Policy & Finance > School Finance

School funding primer: A is for Alligator



It’s called “the alligator chart” because it looks like a reptile’s gaping maw. Nicknamed by its creator, the Sacramento-based education consulting firm School Services of California, it’s one graph that voters should clip on their refrigerators to remind them what’s at stake this November when they consider more money for K-12 schools. School Services shared an updated version with district officials recently during its annual budget management seminars around the state.

If the governor's tax initiative fails, the gap between what is statutorily owed K-12 schools and what they will receive will be a record gap of $1,944: a deficit factor of 28.8 percent. Source: School Services of California, Inc. (Click to enlarge.)

If the governor’s tax initiative fails, the gap between what is statutorily owed K-12 schools and what they will receive will be a record gap of $1,944 per student: a deficit factor of 28.8 percent. Source: School Services of California, Inc. (Click to enlarge.)

California’s school funding law, Proposition 98, is complex, and the Legislature has tortured the language to make it more abstruse. The alligator chart cuts through verbiage to visually capture  how much money has been cut since 2007-08, the last year that the Legislature funded schools without IOUs for lost cost-of-living increases or direct cuts. Since then, the difference between what schools were entitled to receive (tip of the snout of the alligator’s open mouth) and what they have gotten (the yawning bottom jaw) has grown ominously large.

The chart shows that the average unified district should receive $6,748 per student this year in its revenue limit allocation – unrestricted money that districts can use as they choose to keep the lights on and pay teachers. Instead, districts will receive 22.4 percent less, $5,245 – but only if the governor’s tax initiative, Proposition 30, raising the sales tax and income tax on the wealthy,  passes.

And if Prop 30 (or Prop 38, attorney Molly Munger’s tax proposal, promising even more money to schools) fails, then there will be an additional $441 cut – 6 percent more – midyear, lowering per-student revenue this year to $4,804. The deficit factor, the gap between what schools should get by law and what they will get, will be an all-time high of 28.8 percent: $1,944 per student. A little more than half of that is due to unappropriated cost-of-living increases statutorily guaranteed by Proposition 98. The other half is from actual cuts in spending over the past six years.

As the chart shows, schools were also cut dramatically in 2009-10, when the revenue limit per student shriveled to $4,981. But much of that blow was softened by an infusion of federal anti-recession dollars via the American Recovery and Reinvestment Act – money that’s no longer around.

The revenue limit constitutes 79 percent of unrestricted dollars that districts get; other sources include the state lottery, reimbursements for mandated costs, and local sources such as unrestricted parcel taxes.

And unrestricted dollars comprise 73 percent of total dollars that districts receive. The other 27 percent must be spent for designated purposes; they include federal Title I dollars for low-income children, special education money, and state categorical programs, which also have been cut 20 percent.

But revenue-limit dollars are the bread and butter of district spending – what will determine whether districts remain solvent.

The alligator chart will vary for elementary districts, which receive a smaller revenue limit than unified districts, and high school districts, which receive more. Thus, according to School Services, if Prop 30 fails, high school districts would lose $507 per student midyear, compared with $422 per student for elementary districts and $441 for unified districts.

Proposition 98 requires that the state accelerate repayment of IOUs to K-12 schools and community colleges when revenues increase. The  state Department of Finance is projecting that between extra revenues from higher taxes under Proposition 30 and a recovering economy, revenues to schools will increase $17 billion over the next four years, to $64 billion, and the deficit factor will be erased in seven years. But this assumes that the governor and Legislature will follow the spirit as well as the manipulable  requirements of Prop 98. A big “if,” perhaps.

 

 

 

 

Filed under: School Finance, State Education Policy

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20 Responses to “School funding primer: A is for Alligator”

  1. RosieP said

    on August 7, 2012 at 6:05 pm

    I wish I could attribute the following quote but I cannot remember where I read it or who said it. It goes something like this: “If you cannot explain school funding on the back of a napkin, then you have disenfranchised your voters”. Because now the general population needs “experts” to interpret our arcane system and there can be hidden agendas. The botton line is this: Just look at the horizontal line in the “alligator” graph. Forget the COLA – schools are not even getting general state funding at a level that equals what was received in 07-08. The cuts that have been taking place at school districts are severe and are well documented. School funding MUST be simplified and then let voters decide if they truly support public education or not.

