| Contra Costa County, CA | November 6, 2012 Election |
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Public School FinanceBy Mark Allan JewettCandidate for Board Member; San Ramon Valley Unified School District |
This information is provided by the candidate | |
Public school finance is complex, and inequities exist, this paper attemps to distill the relevant provisions to plain language.Understanding Public School Financing, and the Road Ahead The concept of budget cuts to public education is not new, as it seems like we hear about them each and every year, and we are currently again under siege with yet further threats of draconian school funding rollbacks from the California Legislature if both Proposition 38 and Proposition 30 fail to pass in November. Even if one of the propositions passes, our District will expect flat funding compared to the prior year, not increased funding. However, in order to understand, and therefore properly assess, the magnitude of the impact of recent and projected losses in education funding to our SRV School District, a fundamental understanding of public school financing is warranted. I call it "the complex web that is public school finance", but here I will attempt to distill the most relevant provisions in plain language. A brief history through time: Prior to the landmark California Supreme Court case, Serrano v. Priest, in the early 1970s (John Serrano was a parent of one of several Los Angeles public school students; Ivy Baker Priest was the California State Treasurer at the time), public schools were for the large part funded by local property tax revenues. Glaring inequities exist in such a system, as higher net-worth school districts with higher assessed property values are funded well in excess of districts lower on the socio-economic spectrum with limited ability to fund schools with local property taxes, creating vast funding differences per student across districts. The Court recognized these inequities and therefore held that California's then current system of funding local school district expenses with local property tax revenues violated both the Equal Protection Clause of the Federal Constitution and also similar provisions of the California Constitution. In reaction, the California legislature imposed limits on the total revenues school districts could take in, in theory providing equal educational opportunities for every student. This base revenue limit, or a cap on the total dollar allocation on a per student basis, now forms the basis for the vast majority of revenue funds available to school districts. A district's overall revenue limit is calculated by multiplying it's per pupil amount (i.e. the base revenue limit) by the average daily attendance (ADA). To put this in perspective, our SRVUSD 2012-2013 budget forecast shows for our general fund $155 million in overall revenue limit revenues out of a total $228 million in total general fund revenues, or roughly 68% of our total revenues. However, the revenue limit for the unrestricted general fund component (or the funds available for discretionary use not specifically, or categorically, set aside for mandated programs such as special education) is $152 million out of a total $197 million in total general fund unrestricted revenues, or 77% or our total unrestricted revenues. So you can see that revenue limit funds are the vast majority of total revenues available to our school district. Post Serrano, our property taxes are not kept locally, but are pooled state-wide, and through a highly complex formulaic approach with a complicated history of development, divided up and allocated to all California school districts. Initially, revenue limits for districts were based on average expenditures per student based on 1972 expenditures. At that time, the SRV district was considered a "low wealth" district; meaning, our expenditures were far less per student than the average school district in California. As such, our revenue limit was initially determined at a reduced amount comparatively. To achieve equity, the state provides annual inflation increases (COLA's) to the revenue limit--with high spending districts receiving smaller increases than low spending districts, so in each year, the prior year's revenue limit is adjusted by the COLA to achieve the current year's revenue limit. However, equalization aid is usually only given when the state has surplus funds. Thus, due to the economic downturn, there has been no equalization funding in the last few years. Our district, while in a high socio-economic area, does not enjoy any higher revenue limit than other districts have. In fact, our revenue limit falls below the statewide average. For the 2010-2011 education year, the latest year for which data is available on Ed-Data (a partnership of the California Department of Education, EdSource and the Fiscal Crisis & Management Assistance Team (FCMAT) designed to offer educators, policy makers, the legislature, parents, and the public quick access to timely and comprehensive data about K-12 education in California) Palo Alto Unified School District's revenue limit was $9,729, Mountain View-Los Altos Union High School District's was $11,713 (both Palo Alto Unified and Mountain View-Los Altos Union High are basic aid districts, see below), Acalanes Union High School District's was $6,143, Antioch Unified School District's was $5,392, Mt. Diablo Unified School District's was $5,293, West Contra Costa Unified School District's was $5,403, while the SRVUSD received $5,253. The average for all Unified School Districts was $5,390, the average for all High School only districts was $6,648 while the average for all school districts was $5,565. Note that SRVUSD received the 5th lowest revenue limit of all Unified districts in California for this academic year, with Paramount Unified in LA receiving the lowest at $5,227. As can be seen, equal funding as set forth by the policy of Serrano v. Priest remains elusive. The monies used to fund the revenue limit come from a combination of local property tax collections and state aid. Local property tax revenues are subtracted from the total revenue limit allocation amount to determine the amount of state aid needed. Typically the amount of local property taxes collected is less than the total revenue limit amount. For the average district, less than 40% of the total comes from property taxes and the state contributes over 60%. In our district, the state aid component is approximately 25% of our total revenue limit. In some districts, though, the amount of local property tax collected is actually larger than the total revenue limit amount. These districts are called basic aid districts (see Palo Alto Unified above). They get to keep the entire property tax collection. This seems to be a direct contradiction of the Court's policy of equal educational opportunities as set forth in Serrano v. Priest. The sad state of Prop 98: Proposition 98 was voted into law in 1988, effectively requiring a certain minimum amount of K-14 public education spending. The general rule is that 40% of total state general fund revenues must be spent on K-12 and community college education, with mandated increases based on student enrollment and personal per capital income growth. However, there is an alternative formula that results in far less funding in periods in which the State general fund grows slower than per capita income. If this alternative formula is used, the state is required to "make up" over time the reduction in overall K-14 funding. There is a specific formula for determining this "Maintenance Factor", or reduced funding, for each year that it is required until the lost funding is restored. Over the 4 school years from 2007-2011, our District has received $82 million total reduction in funding as a result of the Maintenance Factor being applied to our revenue limit. For the 2011-2012 year the reduction in funding amount was $39 million and the projected deficit funding amount is $47 million for the 2012-2013 academic year. That is $168 million in overall Maintenance Factor funding reduction since 2007, or the amount the State owes our District when the economy turns around. In the meantime the implications of this deficit funding are clear; the District has had $168 million less to apply to achieve our continued high education standards than what is otherwise required under Proposition 98. Over a budget of approximately $228 million in total revenues, this deficit amount is roughly 74% of our overall annual budgeted revenue. The SRV Budget: Our base revenue limit for the 2012-2013 academic year, as originally calculated, is $6,692, and with a projected ADA of 29,395 (yes, we are a large school district) that equates into $197.5 million in revenue limit revenues. Applying the current year Proposition 98 Maintenance Factor reduces our base revenue limit to $5,202, resulting in (with the addition of other smaller adjustments) $155 million of overall revenue limit revenues. Our budget expenditures are made up of (i) salaries and benefits ($202.3 million, or 85% of the overall expenditure budget), (ii) books and supplies ($8.3 million, 3.5%), (iii) services and other operating expenses largely consisting of outside professional services, custodial services, repairs and maintenance, insurance, and other operating, non-capital items ($19.9 million, 8.5%) and (iv) capital outlays primarily related to equipment and county office payments ($2.3 million, 1%). Adding all this up results in a net cash outflow (revenue less expenses) of $4.5 million. The district is required by law to set aside 3% of total expenditures as a reserve for future economic uncertainties. This is the amount of the general fund ending cash balance that must be maintained (i.e. funded at the required level). Our reserve is forecasted to be $7.3 million at the end of the 2012-2013 school year, or just north of the mandated 3%. In addition, our district has set aside an additional $12.9 million in ending fund balance reserves to take into consideration the non-passage of Proposition 30 and 32. As such, the total, unappropriated ending general fund balance is forecasted to be $2M. What we must understand: The implications are clear, without more federal stimulus monies, the passage of either Proposition 30 or 38, a restoration of the Proposition 98 Maintenance Factor or additional