warren Buffet famously pointed out, Prop 13’s annual 1 percent cap on property taxes and 2 percent annual limit on increases in reassessed value provide a much greater tax break to the wealthy than to low- and moderate-income homeowners. ($5 billion to general fund; $2 billion for K-14 education)
Prop 13 caps annual property taxes at a maximum of 1 percent of assessed value. Raise this cap by 0.1 percent, with the additional funds dedicated to education. ($5-$7 billion to K-14 education)
Reinstitute the 2 percent Vehicle License Fee that existed from 1948-98, dedicating everyone’s extra payment to education. ($6-8 billion overall; $2.5-3.5 billion to K-14 education)
Create a tax on services, which now make up about 80 percent of the economy. California is one of a handful of states that does not include some type of tax on business and personal services. Like property taxes, a services tax is less volatile than income taxes. (After sales tax offset, $7 billion to general fund; $3 billion to K-14 education)
Tax the extraction of oil. California is the only major oil-producing state that lacks this tax. ($2 billion directly to K-14 education)
Restore the ability of school boards to institute general taxes with a simple majority, like cities and counties. This would require a constitutional amendment and a mechanism to ensure the state compensates poorer districts that lack the capacity and resources of wealthier ones. Permitting local jurisdictions to raise new revenues outside Prop 98 is probably a key component of the long-term school funding solution. ($12-15 billion for K-12 education).
Restore estate taxes. In the early 2000’s California stopped collecting its own revenue from an estate tax. Some lawmakers have proposed bringing it back. ($5 billion to general fund; $2 billion to K-14 education).
When all else fails, school communities scramble to get what they need.
Let's start with the obvious. When times are tough and school funding suffers, some people will do what they can. This happens all over California, but unequally. Some wealthier communities can raise hundreds of dollars per student through voluntary giving. Some schools hold elaborate auctions. Some cut to the chase with "check writing campaigns." Others hold a wide variety of fundraising events.
How much is a "normal" amount of fundraising for a PTA or other school support organization? No one really knows.
Information about local donations to school-related nonprofit organizations and education foundations is not collected or reported in a consistent way, so it is impossible to know how much is raised and how the funds are used. The Public Policy Institute of California (PPIC) took a heroic shot at estimating the scale of such donations based on tax filings in 2000. Based on that report, it's safe to conclude that the average of such donations amounts to less than $100 per student, with huge variation. But really, no one knows.
California schools are not within bake-sale distance of nationally normal funding. Voluntary donations cannot match the funding power of a tax. Under current California law, communities have few options for taxing themselves to support their schools. The primary option is to pass a parcel tax, which the next lesson will explain in a bit more depth.
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