  2. CapitolReader said

    on August 6, 2012 at 4:37 pm

    The graph highlights one of our major problems. It is only focused on inputs (how much money we put into the system) and ignores outputs (how well students are being educated). It would be more informative to see how the spending correlates with student test scores – which of course there is none.

    The Getting Down to Facts studies out of Stanford, (which have been totally ignored) support this in saying “If additional dollars were inserted in the current system, there would be no reason to expect substantial increases in student outcomes related to state goals.”

    http://cepa.stanford.edu/sites/default/files/loeb_bryk_hanushek.pdf

    • John Fensterwald replied

      on August 6, 2012 at 5:44 pm

      CapitolReader: The Getting Down To Facts studies called for twin recommendations: more money, wisely spent. That was in 2007, when per student spending was 10 percent more in actual dollars – never mind COLAs – than it will be this year if the governor’s proposed tax increase passes and 17.5 percent more if it fails. It is vital to have serious legislation and negotiations about how districts will be held accountable for new money (I have my ideas) but you can’t have these discussions without additional dollars.

  3. CapitolReader said

    on August 6, 2012 at 4:08 pm

    Honestly the education system is so damaged and hamstrung by the state, in terms of educational outcomes for students, it really doesnt matter if the tax increase passes or not. We need to reform education before the extra money is going to have any real impact.

  4. el said

    on August 6, 2012 at 1:26 pm

    As someone involved in the budget process, I’ve found this graph tremendously helpful in understanding the depth and magnitude of the change of funding. When our school had to cut its reading intervention program, this graph clearly explains why. When staff wonders if they might ask for a (much-deserved) raise, or buy new equipment, this graph explains why there’s no money. Each deserving program that was cut was cut because of the way this graph looks.

    Simply comparing the flat funding line to today tells a great deal of the story.

    I still roll my eyes at the fact that the only year the COLA was implemented was the year it was negative. Fun times, eh?

  5. Josh said

    on August 6, 2012 at 12:55 pm

    FYI, the $441 figure noted in the article was the May Revise trigger cut. The enacted budget calls for a $457 per ADA trigger cut, and from current funding levels that represents a cut of about 8.4%.

    • John Fensterwald replied

      on August 7, 2012 at 6:24 pm

      Josh: My understanding is the $457 would be the average statewide per student cut but that $441 would be the average cut for a unified district.

  6. Ann said

    on August 6, 2012 at 12:36 pm

    Mr. Festerwald, I am the one questioning the SS graph (which I have seen at every board, site council, PTO meeting for the past 6 months.) Could it be Prop 98 ratcheting ever upward as we funneled a decades temporary surplus revenue into public education? By far the most money went to increasing teacher salaries AFTER we had reduced class sizes to little or no avail academically by the way. We also towed all other school employees salaries along for the ride. Look at the increases in spending that occurred in the late 90s and early 2000s. This crisis is no surprise. The state budget has been smoke and mirrors for years.By the way, its said that only a few people really can explain Prop. 98 so how in the world could voters have made a reasonable judgement of it?

  7. navigio said

    on August 6, 2012 at 11:49 am

    btw, not to be pedantic, but munger’s initiative wont avoid the mid-year cut. it will provide an offsetting revenue source, but im pretty sure it wont be considered part of the revenue limit.

    • John Fensterwald replied

      on August 6, 2012 at 12:18 pm

      Navigio: When you have a complex formula like Prop 98, which enables the Legislature to claim full funding despite cuts, it helps to have a chart that gives funding at a glance.

      Yes, the situation is complex and nuanced. A few districts continue to offer generous health insurance plans at the same time they are laying off teachers. But in the end, there’s a simple figure to explain why classes are mushrooming in size, all but core programs are being slashed, and wealthy, basic aid districts and other states are offering what Californians once took for granted.

      As you state, Prop 98 was intended to be a floor. Voters included cost living increases — not just for pay increases but to sustain programs — so that education funding would not fall farther behind.

      We can discuss better ways to use tax dollars (weighted student funding, replacement of step and column pay schedule, etc). But the bigger point must not get lost: If Proposition 98 had been financed as voters decreed, per student funding would be nearly $2,000 more per student. That cannot be explained away.