public/private partnerships with the passage of additional parcel taxes, our district will be faced with very tough choices related to limited resource allocation. If we continue to fund expenditures at the current level, our "structural deficit", (or recurring revenues less expenses) will in the very near term reduce our fund balance and reserve balances to unacceptable, unmanageable levels. Even if the Proposition 98 funding is restored, our children are competing against students from Palo Alto Unified (high schools Gunn and Palo Alto) where the per pupil (i.e. revenue limit) funding difference is an enormous $4,476. Just this difference alone applied to our ADA of 29,395 would result in an additional $131.5 million per year of additional funding simply if we received the same funding per student as Palo Alto Unified. We are competing, that's the good news. We must continue to compete. Salaries and benefits are 85% of our budget. We can continue to apply fiscal rigor into the remaining 15% to help maintain fiscal viability. However, the big levers are increased class sizes, reduced number of instruction days, large concessions by our highly valued work force and are the last lines of defense, and we will have to be diligent, creative and responsible in the way we manage our general fund prior to initiating the last lines of defense, as if we have to trigger any of them, I believe we start to create the environment where it will be enormously challenging to continue to provide the high levels of academic, leadership and whole-student success we have become accustomed to here in the SRVUSD. School Facilities Funding: The revenue limit, and other sources of general fund revenues outlined above, is simply insufficient to fund major capital renovation and new school construction projects ("School Facilities Projects"). Indeed, the revenue limit was never contemplated to fund these types of projects. Instead, School Facilities Projects have been funded over the years in California by the issuance of bonds, both at the State and local level, which are financed with future property taxes. In November of 2000, California voters passed Proposition 39 which allowed school districts to issue local general obligation bonds ("G.O. Bonds") subject to approval of 55 percent of voters, conditional on (i) the establishment of a citizen's oversight committee to ensure bond proceeds are allocated properly, (ii) the provision of a specific list of projects to be funded with any bond revenue and (iii) to conduct annual performance and financial audits. School Facilities Projects are funded in partnerships between local districts and the State through the School Facility Program ("SFP"), a program established in 1998 when the legislature passed the Leroy Greene School Facilities Act of 1998. Under this program, new school construction projects are funded on a 50/50 state and local matching basis while renovation projects are funded on a 60/40 state and local matching basis. The state has funded the SFP by issuing general obligation bonds approved by the voters of California. The first funding for the program was from Proposition 1A, approved in November 1998, a $9.2 billion bond. The second funding for the program was from Proposition 47, approved in November 2002, $13.2 billion bond. The third funding was in March 2004 when voters approved Proposition 55 for another $12.3 billion. In November 2006 an additional $10.416 billion was passed by the voters as Proposition 1d. There are other sources of funding School Facilities Projects. School districts also have the authority to levy developer fees on residential and commercial construction or reconstruction, but statewide these fees generate significantly less money than bonds. School districts are also able to tax just a portion of their districts new housing developments by establishing a Mello-Roos Community Facility District or a School Facility Improvement District (SFID) requiring property owners pay a special tax based on a formula. The SRVUSD has placed Measure D on the ballot for November. Measure D is a G.O. Bond facility that, if passed by 55% of the District's voters, will provide for $260 million, over time, for the renovation of existing school facilities (seismic modifications and upgrade to our technology infrastructure to support the huge increase in classroom technology use) and new school construction (additional classrooms and a new school). We have current and forecasted overcrowding in certain areas of our district that needs attention, and certain of our schools have long-overdue renovation needs, as determined by a citizen's facility advisory oversight committee and a citizen's facilities advisory committees. Measure D is governed by Proposition 39, meaning that at least 55% of the District's voters need to vote yes for it to pass, and if it does, there will be the establishment of a citizen's oversight committee to ensure bond proceeds are allocated properly, and annual performance and financial audits must be conducted. The specific list of projects to be funded with Measure D funds are listed on the District's website. |
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