August 27, 2004

Public education funding and its effects on the Evergreen School District

By Brenda Franca-Serpa
Special to the Times

Editor’s Note: This article is the second in a series of five intended to raise awareness of the primary issues facing our local Evergreen School District (ESD), and to suggest credible solutions for which the entire Evergreen community can take responsibility.

Prior to the 1970s, California funded its schools by providing a base level of general purpose funds for each pupil. Local districts exerted their control of property taxes to increase per pupil funding to the amount the district wanted to spend.

Each school district in California funded its own budget through the revenues generated through property taxes. Very wealthy property-tax-wise districts had unlimited funds, in essence, to spend on public school funding and new school construction and maintenance.

This created a disparity among public schools in the state. Impoverished school districts, such as those in the Watts section of Los Angeles, had little money, comparatively, to spend on public education.
Equitable education

In the 1960’s as today, from a social standpoint, an equitable public education for all was thought to be an equalizer and hopefully a panacea for social reform. But, with the type of spending based solely on property tax revenue, it was not an equal education for all students in the California school system.

In Serrano vs. Priest, the California Supreme Court ruled that financing school districts based on revenues collected through local property taxes was unconstitutional.

In Serrano I (1971) the California Supreme Court ruled that local districts couldn’t use any wealth-based systems to increase funding. It limited district disparities in per-pupil expenditures to $100.

Senate Bill 90 set revenue limits, which placed a ceiling on the amount of tax money each district could receive per pupil. The 1972–73 general purpose spending level became the base amount in determining each district’s annual revenue limit. This was the beginning of the shift from local to state control of school finance.

In Serrano II (1976) another judge accepted different revenue limits for large and small elementary districts, large and small high school districts and large and small unified districts, effectively creating six separate Serrano bands.

The current allowable band of variation in per-pupil spending, known as the “Serrano band” (Serrano bands is more factual) is about $350 due to inflation.




Tax revolt and Proposition 13
Next, in the 1970’s inflation plagued the economy in California. Rising home prices created rising property taxes, which created irate Californians who were led by Howard Jarvis on a statewide tax revolt. Voters unanimously passed Jarvis’s Proposition 13 in 1978. The passage of Proposition 13 effectively:

Slowed property tax reassessment to no more than 1 percent per year with the exception of a sales-initiated reassessment at 1975-76 values. Increases in assessed value per year are capped at 2 percent or the percentage growth in the Consumer Price Index (CPI) whichever is less. CPI is a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services.

It prohibited future taxes by requiring new local taxes to be approved by a two-thirds (majority) vote. The only way to garner more tax revenue is to impose a uniform dollar tax per parcel of land, better known as a parcel tax and this must be approved by a two-thirds majority vote.

As of 1986, property taxes can be increased for bonds for school construction or renovation and must also be passed by a two-thirds majority vote.

Proposition 39 passed in November 2000 meant that local school bonds could be approved by a 55 percent vote rather than a two-thirds vote of the local electorate.

Impact of Proposition 13
For the first time in California history, the state was in charge of distributing the proceeds of locally levied property tax, with the rate and base defined by Proposition 13. Now, with the passage of Proposition 13, there was one tax rate and the legislature had a much smaller property tax pie to slice up and distribute to the same number of governments.

Assembly Bill 8 was created to increase state aid to schools to offset the property tax shift to the other local governments, amongst other things.

Proposition 98 guaranteed a minimum level of funding for K-14. Proposition 111 modified Proposition 98. In low-revenue or no-revenue growth years, the state is allowed to modify the formula through a maze of complex adjustments. Yet, school districts such as the ESD are still required to operate as though they received their full funding.

Overall impact on public education
All the aforementioned legislation forever gave the state governance over the allocation and use of local property taxes. Hence, all school districts have had to look to the California legislature and governor for a slice of public school funding ever since.

Over time, under funding of school districts creates deficit spending and eventually education inequities due to cutbacks in essential programs, including teacher and staff layoffs. For example, when the state is in a recession, the appropriation for revenue limits is not always enough to pay the cost-of living adjustments (COLAs) specified in the law.

