Katherine Welch published What is the ‘excess’ educational funding in San Francisco that you refer to, where did it come from? in Questions and Answers: Analysts 2019-03-16 07:47:20 -0700
What is the ‘excess’ educational funding in San Francisco that you refer to, where did it come from?
San Francisco is unusual in that it is both a county and a city, and contains only one school district, so it illustrates the phenomenon of “excess” school property tax well.
In 1977, before Proposition 13, San Francisco Unified School District’s levied a property tax of 0.83% of assessed (market) value to fund its schools. Every property paid that level of tax for SFUSD because all local levies were independent of one another. (SFUSD’s levy was low for unified districts around the state — the average was 1%.)
Proposition 13 cut the sum of all local levies (for schools, city, and county governments) down to a total of 1%. This reduced SFUSD’s share of the new, consolidated levy to 0.30% — just under a third of local taxes.
At this time, the California state general fund -- fed by income tax -- was running a huge surplus. The Legislature was able to use it to backfill about ⅔ of the property tax losses that Proposition 13 had cost schools, cities, counties and other local districts. So, as school property tax revenues decreased, from $4.7 billion down to $2.3 billion, state funding grew from $3.5 up to $5.6 billion, for a loss of “just” $300 million.
SFUSD per-pupil spending actually grew slightly, from $2,333 to $2,500 per student, with property taxes still providing 30% of total funding. During a period of 10% annual inflation, this wasn’t great, but the property tax rolls continued to grow and enrollment dropped, as the swell of baby boomers aged out of the system.
The following year, 15 months after Proposition 13, the Legislature decided to ease itself out of the roll of backfilling city and county losses. The Legislature directed county controllers across the state to take away educational property tax allocations worth over $507 million (1979 dollars) — about 20% of the property tax still left in education — and give it to city and county governments.
In San Francisco, this meant that SFUSD’s share of total property tax revenues fell from 30% down to 8.5%, where it sits today. In Los Angeles and Alameda counties, the allocation to education shrank to 23%. Elsewhere less was taken, so the median direct allocation education in California counties is 46%.
The financial whizzes among you will have just said, “Whoa! Did you just tell me that schools were forced to swallow a big chunk of the cost of Proposition 13 for three large commercial counties — Los Angeles, San Francisco, and Alameda — and their cities?”
Yes. The AB-8 Split buried the cost of servicing counties and cities with large commercial sectors in school funding, or, put differently, allowed some large counties and cities to keep spending on local services high, subsidized by the rest of the state via the school funding mechanism.
As the state’s general fund fortunes fluctuated over the next decade, the hole in school property taxes, and resultant large state general fund spend "on education," was unsustainable. School funding ended up sliding downwards -- the “First to Worst” of the documentary film. Proposition 98 was passed in 1988, demanding that it fall no further as a proportion of total state spending.
Forced to deplete its general fund monies to meet voters’ Proposition 98 demands for schools and community colleges, the Legislature responded by reversing its earlier AB-8 action. In 1992 and 1993, it shifted property tax allocations away from cities and counties toward “Educational Revenue Augmentation.” But with a twist. The goal was not to grow education funding, but to create a pot of money that could be used to offset the state’s own Proposition 98 obligations to support education.
In San Francisco, this meant the creation of a county Educational Revenue Augmentation Fund with an allocation of 25% of total property taxes, targeted to fund the state’s obligations to SFUSD and SF Community College District.
Thus, the 35% of property taxes allocated to all education in San Francisco at the time of Proposition 13 became available for education again. But the majority of it — the 25% ERAF fund — is only available to the extent that the state’s school and community college funding formulas call for it. If they do not, those property tax dollars are redistributed to the City and County of San Francisco for other civic uses.
This is why San Francisco's controller recently announced that $400 million of “excess” educational revenue was being handed to the mayor to spend, under state law.
Are these the headlines we expect to see in the tenth year of an economic expansion?
