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California School Funding

By December 16, 2021Uncategorized

To understand why there is a need for an organization like the Manhattan Beach Education Foundation to support our community schools, it is important to first understand the history of public-school funding in California. It’s an alarming, and often unknown fact, that education funding in our Golden State is far below other states. According to data recently released by the US Bureau of Economic Analysis, California is the fifth largest economy in the world and the wealthiest state in the nation with the highest Gross Domestic Product (GDP) with over $3 trillion. Households earn more than $10,000 above the national average – but yet, it spends significantly less on meeting educational goals and addressing the needs of its six million students. How is this possible – and more importantly, how can it be rectified?

The deficient level of funding directed to education wasn’t always the case – the state’s per-pupil funding was once well above the national average and near the top of the country. Prior to the 1970’s, local property taxes were the main source of K-12 funding, giving California school districts significant revenue and local control over their own operations. The state guaranteed a base level of funding for each student, and districts could use their own tax earnings to increase funding to their preferred level. During that time, local property taxes made up about 60 percent of school funding on average, while the state supported an additional 30 percent. The quality of the schools was directed by local priorities and how much a district could afford.

But because property values and tax rates varied across the state, large disparities in per pupil funding across districts were inevitable. In 1971, the California Supreme Court ruled the funding system was a violation of the State Constitution in Serrano vs. Priest. Before the state legislature developed a response, voters approved Proposition 13 by voters in 1978. The passage of Prop 13 significantly changed the composition of state and local revenues in two ways: first, it capped the rate of growth on one of the most important sources of revenue in the state, and second, it made it more difficult for local officials to raise new taxes, such as a parcel tax, by requiring a two-thirds majority vote. Once Prop 13 was adopted, AB-8 was also implemented to provide the formulas for how the property taxes were going to be distributed back to school districts once they were shifted to the state. The formula resulted in cities, counties, schools, and special districts being granted their portion of the tax dollar based on the average taxes they received in the three years prior to the passage of Prop 13. For Manhattan Beach schools, that meant approximately 20% of property taxes went to fund education, as it was only supporting a K-8 district at the time. The portion of property taxes that funds education remains at this level still today.

With the property tax revenue down by 60%, schools across the state were suddenly severely underfunded. Cuts to programs were inevitable as districts lost the autonomy to locally fund programs with property tax dollars and lost libraries, music, and key support staff such as assistant principals and counselors. It was at this time that education foundations became an acceptable way to supplement state funding and support enrichment programs and curriculum in California. In fact, MBEF was founded in 1983 on this premise and continues to play a significant role in supplementing programs for Manhattan Beach schools.

As a result of Prop 13, California dropped to the bottom quartile of per pupil funding, ranking somewhere between 46th – 48th for many years. Since then, California has been slowly building its funding support of education (see Per-Pupil K-12 Education Spending 2002-2018). In 1988 voters approved Proposition 98, which requires the state to dedicate a minimum of roughly 40% of its General Fund to K–14 education each year. This was followed by the introduction of the Local Control Funding Formula (LCFF) in 2013, which directed over $18 billion in additional state funds phased in over the next eight years. The LCFF links district funding to the percentage of students with higher needs, such as low-income, English learners, or foster youth. Districts that receive additional funding through LCFF are also required to implement accountability plans that include community input and demonstrate how the funds will help achieve their goals.

While this is an honorable start to creating more equity in education spending and has earned the state a healthy grade of “B” in funding distribution according to the Education Law Center’s recent report, Making the Grade 2021, California still has a long way to go before it is funding schools at an adequate level. Numerous studies and articles have been published that outline just how behind California is – the most in-depth published by the California School Boards Association (CBSA) entitled, California’s Challenge: Adequately Funding Education in the 21st Century. The report includes an important analysis on education adequacy and how it is measured, as well as commentary on ways to increase funding for education within the state. Based on the Making the Grade 2021 report, California currently ranks as 30th in per pupil funding across the country, earning it a mediocre “C” for funding level. While some reports indicate California has advanced to somewhere between 19th-21st in the nation, these reports are likely based on one-time funding from the state and federal governments as Covid relief funds and are not sustainable. When considering the amount of funding allocated to education based on the state’s economic activity, it earns a “D” for its lower-than-average effort.

On top of these challenges, there is a natural decline in student enrollment across the country based on demographics and district expenses continue to rise much faster than revenue. The Changes in Per Pupil Spending Since 2003-2004 chart demonstrates the dramatic increase in school district expenses within the state, particularly when it comes to the shift of retirement system expenses to the local level.

To help counteract the lack of support at the state level, many districts sought additional revenue streams through local parcel taxes early in the struggle. Although Prop 13 instituted the 2/3 majority requirement to pass local taxes, parcel taxes common method for supplementing the limited funding from the state. San Marino, a nearby high performing district often compared to Manhattan Beach, first introduced a parcel tax in 1991 for $100 and has diligently grown this over time, with the most recent voter approval in June 2021. Today, two combined parcel taxes totaling $1352 in annual support help fund San Marino schools with an additional $5.7M to serve its almost 3,000 students in four schools.

Funding in Manhattan Beach has followed a different path. Initial attempts at a parcel tax failed in 2003 and the community rallied around support of the Education Foundation as its primary source of supplemental funding. Referring to the Per Pupil Funding chart to the right, it is clear how Manhattan Beach continues to lag behind other high performing districts in funding. Support of the MBEF Annual Appeal and Endowment (yellow portion of bar graph) has helped grow funding through MBEF making up 7-9% of the district budget. The funding from MBEF cannot keep up with rising costs however, and although MBEF has significantly increased its funding each year, the percentage of the MBUSD budget it represents is decreasing.

In 2018, voters passed its first parcel tax, Measure MB, that brings in a nominal $225 per parcel or $2.5 million annually. With the structural deficit we face in education funding, this will not be enough to sustain our high-quality schools in the future. To grow our per pupil funding in Manhattan Beach schools, we must come together as a community to grow additional revenue source, through MBEF and a more substantial parcel tax. Just like other communities, we can turn to local support to keep our schools strong.

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