Prop 13 and the education-funding blame game

North County Times (Escondido, CA), August 31, 2008
Sacramento Union, September 17, 2008

Under today’s complicated system: schools with poor results rewarded more than those with good results

Earlier this summer California marked the 30th anniversary of the passage of Proposition 13, the historic ballot measure to limit property taxes. Prop. 13 remains popular but draws blame for state education woes, especially in finance.

Yet the evidence clearly shows that politicians, not Prop. 13, have been the enemy of sensible education funding.

Before Prop. 13, the majority of public-school funds came from local property taxes. After its passage, the state stepped in and provided the majority of education funding. Because of this flip in revenue sources, and because they couldn’t rely on skyrocketing property values to help fill their coffers, many educators argue that Prop. 13 caused education to be under-financed.

State budget figures, however, show that schools are not being starved financially.

More important, blaming Prop. 13 ignores the dysfunctional system of education finance state lawmakers created in Prop. 13’s wake.

Over the last six fiscal years, total education funding in California, including state, federal and local tax dollars, increased from $52 billion to $70 billion. Of special note, from 2005-06 to 2007-08 the state increased education funding by $5 billion beyond what was needed to keep pace with increased student enrollment and inflation.

As Gov. Arnold Schwarzenegger’s Committee on Education Excellence has pointed out, two recent studies from Stanford University suggest that this $5 billion increase would be more than enough to be classified as adequate funding.

The key problem is not how much is being spent on education, but how it is being spent.

The “how” problem is the result of decisions by state lawmakers.

When lawmakers back-filled revenues to local school districts after Prop. 13 passed, much of the new state funding came with strings in the form of categorical dollars, funds earmarked for specific purposes such as reducing class sizes or aiding special-needs students.

There are now more than 100 categorical programs, and the tax dollars devoted to them, as a share of state education spending, has tripled in the years after Prop. 13 to the point where a third or more of education funding comes from these restricted funds.

Compared with other states, California has much more funding tied up for specific earmarked purposes. Thus, California schools often can’t channel funds to meet their greatest needs because the state says that funds can be spent only on the state’s preferences.

The increase in earmarked funding as a share of state support, according to another Stanford study, “lowers the efficiency with which a district generates student performance.” In surveys, school principals say that earmarked categorical funding rules are the biggest obstacles to allocating resources for reforms such as increasing instructional time on reading and lengthening the school day.

In fact, the Stanford study found that local superintendents “emphasized increasing the flexibility of spending over solely increased funding by a three-to-one margin.”

State lawmakers and education officials are also responsible for illogical categorical funding formulas, which result in funding inequality between districts. For instance, from one program earmarked for poor kids, the San Jose school district receives 10 times more dollars per student in poverty than the Oakland district, even though Oakland has three times more kids in poverty and more minority students.

Sacramento is also responsible for creating perverse funding incentives, such as funneling more dollars to failing schools rather than rewarding successful or highly improving schools. The message from the State Capitol: The worse you perform, the more money you get.

Finally, legislators have made the education-finance system so complicated that the Legislature itself has to use the State Auditor and outside researchers to find out how much funding for each categorical program goes to each school district.

Stanford University researchers conclude that the state’s education-finance system “is complex and irrational.” They warn that pouring more money into the system “will not dramatically improve student achievement and will meet neither expectations nor needs.”

After Prop. 13, lawmakers had the opportunity to craft a sensible education-finance system.

They blew it, and they alone should be blamed for their disastrous mistakes.

Lance T. Izumi is director of Education Studies at the Pacific Research Institute in San Francisco.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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