Increasing San Mateo County school districts’ LCFF target funding (less any excess local property tax revenue, typically so-called ‘basic-aids’) suggests that specific districts are experiencing approximately the levels of financial pain shown below (above and beyond the general pain described in West-Ed’s “Silent Recession”).
Across the high-cost counties we’ve reviewed, this pain is generally reflected in multiple measures including less-experienced staff, higher staff turnover, less support staff, fewer enrichment programs (unless supported by external funding sources), perennial budget shortfalls, lower reserves, larger schools, larger class sizes, lower salary structures, antagonistic relationships between trustees, parents, unions, and staff. It is often worse, however, in areas of socioeconomic disadvantage, since the fixed Federal free-or-reduced-price-lunch cut-off excludes many high-needs students from LCFF student-need supplementation who are experiencing housing-cost related poverty.
Wonder how districts are educating their communities and taking action? See Redwood City's flyer here.
Time to make an imPACT!
Please contact your state legislators. Here is the state search tool to find them. Their details are below. Rally friends to make a bigger imPACT!
- Email is nice -- tell them how your school is hurting and how you want them to “support a regional cost supplement to the Local Control Funding Formula in the May Revise.” (They’ll be impressed.)
- A phone call is better -- ask their office if they are supporting a regional cost supplement for your school district -- share a personal story and tell them where they can find more information (here!) if they ask.
- Tweet to your representatives -- ask if they will stand up for your schools and your students and support a regional cost supplement! Tag #MakeAnImPACT and @EducateOurState
- Fax your legislators' offices -- phone calls and faxes are always heard. Get your friends to all do it together for a bigger imPACT.
Now dig deeper! Whom do you know in the Education Community? An education researcher at Cal, Stanford, UC Irvine, UCSD or USC? A school board member? Send them an email, too, and link to this site. We need to influence the influencers!
Still willing to work to help your kids, grandkids, neighborhood kids AND the kids on the other side of the tracks in your county? Please, put this on Facebook and Twitter, talk at your school PTA meeting, address your school board. We are here to help -- just reach out to us here and let us know.
WRITE, EMAIL, TWEET and CALL
KEVIN MULLIN: Assembly District 22 https://a22.asmdc.org Capitol Office, Room 3160P.O. Box 942849, Sacramento, CA 94249-0022; (916) 319-2022 District Office 1528 South El Camino Real, Suite 302, San Mateo, CA 94402; (650) 349-2200
Twitter: @KevinMullin Facebook: https://www.facebook.com/AssemblymemberKevinMullin/
MARC BERMAN Assembly District 24 https://a24.asmdc.org Capitol Office, Room 6011 Sacramento, CA 94249-0024; (916) 319-2024 District Office 5050 El Camino Real, Suite 117, Los Altos, CA 94022; (650) 691-2121
Twitter: AsmMarcBerman Facebook: https://www.facebook.com/AsmMarcBerman/
SCOTT WIENER State Senate District 11 https://sd11.senate.ca.gov Capitol Office State Capitol, Room 5100, Sacramento, CA 95814-4900; (916) 651-4011 District Office 455 Golden Gate Avenue, Suite 14800, San Francisco, CA 94102; (415) 557-1300
Twitter: @Scott_Wiener Facebook: https://www.facebook.com/ScottWiener2/
JERRY HILL State Senate District 13 https://sd13.senate.ca.gov Capitol Office State Capitol, Room 5035, Sacramento, CA 95814-4900; (916) 651-4013 District Office 1528 South El Camino Real, Suite 303, San Mateo, CA 94402; (650) 212-3313
Equal isn’t equitable.
We need per student funding to reflect regional cost differences in our most expensive counties.
Children in the poorest schools in our wealthiest counties are seeing the biggest cuts in their schools; this makes it imperative we move to Parity And Cost Transparency (thus our title, imPACT) by giving these districts a supplement to account for the higher costs in these districts.
Make an imPACT and bring equity to these students and these schools in our most expensive counties.
