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EDUCATION FUNDING, REAL PROPERTY PARCEL TAX
Initiative Constitutional Amendment and Statute

THE QUESTION

Should the California Constitution be amended to levy an annual $50 real property tax on most parcels with the funds allocated to five K-12 education programs?

BACKGROUND

Local Property Taxes. Local governments in California impose a property tax based on the assessed value of property, so that the amount assessed increases as the value of the property increases. Some local governments also impose a type of property tax known as a parcel tax, where the amount owed is typically the same for each parcel--or unit--of property. (Currently, the state government does not impose either type of property-related tax.)

Use of Local Parcel Tax Revenue. Local parcel tax revenue may be used for virtually any designated purpose. For example, in recent years parcel taxes have been approved by voters in several school districts and the resulting revenues used to fund class size reduction (CSR), school libraries, education technology, and other education programs. In such school districts, the parcel tax revenue can be a significant source of funding for kindergarten through grade 12 (K-12) education programs. However, parcel taxes are a minor source of total statewide funding for school districts.

PROPOSAL

Statewide $50 Parcel Tax. This initiative adds a new section to the Constitution establishing an annual $50 tax on each real property parcel. This dollar amount would not change over time, although the number of parcels could rise (for example, as the result of new subdivisions of property). For purposes of the measure, a "parcel" is defined as any unit of real property in the state that receives a separate local property tax bill; accordingly, most individuals and businesses currently paying property taxes would become subject to the new parcel tax. However, the measure exempts from the new tax any parcel owner who: (1) resides on the parcel; (2) is eligible for the state's existing homeowner's exemption; and (3) is 65 years of age or older or is severely and permanently disabled.

Tax Proceeds Used to Fund Designated K-12 Education Programs. A relatively small portion of the revenue generated by the proposed statewide parcel tax would be allocated to: (1) the state General Fund to offset the decrease in income tax revenues resulting from the increased deductions related to the parcel tax; and (2) counties to offset added administrative costs.

The remaining revenues would be transferred to a new, constitutionally established Classroom Learning and Accountability Fund, out of which will be annually allocated:

• $175 million for class size reduction in K-12 education
• $100 million for instructional materials
• $100 million for school safety programs
• $85 million for facility grants for certain academically successful school districts and charter schools that have not received funding from a state general obligation bond for construction or modernization
• $10 million for an integrated longitudinal teacher and student achievement data system.

To the extent that revenues in the fund are more or less than the amounts allocated by the measure, the amounts provided for each activity would be adjusted proportionately.

The measure allocates monies to school districts (and other local education agencies) in various ways. The bulk of funding (amounts for K-12 CSR, instructional materials, and school safety) would be allocated to school districts, public charter schools, and county offices of education using a new per student formula to be created by the Legislature. The formula likely would provide higher per student funding rates for higher-cost students. (Specifically, the formula is to account for cost differences resulting from students' disabilities, English language skills, or socioeconomic status.) Facility grants would be allocated to school districts and public charter schools using a flat funding rate (capped at $500) for each student enrolled in certain schools performing above average. For the data system, the measure does not specify how or to whom funding would be allocated, and future legislation likely would be needed clarifying such issues.

K-12 CSR. Currently, the state provides $1.8 billion for the CSR program for kindergarten through grade 3 (K-3), funding school districts to reduce the size of their K-3 classrooms to no more than 20 students. The additional $175 million provided by this initiative could be used to further reduce class size in grades K-3 or for any other CSR initiative. For example, the funds would be sufficient to reduce the average class size of fourth grade by about four students (reducing it from a statewide average of about 29 students to 25 students).

Instructional Materials. Currently, the state provides over $400 million annually for instructional material purchases, or about $66 per K-12 student. This is sufficient to purchase one new core textbook for most students in most grades each school year. The additional $100 million provided by this initiative could be used for purchasing any textbooks or other instructional materials that were approved by the State Board of Education. Funds likely would be sufficient to provide about 25 percent of K-12 students with one additional core textbook each year.

School Safety. Currently, the state provides $548 million (or about $90 per student) for after school programs, $97 million (or about $40 per grade 8 12 student) for general school safety programs, and $17 million (or about $3 per student) for competitive school safety grants. The additional $100 million (or about $16 per student) provided by this initiative could be used for school community policing and violence prevention, gang-risk intervention, and after school and intersession programs.

