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Lesson 8.9

More Money for Education:
What Are the Options?

School donations are great, but…

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The preceding lessons in this chapter explained why California’s schools have a history of money troubles. The focus of this lesson is to explore the options for increasing state and local funding for education in California.

But first a quick recap: In the 1970s, in response to a court ruling, California voters amended the state constitution (Prop. 13), reducing and freezing local property taxes as a revenue source. The state legislature raised income tax rates to compensate, mostly, but overall funding for education withered. In the 198os, California voters amended the constitution again (Prop. 98) to guarantee a level of protected funding for education in the state budget. It helped, but California still commits relatively little of its economic wealth toward education compared to other states and nations.

Adding to the challenge, California's high cost of living makes the cost of providing education here very 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 wealthiest taxpayers, it tends to boom and bust with the stock market. Property taxes are less volatile, and even in the Pandemic, solid majorities of Californians said they would support taxes for schools in their own community. Under the rules created by voters in California's Proposition 13, for decades a majority was not enough to authorize a local tax…

… but that changed with a decision by the California Supreme Court in late 2021. In 2018, San Francisco voters placed a tax measure for schools on the ballot as a local voter initiative. Implemented in this two-step way, California's highest court affirmed that a majority is sufficient.

Where to find funds for education

These systemic challenges are not new, and there have been many attempts to address them. They fall into four categories:

  • A Bigger Slice. Commit more of the existing state budget to education, cutting elswhere.
  • A Bigger Pie. Raise more taxes at the state level to provide more money for education.
  • A Different Pie. Allow local taxes to provide new money for education.
  • Actual Pie. Hold bake sales and other local fundraisers.

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 education funding system, which most everyone agreed was awful. The committee proposed a model in which money would go to school districts (and ultimately to schools) on the basis of the needs of students rather than as categorical funding for specific programs. Fast-forward a few years (and one Great Recession), and this recommendation was adopted in 2013 as the Local Control Funding Formula (LCFF), the basic structure of the California education funding system. (See Lesson 8.5)

Defending the education share of the budget

The budget process is zero-sum: there are winners and losers. Local property taxes are shared between education and local government, for example, and counties play a key role in divvying up the money. Schools have not always received their due slice. It’s a weedy issue, but if you feel like following it look for news about Educational Revenue Augmentation Funds (ERAF, pronounced EHR-aff).

At budget time, advocates for other worthy 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 Prop 98 guarantee, lawmakers can expect at least the threat of a lawsuit.

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 through litigation are common among the states. In some places, notably New York, lawsuits have spurred major increases in funding for education. Related cases have not been particularly fruitful in California. (See our blog for more.)

Lawsuits over the condition of education have worked sometimes as a way to divert education funds from one place to another. In 2004, then-Governor Schwarzenegger settled a class action case usually known as the Williams Case. The settlement established some fairly obvious 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 influential Getting Down to Facts project was extended and updated, in part to develop a research-based meaning for 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… almost a third more than that year’s spending levels."

Public opinion matters

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.

Increasing taxes to fund schools

A Bigger Pie?

The solution is not always zero-sum.

The California legislature has the power to pass taxes by a majority vote, but it rarely uses this power. Instead, it places tax measures on the state ballot, where (after a costly campaign) they can be passed by a majority vote. In 2012, California voters rescued schools from big cuts by passing Proposition 30, which raised taxes on the state's wealthiest earners. In 2016, voters overwhelmingly extended the tax to 2030 (Prop 55).

A different pie: Local taxes and changes to Proposition 13

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. California voters amended the state constitution by passing Proposition 13, making it very difficult to pass local taxes. A majority isn't enough. The theory is that voters should have the power to disempower themselves, like Odysseus tying himself to the mast to resist temptation. Unlike the heirs of Odysseus, though, California’s voters remain tied to the mast. Proposition 13 was a one-time vote that has affected generations of Californians.

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 workaround to levy taxes: pass a 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. Effectively, it's like every "no" vote counts twice.

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. In 2022, the Opportunity Institute documented the measure’s unequal impact on California communities in a study titled Unjust Legacy.

Any time there is even a tiny hint of a shred of a possibility of change in the 2/3 rule for local taxes, it is a big deal. As of 2022, the most interesting development is a series of court rulings that have established that a majority is sufficient to pass a measure if it originates as a citizen initiative.