California’s school finance system provides the SAME funding for a student in a less expensive county, where a two bedroom apartment may rent for $900, as it does for a student living in a more expensive county, where the same apartment can rent for three or four times as much (see graph below). This means that, for example, while the teacher shortage may be impacting all districts, it impacts these districts even more. As another example, a family of four – with two parents working as custodians, teachers, school nurses, administrators -- can just make ends meet for $67,000 in Sacramento or San Bernardino county. A similar family needs over $108,000 in the Bay Area to maintain the same modest lifestyle, according to the California Budget & Policy Center.
When the new funding formula was originally developed (it went into effect in the 2013-14 school year), cost of living was intended to be part of the calculation, in addition to student needs. Former State Board of Education Chair Michael Kirst’s 2008 blueprint for this “more rational, more equitable” school finance system in California clearly stated that district revenue should be linked to “student needs and regional costs.” When that funding formula, called the Local Control Funding Formula (LCFF) (click the link for a definition of LCFF) was implemented in 2013, however, regional costs were omitted to achieve full implementation sooner. We have heard several other reasons for this omission; you can read those reasons here.
The misery experienced in the poorest districts in our wealthiest counties goes beyond that experienced by all districts across the state, so well described in West-Ed’s The Silent Recession. Our effort here is to bring equity to school funding by supplementing some districts for cost of living differences; no district in the state would receive less than they currently receive. The state recognizes cost of living for other investments (e.g. childcare); it is time to supplement that difference for K-12 education.
A regional supplement is surprisingly affordable. Although the total shortfall is $1.1 billion -- less than $700 million, or 1% of the total LCFF budget, would be needed from the General Fund. Why? Because over half a billion dollars of “excess” property tax revenue, allocated to education, but redirected, is available to pay for it annually in the four highest-cost counties.
Basically, a fund was created to allocate some property taxes to schools, but the money in that fund only gets to schools up to the level the state says schools should be funded -- which does NOT include a cost of living supplement. We know from county child care allocations, for example, that it is CRITICAL to adjust for cost of living -- otherwise counties could not attract providers. However, we have not made the same adjustment for K-12 funding. It's time. If you have additional questions about how a district could have "excess" education revenue more information is here (the amount), here (the history) and here (an explanation).
imPACT is our campaign to address this inequity, now. The extreme financial crisis facing most schools in the poorest districts in our wealthiest counties makes it imperative we move to Parity And Cost Transparency and supplement funding for cost of living differences in those counties. Please join us in asking the Governor and Legislature to incorporate a regional cost supplement into the school funding formula, LCFF, as originally intended.
Do you live in one of the ten highest-cost counties in California -- including Alameda, Contra Costa, Marin, Orange, San Diego, San Francisco, San Mateo, Santa Clara, Santa Cruz and Ventura? Find out how much additional financial stress your local districts are experiencing by clicking on Counties.
We have provided questions and answers for parents and other concerned community members and one for analysts. We add more every day. If your question is not listed, please add it in the comment box at the bottom of either of those links and we will post your question and a response. Thank you!
Do you wonder how there could be “excess” property tax revenue -- meant for, but not going to, schools -- available to the Legislature for schools in the most expensive counties: San Francisco, San Mateo, Marin and Santa Clara? Click on $623 Million.
Are you asking yourself if this completely fixes California school finance? No. It rectifies an immediate problem, recaptures hundreds of millions of dollars for education starting in July, and serves to reassure voters -- especially in the areas where any new full, fair and adequate funding will predominantly be raised -- that their local needs are respected.
Make an imPACT -- contact your local legislatures if you are in an imPACTed county -- including Alameda, Contra Costa, Marin, Orange, San Diego, San Francisco, San Mateo, Santa Clara, Santa Cruz and Ventura -- click on the counties link here and your county page will have the information to contact your legislators.
We also need to reach out to Governor Newsom, his Education Advisors and the key Legislative committees. Join with other parents and members of the education community to have an imPACT now. Email us here to get involved, and with questions or for connections.
Join the fight for equitable -- not nominally equal -- funding of all children in California.
Katherine Welch wants to volunteer 2016-10-11 19:42:58 -0700
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Thank you for standing up for the children of California!