Facility-Related Grants. Currently, the state provides funds for school facilities primarily using general obligation bonds. In addition, it has provided $9 million annually for the last several years to help public charter schools in low-income areas cover some of their facility lease costs. The $85 million provided by this initiative would be for school districts and charter schools that have not yet received any state general obligation bond monies for school facilities. In addition, charter schools are only eligible if they are governed by or operated by a nonprofit public benefit corporation. If those conditions are met, then school districts and charter schools would receive funding for each student enrolled in a school ranking in the top 50 percent based on the state's standardized test scores. They could use the grants for any general purpose. Districts and schools receiving such grants would be prohibited from receiving future state general obligation bond monies unless the bond expressly allowed them to receive such funding. It is estimated that about 40 noncharter schools (serving less than one percent of all noncharter enrollment) would be eligible for grants. For charter schools, it is estimated that about 100 schools (serving about 25 percent of all charter enrollment) would be eligible for grants.

Data System. Currently, the state provides virtually no funding expressly for the ongoing collection and maintenance of student-level and teacher-level data. The $10 million provided by this initiative would be for an integrated longitudinal data system. Such a system would allow the state to measure student and teacher performance over time. The initiative requires school districts to collect and report the data needed to create and maintain the system.

Annual Independent Audit. The initiative requires school districts to conduct an annual independent audit showing how they spent their Classroom Learning and Accountability Fund monies. These audits are to be reviewed by the applicable county superintendent as well as the state superintendent and posted on all the applicable district, county, and state Web sites.

Supplemental Funding. The initiative prohibits the use of the funding provided by the initiative to replace any other required or discretionary educational funding.

FISCAL EFFECTS

It is estimated that the proposed statewide parcel tax would initially raise approximately $450 million annually. Given that the dollar amount of the tax would not increase, total parcel tax revenues would only grow slowly over time as new parcels of land were created. Approximately $30-40 million of the tax would be transferred to the state General Fund to compensate for a projected loss of state income tax revenues, and approximately 0.2 percent (or about $1 million) would be allocated for county administrative expenses. The remainder of new tax revenue would be allocated to schools for the specified education programs. At least initially, these revenues likely would be somewhat less than that needed to meet the measure's designated funding levels; if so, the program allocations would be adjusted downward proportionally.

WHAT A YES OR NO VOTE MEANS

A YES vote means that the California Constitution and state law should be amended to levy an annual $50 parcel tax on most parcels of land in California, with the proceeds allocated to school districts for five specified K-12 education programs.

A NO vote means that the state will not levy an annual $50 parcel tax on most parcels of land to raise additional funding for K-12 education programs.

SUPPORTERS SAY

• California students are falling behind, ranking among the bottom six states in reading and math. In the nation's five biggest states, only California students score below average on every national assessment of educational progress.
• It will provide funding directly to local schools and school districts so that they, not Sacramento, will decide where to spend the funds.
• It is a relative small parcel assessment that will raise needed funds for student achievement while protecting property owners against runaway taxes--especially seniors with fixed incomes.
• The funding will be subject to oversight and annual independent audits to ensure that every penny goes into classrooms and student learning, where it is needed most.

• This act pays for itself. The Fund will improve education without affecting any state services or programs currently supported by the State General Fund.

OPPONENTS SAY

• It gives Sacramento politicians increased power as to where and how to spend your money. It does nothing to assure that funds raised in your community will be spent on your schools.
• It imposes the first statewide property tax since 1910, and would encourage other special interests to pass more and bigger state property parcel taxes to fund their specific causes.
• It exploits a loophole to avoid the requirements of Proposition 13, which requires two-thirds of the voters to approve any local parcel tax. Once the door is opened to approving a statewide parcel tax by a simply majority vote, additional statewide parcel taxes will be proposed in the future.
• The new parcel tax is permanent, whether or not it results in improvements to our education programs.

SUPPORT AND OPPOSITION

Official ballot arguments in support are signed by: Reed Hastings, Past President, California State Board of Education; Jack O'Connell, California State Superintendent of Public Education; Shelbi Wilson, California Teacher of the Year, 2006; Russell "Rusty" Hammer, Former Chamber of Commerce Executive; Stephanie Pridmore, Local PTA President

Official ballot arguments in opposition are signed by: Dr. Tom Bogetich, Executive Director, California State Board of Education (Ret); Jon Coupal, President, Howard Jarvis Taxpayers Association; Joel Fox, President, Small Business Action Committee; Clifford Corigliano, ST., Teacher of the Year, 2003; Art Pedroza, Member, California and American Federations of Teachers, AFL-CIO; Lorie McCann, Parent-Teachers Association Local President

FOR MORE INFORMATION

Supporters

EdVoice and Tax Payers for Accountability & Better Schools, 916-448-3868; betterschools@edvoice.org; www.voteforbetterschools.org

Opponents

Californians Against the Statewide Parcel Property Tax, 916-927-1512, www.noprop88.com

Web Resources

Analysis by the Legislative Analyst's office

Voter Information Guide (ballot pamphlet)

Reports of campaign expenditures for ballot measures