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Increased Taxes are a Big Win for California Children

February 26, 2013


(The tax measure) really helps to kind of jumpstart the healing process.

Paul Warren

Policy Associate

Public Policy Institute of California

When Gov. Jerry Brown delivered his budget proposal in January, he introduced a major overhaul of how schools are funded in an effort to invest in education and give more control to local school districts.

Funding for K-12 would increase by $2.7 billion next year, and by $19 billion by 2016-2017. School districts that serve low-income students and English learners will also receive more generous increases.

“Our future depends not on across-the-board funding, but disproportionately funding those schools that have disproportionate challenges,” Brown said at a press conference. “Growing up in Compton or Richmond is not like it is to grow up in Los Gatos or Beverly Hills.”

The budget comes on the heels of the passage of temporary taxes via Prop. 30 and Prop. 39.

Californians passed its first statewide sales and income tax increase in nearly 20 years when they voted for Prop. 30. Sales tax increased temporarily by a quarter-cent for four years that began Jan. 1, 2013. For high-end earners making over $250,000, income taxes will increase temporarily for seven years, starting with the 2012 tax year.

Voters also passed Prop. 39 that raises corporate taxes on multi-state businesses. Revenues from both these measures will go to funding schools.

The tax measure is not a cure for cash-strapped schools and California’s budgetary problems, but it “really helps to kind of jumpstart the healing process,” said Paul Warren, policy associate at the Public Policy Institute of California, a non-partisan research organization.

The combination of tax revenues to help fund schools and an overhaul of the education finance system under the budget proposal illustrates a big win for kids.

Investing in schools

“California is on its most stable fiscal footing in well over a decade” — thanks to deep cuts over the past two years and Prop. 30. The proposal figures a balanced budget with a $1 billion reserve.

In addition, K-12 schools will have $56.2 billion for 2013‑2014, an increase of $2.7 billion over the current school year.

For the first time since the recession, the budget reinvests in education funding, rather than cutting it. This reinvestment aims to respond to the historical inequities in school district funding.

Under the proposed budget, schools and county offices of education will have a new funding formula that will address the needs of those students that have the biggest challenges. There will be base funding for all students and additional funding for certain students, such as economically disadvantaged children or English learners. This is known as the weighted pupil funding formula.

Funds for schools will rise by almost $2,700 per student through 2016-2017, including an increase of more than $1,100 per student in 2013-2014 over 2011-12 levels.

Approximately $1.8 billion in state deferred payments to schools would be repaid. Also local school districts will have more control on how it will distribute state funds “so those closest to the students can make decisions.”

In addition to revenues from Prop. 30, the governor proposes to provide $450 million from Prop. 39 for energy efficiency projects in schools.

Schools will also see an increase of $77 million in funds for child nutrition programs for 2013-2014. Additional funds will also be provided to K-3 grades to increase class sizes.

Schools saved from bigger cuts

The passage of Prop. 30 was a big win for schools by protecting them from massive cuts.

“It definitely would have been painful if Prop. 30 hadn’t passed,” said Wade Roach, assistant superintendent for the Napa Valley Unified School District. “It’s great that it passed because we don’t have to make those tremendous cuts we were planning to make.”

The new sales tax is expected to raise $8.5 billion this fiscal year and on average approximately $6 billion yearly. In addition, Prop. 39 is expected to bring extra cash to the state’s general fund: $500 million in 2012-2013 and $1 billion annually, thereafter.

Where the tax revenues go

The additional revenues will be used for a wide range of purposes, such as balancing the state budget and reducing K-14 education deferrals. The revenues will also guarantee funding for public safety services. In an effort to ensure the funds go where voters intended and remain untouched by the legislature, the money will go into a newly created state account, called the Education Protection Account. This account will undergo a yearly audit.

Of the funds in the new account, the public schools are expected to receive 89% whereas community colleges are expected to receive 11%. They can use those new funds for any educational purpose.

The new funds are also expected to increase the minimum amount of money that schools are guaranteed.

Still below the national average

School officials and advocates, however, point out that Prop. 30 did not completely fix their financial problems nor did it bring immediate revenue.

“The financial problems facing our schools have only been mitigated, not eliminated,” said Wendy Sinnette, superintendent of La Cañada Unified School District, in a letter to the school community.

Roach doesn’t expect a lot of additional funding for his school district this year or next year. In order to fix public schools, Roach said the goal should be to raise California school funding to the national average in order “to get us to a level playing field.”

Mary Ignatius, statewide organizer for parent-led grassroots organization Parent Voices, agrees that Prop. 30 wasn’t a fix, “but it paved the way to have a dialogue about what we are willing to pay for.”

“One thing that could help the cash-strapped educational finance system is investing in child care for babies, toddlers and preschoolers,” Ignatius said, pointing to studies that show how healthy brain development occurs between ages 0 to 3. “The emotional and social development of children in the early years is critical to future academic success. The research is there, the priority in the budget isn’t.”

This year, Parent Voices will look to build relationships with the freshman legislators and identify those who see investments in child care as a solution, not a problem, Ignatius said.

Light at the end of the tunnel

In November, the Legislative Analyst’s Office (LAO) cautioned the political leaders at the state Capitol “to keep a tight rein on state spending in the next couple of years,” advising them to build a reserve and address its debts.

Overall, the outlook for California’s fiscal conditions is looking bright for the next five years with a “strong possibility” of surpluses that could reach more than $9 billion, according to the LAO.

This forecast depends on certain factors, including steady growth in the economy and stock prices.

In the report, LAO’s Legislative Analyst Mac Taylor said that with the combined revenue of Prop. 30, prior budget cuts and the state’s economic recovery, California will be at “a promising moment: the possible end of a decade of acute state budget challenges.”