Tag: fiscal reform

Governor Proposes Minor Changes to K-12 Funding Levels

The governor released the May revision of his 2014-15 budget yesterday. All told, the news was good. Revenues were modestly better than forecast in January—up about $850 million in the coming fiscal year. But due to the complexities of Proposition 98—the constitutional funding guarantee for schools and community colleges—the amount proposed for K-12 education fell slightly.

The governor’s plan for schools is mostly unchanged, however. The chart below illustrates per-pupil funding levels proposed in the May revision. Schools would receive about $8,800 for each student—an increase of $780 from 2013–14. The current estimate of per-pupil funding in 2013-14 is up slightly from the level estimated in January, providing a healthy $430 per student more than in 2012–13.

Most of the new funding in 2014–15 goes to pay for the new Local Control Funding Formula. As in the January budget proposal, the budget includes $4.5 billion, or about $750 per student, for the new funding formula. The three-part formula distributes funding using a base grant (that differs by grade span), a supplemental grant for disadvantaged students (low-income, English Learner, and foster care students), and a concentration grant for districts that serve above-average proportions of disadvantaged students.

The budget also provides $27 million to help districts administer new state tests. With the transition to the Common Core State Standards, new computer-based assessments are currently being field tested in California. Students take the new tests on computers linked to the internet, and the additional funding would help schools develop higher speed internet connections.

One final note: Governor Brown proposes to establish a Proposition 98 reserve in the future to protect against volatility in General Fund revenues. His proposed constitutional amendment creates a rainy day fund that would help buffer schools from the extreme boom and bust cycle of state revenues.

In addition, the governor appears to have established an approach to K-12 budgeting that helps protect state and school district finances from uncertainties in the estimating process. Because revenues—and school funding levels—are estimated a year in advance, the amount of resources available to schools changes throughout the year as the revenue picture becomes clear. To reduce risks to state and district budgets, the administration: ·

  • Makes relatively conservative revenue forecasts. Moderating the administration’s revenue estimates helps prevent the state from spending more than Proposition 98 requires. If actual revenues are higher than assumed, it makes the additional Proposition 98 funds available on a one-time basis to retire debts or pay for other one-time costs. ·
  • Builds more flexibility into annual K-12 budgets. The administration, for instance, proposes to spend about $1.5 billion in ongoing 2014–15 funds to retire one-time K–12 debts that were created during the recession. These one-time expenditures help protect district budgets, because debt repayment can be downsized if Proposition 98 funding does not reach its expected level, while district base budgets are left intact.

This approach requires restraint on the part of state policymakers and local educators. But the dividends—repaid debts and one-time funding for things like computer infrastructure—are also becoming more evident.

Survey Focuses on Historic Changes in California Schools

PPIC’s 10th annual survey on K–12 education focused on two historic changes in California schools: the transition to the Common Core math and English standards and the Local Control Funding Formula.

Sonja Petek, project manager for the survey, talked about the key findings last week at a lunchtime briefing at the Cathedral of the Blessed Sacrament in Sacramento.

As our recent report, Implementing the Common Core State Standards in California shows, Common Core is off to a challenging start so far in the state. However, the PPIC survey found that most Californians and public school parents support the standards—which have sparked controversy in other states. But most are also concerned that teachers are unprepared to implement the new standards.

While most Californians had heard at least a little about the Common Core standards, awareness of the new funding formula was much lower. After they were read a description, most Californians said they supported the Local Control Funding Formula, which gives school districts increased flexibility over spending and provides extra money for disadvantaged students.

The survey also asked whether the state should fund voluntary preschool for all 4-year-olds (73% said yes) and whether likely voters would support a local bond measure to benefit school construction bonds (55% would) or a local school parcel tax for schools (48% would).

California’s Taxing Dilemma

As the April 15 deadline for filing taxes looms, we asked Californians in the latest PPIC Statewide Survey how they view their state and local tax burden. Their responses point to a disconnect between public opinion and the views of many fiscal reformers.

A record-high 60 percent say that they pay more than they feel they should in state and local taxes. Just two years ago, 46 percent held this view. Today, six in 10 Californians also have the perception that California currently ranks above average or near the top in state and local tax burden per capita. And they are correct: A Tax Policy Center report recently ranked California’s 2011 state and local tax burden as the 11th highest in the nation.

Further, a record-low 50 percent of Californians say that the present state and local tax system is very or moderately fair. In contrast, 57 percent said it was at least moderately fair two years ago. Across income categories today, perceptions of the fairness hover around 50 percent.

What changed in the last two years? For one thing, voters passed Proposition 30, temporarily raising the state sales tax, as well as state income taxes on wealthy residents.

