Will LA Teachers Strike Settlement Lead to $11 Billion Tax Hike?

Will LA Teachers Strike Settlement Lead to $11 Billion Tax Hike?

The settlement of the Los Angeles’ teachers strike last week made major news across the state.

As PRI’s Lance Izumi wrote recently in the Daily Caller, “the Los Angeles teachers strike is a perfect storm of bad policies, bad management, bad demands, and, too often, bad actors.”

One of the little-noticed points in the district’s agreement with the union is a push for a new, multi-billion dollar annual tax increase.

But the end of the teachers strike is not a victory for taxpayers.  Once again, the district and the union have agreed upon a deal that is not fiscally sound and will put more pressure on future district budgets and school reserves.

Underscoring this point, LA Unified Superintendent Austin Beutner told the Associated Press that even with the deal, “the district is projecting a half-billion-dollar deficit this budget year and has billions obligated for pension payments and health coverage for retired teachers.”  PRI’s Wayne Winegarden has written about the pension crowd out threatening funding for education and other priorities thanks to the state’s unsustainable public employee pensions.

Yet instead of taking a stand for fiscal responsibility, the district and the union announced they will link arms as part of the deal to seek an easy way out – demanding billions in new taxes.

The superintendent, the teachers union president, and Los Angeles Mayor Eric Garcetti have all agreed as part of the strike-ending settlement to endorse the “California Schools and Communities First” ballot initiative.

That measure, for which proponents have submitted enough signatures to appear on the November 2020 ballot, would gut Proposition 13 and impose a split-roll property tax system on commercial property.  If passed, a split roll property tax scheme would impose an estimated $11 billion annual tax increase on commercial property.

As Joel Fox aptly called it in a Sacramento Bee column – split roll “is a tax to fund public employee pensions and health care costs.”  It also may not generate the revenue one might imagine.  Fox writes that, “relying on commercial property tax in an era when brick and mortar buildings are facing the revolution of digital commerce is an additional mistake as some commercial property value could stagnate and retail business, already reeling, would take another hit.”

This push for even more tax revenue and more money from Sacramento for LA Unified comes despite the fact that Gov. Newsom’s January budget includes $80.7 billion for K-12 schools and community colleges, which the administration notes is a new all-time high.  This includes a year-over-year increase of $2.9 billion in funding for education.

As PRI’s Kerry Jackson has written, “the split-roll coalition (is mistaken) if it thinks the owners of real commercial property will graciously accept and pay these higher costs themselves.”  He argues that some will pass on these costs to consumers in the form of higher prices, while those unable to pass on the higher costs will have to cut costs elsewhere through “slashing jobs, living with smaller profits, or eventually going out of business.”

He cites a Pepperdine University study that found that a split roll property tax increase would trigger nearly $72 billion in lost economic output and nearly 400,000 lost jobs in the first five years.

It’s naive for the district and the union to think that a split roll property tax will result in a truckload full of money being dropped on their front steps to cover their joint reckless fiscal policies.

The irony is that split roll will likely trigger a major hit in tax revenue for revenue-hungry school districts like Los Angeles Unified, thanks to the big hit to the economy a split roll tax scheme would surely bring about.  That would be no victory for the district, its teachers, and most importantly – students, parents and taxpayers.

Tim Anaya is the Pacific Research Institute’s communications director.

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.