BASIC
AID SCHOOL BUDGET CRISIS BACKGROUNDER: A Dangerous Precedent
From Bolinas-Stinson Union School District, posted
14-Feb-2003
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On January 10, 2003, Governor Gray Davis proposed a
2003-4 California state budget that relies heavily on
deep cutbacks in education spending to help offset a
projected $34.6B deficit. Buried in that budget is a
proposal to “capture” $126M in local property
tax money from Basic Aid school districts, amounting
to 15-30% of the budget in some districts. Money taken
from Basic Aid districts would offset – not augment
– state general fund spending for education. Basic
Aid district property tax money confiscated by the state
would NOT be used to increase education funding in any
other school. This local tax money is being redirected
from local school districts to the state general fund
to offset the state’s budget deficit.
The proposal to take local property tax money earmarked
for local school districts and divert it to the state
general fund is landmark and would set a dangerous precedent.
Never before has our state government taken local property
tax that has historically been used to fund local schools
and diverted it from the counties where the tax was
collected.
Property tax and school funding pre-Proposition 13
Prior to passage of Proposition 13 in 1978, local governing
boards could ask local voters to raise and lower local
property taxes to support local agencies and services.
Because property tax rates were established locally,
organizations funded by property taxes – schools,
fire districts, police, water districts, libraries,
etc. – were funded to some extent according to
the willingness of the local community to pay taxes.
In 1972, SB90 established revenue limits for public
schools in response to the initial 1971 California Supreme
Court decision in the Serrano vs. Priest equalization
lawsuit that found the existing system of financing
schools unconstitutional because it violated the equal
protection clause of the state Constitution. In 1976
a subsequent Serrano decision found that property tax
rates and per pupil expenditures should be equalized
and that, by 1980, the difference in revenue limits
per pupil should be less than $100 (the Serrano band).
This legislation attempted to equalize the huge differences
in funding of public schools at the time by “leveling
up” underfunded school districts through increased
yearly Cost Of Living Allowance (COLA) while “leveling
down” highly funded districts by decreasing COLA.
However, many wealthier districts took advantage of
a provision that allowed local districts to override
the state revenue limit with a majority vote of the
district electorate.
Generally speaking, the thrust of legislation during
the early and mid ‘70s attempted to “level
up” districts that were underfunded. More importantly,
it was recognized that local property tax revenues determined
by local governing boards and approved by the local
electorate could not be diverted from local districts.
Proposition 13 and beyond
Proposition 13, a constitutional amendment approved
by California voters in 1978, fundamentally changed
how local property taxes are managed and limited property
tax rates to 1% of a property's assessed value (this
is the “Basic Tax” that shows up on your
county tax bill). In addition, increases in assessed
property value per year are capped at 2% or the percentage
growth in the Consumer Price Index (CPI), whichever
is less. Prior to Prop. 13, local governing boards could
ask district voters to raise and lower local property
taxes to support local agencies and services. Prop.
13 took that authority away from local boards and effectively
gave it to the state (the state legislature creates
law that governs local property taxes); local boards
have no say in how much property tax is collected or
how property tax money is allocated among county agencies
and services. Proposition 13 also restricted how new
taxes (such as parcel tax) could be levied by local
governing boards, requiring a two-thirds supermajority
district voters for approval.
In response to Prop. 13, the legislature passed AB8
in 1978 to establish a formula for dividing property
tax between local cities, counties and school districts.
In effect, local agencies and services that were supported
by local property taxes prior to Prop. 13. were allocated
a similar percentage of property tax funding that they
received in the three years prior to enactment of Prop.
13. For example, if local property taxes were allocated
during the years of 1975-8 with local schools receiving
27%, fire district 13%, police 30%, libraries 8% and
water district 1%, then those are roughly the percentages
used to this day. These percentages reflect how local
communities elected to fund their local agencies and
services in the mid-‘70s.
Two other propositions have significantly affected
school funding since Prop. 13: Proposition 4 in 1979,
and Proposition 98 in 1988. Proposition 4 established
the Gann Limit, a constitutional limit on government
spending at every level in the state, including school
districts. The Gann limit has not had a large impact
on schools recently due to chronic underfunding. Proposition
98 has had far greater, and often unanticipated, effects.
By setting minimum expenditures for education based
on state tax revenue, Prop. 98 has more often resulted
in establishing an education funding ceiling rather
than a funding floor.
Prop. 13 had by far the largest impact of all these
laws. And though Prop. 13 took away local governing
board control of local property tax, it acknowledged
that property taxes collected locally and earmarked
for local agencies and services must be spent on those
target agencies and services within the county where
the tax was collected. Even in the wake of Prop. 13
and other recent legislation, property taxes earmarked
for local agencies and services have been spent in the
county where they were collected.How the
Governor’s budget impacts Basic Aid districts
In addition to the 6% education spending reductions
that will affect all schools, Basic Aid districts face
two further proposed reductions. First, the “basic
aid” payment of $120/student will be lost. Secondly,
and much more important, the governor proposes to take
80-85% of local property tax revenue that exceeds a
district’s revenue limit calculation. In many
Basic Aid districts, the combined reduction of state
categorical funding and loss of basic aid payment and
local property taxes exceeds 25% of the district’s
budget. By contrast, Revenue Limit districts will face
funding cuts totaling approximately 6%. Such an extreme
loss of funding in the course of one year would eviscerate
many Basic Aid districts.
A dangerous precedent
The Governor’s proposal to take local property
tax money earmarked for local school districts and divert
it to the state general fund sets a very dangerous precedent.
This money, as explained above, has historically been
used to support local districts and services. Prop.
13/AB8 Basic Tax allocations are based on historic allocations
of local taxes, proposed by local governing boards and
approved by local electorates, to fund local agencies
and services.
If the state decides it’s OK to reach into local
districts and take local property taxes, what is to
keep the state from also taking local parcel taxes that
have been proposed by local governing boards and approved
by the local electorate to fund local agencies and services
above the state’s minimum support? In fact, what
is to keep the state from attempting to drain the fiscal
reserves of local districts? Such a proposal has already
been made: to target specific school districts that
have significant reserve funds and take most of those
reserves to offset the state budget deficit.
The outcomes are obvious: local tax mechanisms –
such as parcel taxes – needed to provide funding
for local districts could be rendered useless. Communities
would no longer elect to fund critical agencies and
services as needed. And the quality of those local agencies
and services will be radically diminished. In the process,
some of the state’s few jewels of public education
will be irreparably damaged. If the Governor’s
budget is adopted, many Basic Aid school districts will
be effectively destroyed next year.
Further Information
For more information regarding the Governor’s
2003-4 budget year proposal and its impacts, please
see:
http://www.documents.dgs.ca.gov/osp/GovernorsBudget04/pdf/ed.pdf
http://bolinas.marin.k12.ca.us/Budget_update.htm
http://www.pausd.palo-alto.ca.us/district/superintendent.html
http://www.tamdistrict.org/
(you’re here!)
http://delmarschools.com/
For explanations of California public school
finance see:
http://www.edsource.org/edu_fin_law.cfm
http://www.edsource.org/edu_fin.cfm
http://www.sscal.com/histrvlm.htm
http://www.igs.berkeley.edu/publications/par/Nov1999/Kiewiet.html
http://www.ppic.org/publications/occasional/chapman.occ.pdf
http://www.ppic.org/publications/occasional/LyonsProp13.pdf
For independent analysis of public school spending
and performance see:
http://www.edweek.org/context/states/
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