      • navigio replied

        on August 7, 2012 at 10:55 am

        Hi John. Thanks for your response. Let me first just say that my comments are coming from a belief that our voting populace (both local and statewide) has a fundamental mistrust of their representative entities when it comes to education funding management. Whether that mistrust is justified is, for me, beside the point. Perhaps its like in politics: it doesnt matter what’s true, it matters what voters think is true. Ideally those would be the same, but they rarely are. I think one of the worst things that can happen in a political debate is to base an argument on a claim that can easily be shown to be misleading (again, whether its misleading or not is less important than whether it appears that way). I’m not even saying that this graph is that, but my points were to try to highlight that there are some pretty easy ways to make people question the underlying intent (ie by highlighting what this graph does not show). I mean heck, go do ed-data and look at total revenue at the state level over the same years. For COEs its essentially flat. For districts it admittedly drops in 09-10, but after a 10% increase from 06-07 to 07-08. Again, my point is not that these things are wrong or unexplainable, but it just takes one smart, manipulative person (who is anti-taxation or even anti-public education) to maintain that seed of mistrust in the voters’ minds. And there is at least one of these in pretty much every community, often more. It still boggles my mind that communities reject parcel taxes at the rate they do. The vast majority of those are for less than a family dinner. But they do and I think mistrust is the fundamental reason for that. It would be one thing if there were the venue to counter these critiques but as was made clear in the PPIC funding panel, thats pretty much impossible (I have a lot of comments on that, but thats for a different thread).

        One of my first introductions to politics was watching an online debate about a bicycle plan where proponents essentially lied through their teeth because they felt the ends justified the means. As a person who would rather things be about truth and solutions, I called them on it (even though I was also a proponent) and was summarily chastised. As you can see, it did not deter me, but I still struggle with how best to convince a voting populace that often has no interest in being convinced. But of course, this forum is less about the general voting populace (though I hope it can become that).

        A couple final thoughts. Prop 98 passed by a less than 1% margin. The term ‘cost of living’ was not in the ballot description, or even the LAO’s analysis in the voting primer (though it was in the actual text of the constitutional changes for the 4 people who bothered to read that ;-) ). I would venture to guess had the term ‘cost of living’ been included on the ballot description, it would not have passed. Obviously that can only be conjecture and its not intended to imply that COLAs are invalid in concept, just that I dont think an essentially 50/50 split can be considered a voter mandate for a policy that was not really even explicitly mentioned.

        And quickly to your last point, during the years of stimulus, I dont think the difference would have been $2000 more per student. My impression is that the state essentially banked in part on those federal funds in its decision to cut funding to education. Obviously its a whole different story once those stimulus funds are gone, but clearly sacramento is still banking on some other funds in its planning.

        All that said, fundamentally I dont disagree with your points, I am just concerned that the arguments for increasing funding are solid. If this graph is good for anything, its for pointing a finger at our Governors and State Legislators for essentially breaking the law (imho) at the expense of kids.

        • John Fensterwald replied

          on August 7, 2012 at 11:59 am

          Points well taken, Navigio.

  8. navigio said

    on August 6, 2012 at 11:28 am

    I am one who incessantly argues for increased funding (and for I think good reason), but I have to admit, I hate this graph. I guess the primary reason is it tries to over-simplify a complex issue, and it shoots itself in the foot in the process.

    Firstly, it ignores the federal stimulus funds. True those are/have expiring/expired, but when the standard (critical) citizen bothers to look even barely behind the numbers and sees the stimulus funds that ‘offset’ the state/local loss, they will dismiss the general claim of this graph out of hand because it will be seen as an attempt to obsfucate the real ‘need’.

    Then, ‘COLA’ has dubious value as a political term with 11% unemployment and stagnating wages. Most people dont understand that the lack of a cost of living increase is equivalent to a pay cut when there is non-zero inflation. But when you have wage stagnation and even explicit pay cuts in some sectors, I think the term ‘statutory COLA’ tends to polarize the issue (as Ann’s comments show), even if the case for them is conceptually sound.

    Then things get even more tricky.

    There is a potentially non-trivial amount of encroachment on these funds imposed by the special education requirement and maybe even other things (adult ed, home to school transportation, etc?). Conversely, categorical flexibility has meant an additional influx of funds for things that would have otherwise been funded with these reducing funds. Those competing flows blur things as well.

    And then, very generally speaking, it is probably also counter-productive to use the term ‘entitled to’. While this is essentially what prop 98 does, the term disregards the issue as one of need, and again tends to polarize. It even bypasses the point that prop 98 is supposed to be a floor. I wish humans weren’t so simplistic that they believe as long as the doors are open and the lights are (mostly) on, that need is not there, but alas..