Possible ways to fund schools

California's funding for education is dramatically low relative to the state's economic capacity, 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 $170 per student

In a system with about six million K-12 public school students, $1 billion is equivalent to $170 per student. This rule of thumb can help put things in perspective.

In a 2018 op-ed contribution to EdSource, John Affeldt of Public Advocates, an advocacy organization, summarized the policy options in circulation to increase funding for education:

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. taxes on services have become common in many states. Like property taxes, services taxes are 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 the general fund; $2 billion to K-14 education).

Local Fundraising for Schools: Bake Sales

When all else fails, school communities scramble to get what they need.

Actual pie??

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."

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 education foundations is not collected. 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.

The vast majority of public schools are funded by taxes, period. California schools could afford to commit more of its wealth to public schools, but not through bake sales. 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.

Updated September 2017
Updated November 2018 with revenue options from John Affeldt and GDTFII findings.
Updated December 2020.
Updated September 2022
Updated October 2022.

Quiz

Education costs thousands of dollars per student per year. In a typical school in California, how much of that cost is covered through donations?

Answer the question correctly and earn a ticket.
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Questions & Comments

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user avatar
Carol Kocivar June 14, 2022 at 7:47 pm
Major Tax Change
Important court ruling finds that only a simple majority vote is required when voters place measures on the ballot through the initiative process. This affects both parcel taxes and other local measures put on the ballot through the initiative process.
(November 17, 2021 ) — The California Supreme Court denied review of the Court of Appeal’s ruling, upholding San Francisco’s Proposition G from the June 2018 ballot.
SF Court Finds Simple Majority Vote Enough For Parcel Taxhttps://www.law360.com › tax-authority › articles › sf-co...
https://www.sfcityattorney.org/2021/11/17/chiu-statement-on-ca-supreme-court-victory-in-proposition-g-case/

More explanation here:
https://www.stateandlocaltax.com/noteworthy-cases/california-court-approves-of-simple-majority-vote-for-special-taxes-proposed-by-voter-initiative/
user avatar
Jamie Kiffel-Alcheh December 3, 2019 at 12:18 pm
Does a tax on services include ridesharing and other “sharing“ such as AirbnB?
user avatar
Jeff Camp - Founder June 28, 2016 at 12:08 am
Superb study by PPIC of voluntary giving to schools through their PTAs, PTOs, booster clubs and other sources. This kind of information isn't easy to get! The overall numbers per pupil are quite small, even in rather wealthy districts and schools. The authors (Weston et. al.) conclude that voluntary giving only modestly offsets the redistributional impact of LCFF on wealthier districts. http://www.ppic.org/content/pubs/report/R_1015MWR.pdf
user avatar
Brenda Etterbeek June 16, 2019 at 4:26 pm
Thank you! This study is important to review. Thanks for the link!
user avatar
Carol Kocivar June 10, 2016 at 2:17 pm
The Right to a “Quality” Education
In many states across America, courts have played an important role in determining whether funding for public education is adequate. So far, in California, the courts have said, “NO. This is not something for the courts. The legislature has to deal with this.”
Learn more in our blog about the issue of whether California’s low funding is unconstitutional?
/the-right-to-a-quality-education/
user avatar
Carol Kocivar January 29, 2016 at 3:53 pm
Up-Date on Court Adequacy Cases
Oral arguments in Robles-Wong v. California took place in the Court of Appeal in San Francisco on Wednesday, Jan. 27, 2016. Plaintiffs in this case include three statewide education associations (CSBA, ACSA and CA PTA), nine school districts, and approximately 60 individual students and their families.
Robles-Wong is designed to clarify the State’s constitutional obligation to fund an educational system that provides all students the education they need to compete and succeed in our global economy.
http://edsource.org/2016/california-lawsuit-appeal-pursues-claim-of-inadequate-education-funding/94008?utm_source=Jan.+28+daily+digest+--+Jane&utm_campaign=Daily+email&utm_medium=email
user avatar
Gloria Lucioni January 6, 2019 at 8:51 pm
Is there a "legal" assumption that redistribution of state funds per pupil to all districts with LCFF is unconstitutional? CA legislature operates on a balanced CA budget. Is this case one in which federal dollars are required beyond 9 to 10 % to counter district and school lack of accountability and transparency ? Or is a petition to require this or these districts to collect more parcel or commercial taxes?
©2003-2022 Jeff Camp
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