Warning: The reality of what the state has done with taxpayer money allocated to our children and our public education system can be disheartening. Please believe us when we tell you that together we CAN and we WILL stop this madness. When we engage our communities and commit to support policies, legislation and candidates that put the needs of our children and our state first, it is a game changer. JOIN US today and spend your time telling Sacramento to clean up these diversions vs. spending your time working on the endless cycle of school fundraising that drains our wallets and our spirits. You do not need to become a finance expert, but instead to understand there is a pattern here that is hurting our children, our public education system, the integrity of our government and the future of our state. Here goes...
Parents are puzzled. Why are state and property tax bills so high? Why is our kids' school funding so low?
Pundits, politicians and PACs blame their favorite scapegoats: Prop 13, illegal immigrants, greedy teachers’ unions, wealthy basic-aid districts, top-heavy management! White papers dissect school funding from every angle, but miss the black hole:
California has a pattern of tricks
that allow tens of billions of “education funds” to be diverted
from our schools every year.
We’ve followed the money—the actual revenues raised and where they go—and have discovered how funds allocated to your child’s school are being manipulated away each year. We could call them the seven deadly sins, because they have killed the opportunity for many of the children of California to have access to a highly effective education and the chance to realize their potential. But we won't be any more dramatic - these intentional diversions speak for themselves:
1. Local Funds Are Shifted Away from Schools (AB 8 Split of 1979)
What Happened: In the aftermath of Prop 13, the Governor & Legislature told cities and counties to backfill their losses -- taking 30% of the property tax revenues that were allocated to schools. Sacramento promised to make up the schools’ losses from the State's General Fund.
Result: This reduced property taxes flowing to K-12 schools (less than 10% in SF, 20% in Los Angeles, Alameda, and other major counties, leaving some wealthier counties at 40%+, like Marin, Santa Barbara, and Napa)
Lessons: Many schools (especially urban) became heavily dependent on the State’s General Fund. Revenue for schools has switched to unstable income tax revenue—it cycles with the State’s economy. Without changes in the local property tax allocations, changes to Prop 13 will only provide minimal extra funding to most urban schools. (In SF, for example, K-12 schools would only get 10 cents per dollar raised through increased property taxes.)
2. Proposition 98 is Routinely Manipulated and Undermined
Background: After Prop 13 hit education funding, voters approved Prop 98 (1989) to give K-14 schools a “fair share” of the state’s growing budget. Prop 98 funding from the State General Fund now accounts for the majority of most schools’ funds. But, no sooner had voters acted than …
- Prop 111: “Traffic Congestion Relief and Spending Limitation Act Of 1990”
What Happened: The Legislature, under the cover of gasoline taxes to build highways and the need for a balanced budget, gutted Prop 98 by introducing “Test 3.”
Result: This allows the state to cut back funding to education during a slow economy with only “maintenance factor” promises to catch up education funding when times get better.
- Proposition 30 (2012) “Temporary Taxes to Fund Education…”
What Happened: The Governor proposed, and the Legislature passed, a state budget that included the funding proposed under Prop 30 as part of the Prop 98 funding to schools—so funding to schools would be cut if it didn’t pass. Under the “promise” of giving funding to education through increases in personal income and sales taxes, voters approved Prop 30. But there was a hidden caveat (in “realignment”)…
Result: The State was able to pay off its debt to schools (“deferrals,” see back), but the changes to the state constitution actually diverts funds away from schools in the long term. $6B of new taxes were added temporarily, but $6B of existing sales taxes were removed from the Prop 98 calculation permanently, resulting in a $2.4 B annual loss to education! [Note: Prop 98 allocates roughly 40% of the general fund to public education, thus a $6 Billion diversion of funding from the general fund will reduce Prop 98 funding by $2.4 Billion or ($6B*40%).]
Lesson: Be suspicious of any proposition by the Governor or Legislature that impacts education funding because regardless of what the LAO analysis states in the voter guide, the proposition probably hurts your schools. Don't trust the status quo.
