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BACKGROUNDER on Governor’s Basic Aid Property Tax Taking (24-Apr-2003)
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What is a Basic Aid District?

A Basic Aid District is a school district that covers through local property taxes alone the state’s obligation for unrestricted funding per public school student.

This per-student unrestricted obligation is known as a “Revenue Limit.” This amount varies from district to district, with most clumped together in a “middle class,” and the outliers ranging above by thousands of dollars per student.

About 95% of the almost 1,000 California school districts require an augmentation of state General Fund revenues to local property taxes to fund the Revenue Limit. For the typical district, about half of its $4,500-$5,000 Revenue Limit comes from State General Funds. Basic Aid districts receive only the $120 minimum unrestricted state funding guaranteed by the Constitution, but also get to keep all local property tax dollars that may exceed the district’s Revenue Limit.

What is the Governor’s Proposal

There are two parts:

1. To eliminate the constitutionally required $120/student “Basic Aid” minimum state general fund stipend by counting restricted categorical dollars toward that $120. The Legislative Analyst has proposed this action for more than a decade. Given the fiscal crisis, this likely has legislative support.
2. To seize any local property taxes above the amount required to fund each district’s Revenue Limit. This proposal is tremendously controversial, and there is fierce legislative and community opposition to this piece. Some of the reasons for this opposition follow:

A) Equity (see “Basic Aid Quiz” attached)
Because of the wide variation in actual Revenue Limits between districts, Basic Aid districts are not necessarily higher-funded than Revenue Limit districts. Take three actual examples comparing unrestricted funding per student (Revenue Limit or Local Property Tax & $120 Basic Aid).

Sunnyvale	$4,406
Beverly Hills	$5,189
Leggett Valley	$10,641

Sunnyvale is the only Basic Aid District. The Beverly Hills Revenue Limit of $5,189 for each student is funded with $3,652 in local property taxes and a subsidy of $1,537 in state General Fund dollars. The Leggett Valley Revenue Limit of $10,641 is funded with $2,155 in local property taxes and a subsidy of $8,486 in state General Fund dollars. (All of this data is from the most recent available financial data from California Department of Education Form J-200.)

Sunnyvale’s per student funding of $4,406 is, with the exception of the $120 per student in Basic Aid, funded entirely by local property taxes. The personal income and capitol gains taxes paid by Sunnyvale residents support the general fund subsidies for Beverly Hills and Leggett Valley. Yet it is Sunnyvale alone that is being targeted by the governor for disproportionate cuts under his plan.

Of California school districts receiving more than $10,000 per student in revenue limit sources, fewer than half (8 of 19) are Basic Aid districts. Of districts receiving more than $10,000 per student from all state funding sources, only about a third (25 of 73) are Basic Aid Districts. While those numbers represent a much higher proportion of total Basic Aid Districts than Revenue Limit Districts, they do not support a policy targeting Basic Aids for devastating cuts while revenue limit districts are held harmless.

Basic Aid districts have been singled out for one reason and one reason only. The only thing that sets Basic Aid districts apart is that their schools are funded locally. Many, many revenue limit students are funded at a higher level than most Basic Aid students. Many, many revenue limit students are from wealthier families than most Basic Aid students.

B) The Seizure of Local Property Taxes
Until now, local tax dollars were sacred. When designing the legislative response to “Serrano,” one of the inviolate principals was that local property taxes to schools would stay local. Governor Davis has not just ignored this principal, he has reversed it. Until now, local property taxes for schools have been off limits to Sacramento. Now, the Governor wants them to become a liability, as the only factor that identifies the Basic Aid districts as targets is that they are locally funded.

C) Leveling Down
California school finance reform has until this proposal always been built upon the precept of “leveling up” – adding resources to lower funded districts, but never taking away from higher funded districts to accomplish this. Even California’s compliance in the renowned “Serrano” compliance (which instituted revenue limits) utilized state General Fund revenues to level up – no dollars were taken away from higher-funded districts.

This unprecedented call to equalize by “leveling down” comes at a time when Education Week has just ranked California schools ranked #48 out of 50 states in adequacy of funding

D) Practical Effect on Schools and the Economy
In his first two inaugural addresses, Governor Davis first emphasized education "first, second and third priority" and then employment "jobs, more jobs and even more jobs." The devastation of basic aid districts could not have been designed better if its goal was to sabotage both goals and the Gray Davis legacy in the process.

The proposal devastates dozens of districts, instantly slashing funding by 20%, 30%, 40% or more. Since schools spend about 85% of their revenue on staff, districts are looking at essentially dismantling their operations, sending layoff notices to 1/3 of their teachers, 2/3 of their classified employees and still being short.

Not only is the proposal turning thousands of taxpayers into tax receivers, but it has also harmed the residential housing market – about the only robust factor of the state economy. Because of concerns over the future of the local school systems, realtors in Basic Aid districts say that the markets are in shock.

E) Political Fallout
Governor Davis can no longer say he is unaware of this issue. As long as the property tax seizure stays alive, it will now be associated with his name. He needs to be fully aware of the political consequences of this position. Does he want to be responsible for the consequences of changing the basic nature of some of California’s best public schools?

Most parents in Basic Aid districts look like most parents across California. But many don’t. These are the individuals who have the means and the motivation to bankroll state school facility bonds, fight against vouchers, drive for education funding initiatives. Their schools' performance leads the state and drives the high end of the accountability system. Their personal income taxes provide a hugely disproportionate share of the state general fund revenues that subsidize revenue limits for revenue limit districts. They tend to be political moderates. And without exception, they have the resources for an exodus from public schools once it ceases to meet their extremely high expectations. So far, the only winners in this proposal have been the private schools, who are drowning in queries about vacancies for next year. Is it good policy to drive these families out of public schools? The consequences of this could be far more drastic than any of us can foresee. Senator Jackie Speier is by no means alone when she forecasts that this proposal would put vouchers back on the front burner.

MORE from the Superintendent’s Office on the fiscal crisis

NEWEST fiscal crisis info (24-Apr-2003)
>> Backgrounder on Governor’s Basic Aid Property Tax Taking
QUIZ: Which districts are Basic Aid districts?
Answers to quiz
Basic Aid Newsflash VI

ALL fiscal crisis info…

KEY CONTACTS IN SACRAMENTO
These are the telephone, fax and mailing addresses of key officials. Faxed or US-mailed LETTERS rather than emails are preferred.

Governor Gray Davis
c/o Michael Bustamante, Deputy Chief of Staff
State Capitol Bldg.
Sacramento, CA 95814
Ph: 916-445-2841
Fax: 916-445-4633

Secretary for Education Kerry Mazzoni
Office of the Secretary for Education
1121 L Street, Suite 600
Sacramento, CA 95814
Phone: 916-323-0611
Fax: 916-323-3753

Senator John Burton
State Capitol Bldg., Room 205
Sacramento, CA 95814
Ph: 916-445-1412
Fax: 916-445-4722

Assemblyman Joe Nation
State Capitol, Room 3013
Sacramento, CA 95814
Ph: 916-319-2006
Fax: 916-319-2106

Email addresses (note that faxed or US-mailed letters are preferred):
Governor Davis: governor@governor.ca.gov
Joe Nation: joe.nation@asm.ca.gov
Senator Burton’s website: http://democrats.sen.ca.gov/senator/burton/