It has meant that the ESD has had to dip into its required reserves to provide the excellent education our students and their parents rely upon and our area is recognized for.

How the ESD’s budget is spent
If you look at the ESD’s budget for 2003-04, the General Fund consists of a Restricted Fund (grants for restricted or specific use) and an Unrestricted Fund (used per the ESD’s discretion).
- 64 percent of the budget is allocated to certificated and classified salaries.
- 23 percent of the budget is allocated to employee benefits.
- 7 percent of the budget is allocated to books and supplies.
- 5 percent of the budget is allocated to services, other operating expenses (utilities, such as PG&E, related services, insurances).
- 0 percent of the budget is allocated to capital outlay
- 1 percent of the budget is allocated for other outgo (excluding transfers of indirect/direct support costs).

A typical California school district’s budget is consumed with salary and employee benefit expenditures. Statewide averages for salaries and employees benefits typically run ~ 85 percent, and the ESD exceeds that slightly.

Recently, the ESD saw a record 40 teachers and administrators opt for a “golden handshake” retirement package.

Apparently the salaries and employee benefits are still higher than the average. High medical insurance costs make providing employee benefits expensive.

Thirty years ago in Evergreen, the landscape was rural, in comparison to the Upper Peninsula. In order to entice teachers to the district, the ESD offered a district salary schedule which allowed rapid advancement.

While the 12 step-column career path succeeded in enticing and retaining excellent teachers to our district, over the years it has taken a toll on the budget (rapid advancement equals high salaries) along with the high medical insurance costs.

Under funded?
The ESD is under funded in terms of total revenues per student (average daily attendance or students attending school/year) compared to the average total revenues of Alum Rock Union and Oak Grove ($7307 plus $7100 divided by two equals $7203.50) by ~$1300/Average Daily Attendance in 2002-03.

The $1300 dollar figure multiplied by the average daily attendance in 2002-03 in the ESD, which was ~ 12,567 amounts to an under funding of ~ $16,337,100 in one fiscal year compared to the two neighboring school districts. Estimated data for 2003-04 and 2004-05 suggest that the situation is unchanged.

Tough choices coming
Lower statewide revenues have forced the state of California to cutback its budget. The ESD gets its funding from the state of California and likewise must reduce its budget.

School districts cannot ask voters to increase their property taxes to procure more revenue for their budgets since the passage of Proposition 13, instead they can can pass a parcel tax.

The ESD offers what is considered to be the essentials (class size reduction, open libraries with librarians operating them, text book, computers and the personnel to attend to them). Yet it is under funded to the point it must borrow from its reserve funds. Over time, under funding creates deficit spending and eventually education inequities.

Without additional funding, the district will lose the essential components that make up its current curriculum. This is not a question of fiscal irresponsibility; it is a fact that the ESD is the lowest funded elementary school district in Santa Clara County.

The ESD board of trustees faces difficult decisions regarding the cycle of deficit spending. It is important as a community to understand the facts surrounding the ESD’s deficit spending mode. Understanding the situation the ESD trustees face will allow cool heads to prevail when they begin to make potentially tough decisions. Finally, the ESD can not continue to operate in deficit spending mode.

Evergreen has seen significant growth; it’s not rural. The funding system has not changed. ESD students receive less money per pupil than urban districts and neighboring school districts.

The third article in the series will appear in the next edition of the Evergreen Times. It will explain how categorical programs use general purpose funds, leaving less money spent in the classroom. It also will delve into how the ESD approves and funds its budget. It will explain how the state of California’s budget and politics in Sacramento negatively impact the ESD’s budget.

The full series can be found on the Evergreen Times Web site, www.evergreentimes.com.

Brenda Franca-Serpa is an involved member of the Evergreen community. One of her children is a student of Laurelwood Elementary School and her other child is attending Silver Creek High School. If you have specific questions about any of these articles or you are interested in starting an education foundation e-mail her at byfs@sbcglobal.net.