  9. Ann said

    on August 6, 2012 at 11:19 am

    Of course it depends on the district as I wrote, but if they are passing on the inflarionary costs then your argument that began this is mute. When I don’t work I don’t get paid. Pay “cut”? These are furloughs and since health benefits usually aren’t changed in accordance, it could be seen as an increase in daily pay. Are you really going to claim that “plenty” of private sector workers have health insurance mostly paid by an employer? You need to get out more!

  10. el said

    on August 6, 2012 at 11:16 am

    I would add that that 5% cut in work time and salary is not matched with a 5% cut in work product or output – basically, staff are expected to get all the same work product done in less time. No one is okay with “Our students will learn 5% less this year.”

  11. el said

    on August 6, 2012 at 11:12 am

    @Ann: it depends on the district contract.

    In some districts, the health insurance contribution is capped, so the employees are eating those increases.

    Most districts still have step-and-column increases which means that additional qualifications and years of service increase pay – but most ‘step’ arrangements cap out; thus, the most senior staff don’t receive them.

    In many districts, staff have agreed to take pay cuts in order to prevent staff cuts. In many districts, hours have been cut by shortening the school year and cutting professional development time; a typical cut from 180 school days to 175 school days plus the loss of 4 in-service days is a 5% annual salary cut. Those would not be classified as ‘pay cuts’, often, because they are still paid at the same rate per hour.

    As for the deductibility of health insurance… you realize that employee-paid health insurance is untaxed all workers, yes, and always has been? And that even a median family health insurance policy is running about $15,000 a year? Plenty of private sector workers have it mostly paid by an employer and have no idea how expensive their health insurance is either.

  12. Elena Burnett said

    on August 6, 2012 at 10:48 am

    Certificated and classified workers DO NOT receive pay bumps every year. The last increase many received was in 2007/08, myself included. For over the last 10 years I have paid for a large portion of my health and welfare benefits as well any annual increases being added to my costs – including co-pays etc. Add to that being cut to an 11 month work year and 6 furlough days. Public sector workers have seen tremendous cuts and nothing is sacred. You need to get caught up to date on what is in fact happening in the public sector – we all have been sacrificing pay, hours, and paying more for fewer benefits in these rough economic times. This all while the costs of utilities, groceries, and getting to work continue to increase each year.

  13. Ann said

    on August 6, 2012 at 10:12 am

    Do certificated and classified workers not receive pay bumps every year? In my experience the answer to that is absolute. Yes health care costs are rising and in the private economy workers share those increases unlike the public workers. Some districts require nothing of employees. (Lets not forget the Patient Protection and Affordable Care Act exception that continues the practice allowing public sector workers to receive health benefits valued at $20,000 or more to receive them tax free. Oil and gas prices fluctuate, again, private businesses have to deal with this by cutting costs. Do you honestly believe public workers are a special class who have no responsibility for shared sacrifice? Are they part of the 1%?

  14. el said

    on August 6, 2012 at 9:35 am

    @Ann, you should also consider that the COLA does not actually reflect expenses school districts have. School districts rarely buy washing machines or cars – they buy things like health insurance and fuel, which are not included in the COLA calculation.

    This ‘entitled to receive’ number is I think very useful to understanding what is happening financially in California schools. We are funding schools with less money, in absolute dollars per pupil, than in 2007-2008. Expenses have not decreased. Naturally, services have been cut.

  15. Ann said

    on August 6, 2012 at 8:35 am

    “…the difference between what schools were entitled to receive (tip of the snout of the alligator’s open mouth) and what they have gotten (the yawning bottom jaw) has grown ominously large.”

    “A little more than half of that is due to unappropriated cost-of-living increases statutorily guaranteed by Proposition 98.”

    These two statements are key to understanding the budget problems facing California. “entitled to receive”? Irregardless of what is happening in the economy? “unappropriated COLA”? How many California workers have received such increases since 2007?

    Additionally Mr. Festerwald, there are two sides to a balance sheet. Even without COLA districts all over the state are fiscally committed to providing every teacher and many other union employees automatic pay increases. So spending increases when revenue does not. What an absurd and unsustainable system this is, school board members elected by unions in negotiations with unions along with other “non-union” (usually former teachers turned manager, assistant sup, CBO etc.) who also adjust their own automatic “me-too” raises. The system is corrupt.

    And the “alligator” is simply a political tool…

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