- The “Triple Flip” & The VLF (Vehicle License Fee) Swap
What Happened: Both diverted local property taxes allocated to schools to satisfy the State's debts to cities and counties, with the promise that "Proposition 98 would hold schools harmless."
Result: The Swap shifts more funds than the State’s underlying debt ($2.5B extra in 2014-15 alone!). This helped grow the massive deferrals debt of 2008-2015 (over $10B). Both mechanisms shifted the State's credit risk onto schools. You can learn more about that here.
Lesson: The Legislature is always eager to ‘make a deal,’ and the State is a lousy credit risk.
3. Schools Are the State's Lender of Choice
What Happened: When the State economy contracted (2008-2012), the State not only reduced actual Prop 98 spending to schools but also “deferred” payments (e.g. issued IOU’s) to schools, to the tune of $10B.
Result: This forced schools to incur borrowing costs, raid reserves (reducing interest income and scaling back capital projects), and cut programs/raise class sizes in order to pay their bills.
Lesson: When hard times come, your schools are forced to bear the costs of the State’s debts.
4. Unfunded Promises Have Consequences
Background: At the height of the dot-com bubble (1999), the Legislature was persuaded to increase teacher benefits and pensions, but without dedicating a funding stream for these increases.
What Happened: When the unfunded liability in CalSTRS had grown to $80B+, the Legislature finally took action in 2015…and dumped the majority of the financial burden on school districts.
Result: Schools educating today’s and tomorrow's students are forced to pay for these promises now (and for the next 29 years) – with the result that future ‘spending on students’ is really just paying for teaching a decade ago and for the lost interest on that obligation.
Lesson: Unfunded commitments and mandates grow until someone is forced to pay them.
5. Manipulate the Well-Meaning Voter: Proposition 2 (2012): “The Rainy Day Fund”
What Happened: Under the guise of the State and schools "saving for a rainy day," voters approved the Governor’s & Legislature’s Proposition 2.
Result: SB 858 was added to Prop 2 in the 11th hour and requires schools to dump $6B in savings, their local “rainy day funds,” in the year after the first penny goes into the State "rainy day fund for schools." Here is an analysis by the LAO.
Lesson: Even if a proposition doesn’t seem to impact education funding, the funds are just too tempting not to tap into somehow, so read propositions sponsored by the Legislature carefully.
6. Cities Want School Funding for Redevelopment
What Happened: The Governor & Legislature ignored how redevelopment was turbocharged by Prop 13, removing another 20% of the property taxes that were left to schools. (They dismissed the issue because school losses would be “made up” from the State's General Fund.)
Result: In 2010 the Governor & Legislature had to take back Redevelopment Funds from cities to help pay for education – only to discover that these funds had been committed to debt service[TH2] .
Lesson: Cities, hungry for revenue, are watching for an opportunity to take property taxes away from schools again (e.g. Initiative #13-0065 in 2013).
7. Unequitable Application of Prop 13
Background: Commercial property lobbies have successfully “persuaded” a series of California governors and legislatures to allow loopholes in Prop 13 to escape property tax increases. Real estate partnerships and large commercial investors hide behind small business owners.
Result: Reduces overall property tax revenues and shifts the burden of paying for local services onto homeowners.
Lesson: Money and successful lobbying have reduced local taxes for some privileged property owners, while creating a large group of voters who expect more from their cities, counties, local services and schools than they get.
While voters work very hard to get money into schools -- others work very smart to get it out again.
Why are our taxes so high, while our school funding is in the cellar?
Maybe it’s because school funding is the easiest to raise -- and raid.
* See us for updates. We are in the process of adding links for those who would like more detail on the references and research here. Contact us here if you would like a 2-page PDF of this information. Thank you.
Katherine Welch commented on 2014 Initiative 2013-11-21 06:59:14 -0800Time for communities to take matters into their own hands. Let’s fix this mess and make a difference for kids. This initiative will start us on the road to transparent and stable school funding. I’m proud to be a part of this effort!
When caring people like you stand together and speak in one voice, our students and our state will win.
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