Today, eight in 10 Californians say that major or minor changes are needed in our state and local tax system. But their views of change don’t necessarily match those of fiscal reformers, who have argued for years that our state budget is too dependent on wealthy individuals with volatile income tax payments. Some reformers have argued that broadening the sales tax base to include services would be an effective way to avoid the extreme ups and downs in state revenues that play havoc with state and local government budgets.

But Californians appear to have little interest in changing the tax system in ways that may impact their pocketbooks. Among four types of state taxes that we asked about in our March 2014 survey, six in 10 oppose extending the sales tax to services that are not currently taxed, and fewer than half favor extending the sales tax to services even if it means lowering the overall state sales tax rate. However, six in 10 would support raising income taxes on the wealthy, while about half favor raising state taxes paid by California corporations.

Voter opposition to extending the sales taxes to services is higher among those who feel that they are already paying more than they should in taxes. Even the more popular proposals—raising corporate taxes and income taxes on the wealthy—are favored by fewer than half of the voters who feel they are paying more taxes than they should.

Meanwhile, voters are saying that they want more state funding for education and health and human services. Some state and local elected officials would also like to raise more state revenues to restore funding for services that were cut during the Great Recession, or pay for new state and local programs. Others are thinking about how to maintain revenues after the sunset of Proposition 30’s temporary taxes.

If tax reform proponents ask voters to raise taxes or to make changes to the state and local tax system any time soon, they will need to be mindful of voters’ current views on these issues.

Reforming Proposition 13

In the current legislative session there has been a movement toward making changes in the Proposition 13 tax limits that voters approved in 1978. Democratic legislators have been emboldened to take on some key elements of the so-called “third rail of California politics” after the surprisingly easy passage of the Proposition 30 tax initiative in November 2012.

Voters have already been making changes to the laws that govern the state. Recently, they changed their legislators’ term limits and the legislative redistricting process, lowered the threshold for state budget passage from a two-thirds vote to a simple majority, and changed the partisan primary to a top-two primary. Surprisingly, they also voted to change the once highly popular Three Strikes Law. So, will reforming Proposition 13 be the next big thing?

One Proposition 13 tweak that is a perennial favorite among tax reformers is lowering the two-thirds vote that is needed to pass local special taxes. Proponents argue that this change would allow local governments to more easily raise needed revenues for schools, public safety, transportation, and water projects.

However, the backers of this particular Proposition 13 reform would face substantial opposition among the electorate today. In our January PPIC Statewide Survey, just 44 percent of voters were in favor of lowering the vote threshold from two-thirds to 55 percent, while 51 percent were opposed. These findings are consistent with most of our polling over time.

Looking more closely at the January survey findings, 50 percent of Democrats want to lower the vote threshold to pass local special taxes to 55 percent, but fewer than half of independents and Republicans favor it. Voter support falls below a majority among men and women, renters and homeowners, across age, education, and income groups and the state’s major regions. In other words, proponents of this change would start with less than majority support and need to run an expensive campaign to convince some “no” voters to vote yes. This would be an uphill battle, given that efforts to change Proposition 13 have always faced a well-organized anti-tax coalition in the past.

But there is a Proposition 13 change that has substantial voter support: creation of a “split roll” property tax. Under this proposal, commercial property would be taxed according to current market value and Proposition 13’s strict limits on property tax assessments and annual property tax increases would apply only to residential property. Advocates for this idea argue that business interests have reaped tax benefits that were supposed to be directed at homeowners and that a split roll would generate billions in new revenues for state and local programs.

This proposal has support among 60 percent of voters in our January PPIC Statewide Survey, with majority support among men and women, homeowners and renters, and across age, education, income, race/ethnic groups and the state’s regions. This reform has solid majority support among Democrats and independents, and 43 percent of Republicans also favor it. What gives the proponents pause for mounting an initiative campaign for a split-roll property tax? The likelihood that a campaign against it by well-funded business and commercial interests would succeed. Also, six in 10 voters say that Proposition 13 has been mostly a good thing for the state in our May 2013 PPIC Statewide Survey, making it easy for split-roll opponents to cast doubts about making changes to this popular initiative.

California voters started a national tax revolt when they approved Proposition 13 during Jerry Brown’s first term as governor—and he does not mention taking aim at Proposition 13 as a priority as he seeks a record fourth term. So what may be in store for change-minded voters? In our January poll, voters liked the governor’s plans for a rainy day fund and paying down the debt. We can expect to see legislation and ballot measures reflecting a desire to get the state’s fiscal house in order. In this election year, it seems unlikely that the state’s politicians will challenge the voters’ longstanding love affair with Proposition 13.