Palo Alto Weekly Online Edition

Publication Date: Friday, May 02, 2003

Budget crisis forces
new thoughts on school funding
Suggestions range from revising Prop. 13 to completely overhauling system

by Martin Nobida

Gov. Gray Davis' proposed 2003-04 budget threatens to drastically change the way California's public schools are financed.

Some experts, however, say that change is exactly what the state needs.

Behind the numbers

Budget cuts take a
back-seat to school work

Budget crisis forces
new thoughts on school funding

List of budget cuts


"Only 10 people really understand the financing system. It's arcane, there's no logic to it and it's a real mess," said Michael Kirst, professor of education policy at Stanford University.

In the midst of an unprecedented state budget crisis, the school funding system has come under intense scrutiny. Talk of the possibly devastating effects proposed budget cuts may have on public education has engendered a rash of suggested remedies -- from quick-fix approaches, like raising taxes, to a complete overhaul of the system.

The current system's framework evolved in an attempt to provide equal education throughout California, where hundreds of school districts were once financed primarily through divergent levels of local property tax revenues.

In 1976, the state Supreme Court declared such differences illegal. The courts called on the state to change the system to ensure more equality. Through a series of legislative acts passed in the late 1970s and early 1980s, the state took greater control of the way education money was raised and distributed.

It established "revenue limits," the amount of general fund taxes districts are allowed to spend per pupil per year (based on attendance, rather than enrolment). Most of California's 1,000 school districts are in communities where local property taxes aren't sufficient to meet the revenue limit. The state, therefore, makes up the difference.

Districts that have sufficient local property taxes receive only $120 per student. This is "basic aid," or the minimum amount guaranteed by the constitution. The Palo Alto Unified School District is one of between 50 and 60 basic-aid districts.

Although Kirst said the state has equalized funds in 95 percent of its districts, some stark differences remain. Palo Alto, for example, spends more than $10,000 per student per year, while the statewide average is closer to $7,000.

Kirst said the system has also failed to meet the state's educational needs.

"Even at the height of the tech boom in 2000 and 2001, California ranked 32nd in education funding in the nation," he said. "If you take into account cost-of-living expenses, its rank was more like 40th."

The current budget crisis is seen by some as a perfect opportunity to address such lingering issues. Quick-fix approaches like increasing the alcohol tax and extending the sales tax to include services are two ideas currently afloat. California's alcohol tax is currently lower than the national average.

A more dramatic measure being bandied about is a split-roll tax system, which amounts to a revision of Proposition 13.

Many blame California's inadequate school funding on Prop 13. Passed in 1978 as a constitutional amendment, it guaranteed residences and commercial properties would be taxed at only 1 percent of their assessed value at the time the property was purchased. It was meant to make housing affordable, but also served to limit the amount of tax revenue going into education.

A split-roll tax system would keep the tax rate for residential property the same, but change commercial property tax assessments to the current market value.

One of the most drastic approaches considered is a move to a so-called "adequacy-based" approach. This would involve determining what the state's educational goals should be, finding out how much it would cost to achieve those goals, and then going about raising the finances.

The approach would represent a complete overhaul of the current system, which critics say simply sets a certain amount of funds for spending, then throws the money at schools and them asks them to do something with it.

As with all the options, however, it's too early to predict what, if anything, will happen, Kirst said.

"There has to be a lot more pain before people can move to those levels," he said. "Right now, the situation is like a storm offshore. A lot of the problems people are talking about now are only in anticipation of the pain to come."

Martin Nobida can be e-mailed at

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Editor's note:
This is part of the final installment in a four-part series on how the school budget crisis is affecting various segments of the community.
As the biggest fiscal fiasco to hit education rocks schools across the state, the Palo Alto Unified School District and the surrounding community battle a state property-tax grab and formulate massive reductions to the district's 2003-2004 budget.
At a study session April 29, the district will reveal its plans to reduce the budget by more than $4 million for the 2003-2004 to address anticipated state cuts and a shortfall in revenue.
In the meantime, it is fighting to hold onto more than $23.1 million in property tax funding that Gov. Gray Davis threatens to take away.

First installment
Second installment
Third installment


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