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The unexpected defeat in 2016 of a school parcel tax in wealthy Marin County and the near-defeat of another in the county that same year prompted a trio of authors to look into what had turned many voters against them.

Their conclusion, in a report issued last week by the nonprofit Policy Analysis for California Education, was that the high cost of school employee pensions was very much on voters’ minds — a bad omen for other districts considering parcel taxes to supplement state funding for schools.

“State and local leaders should heed the lessons of increasing anti-tax sentiment in famously progressive Marin,” wrote Hannah Melnicoe, Cory Koedel and Arun Ramanathan in their report, “The Canary in the Gold Mine.” “Statewide and local leaders must prioritize the development of a statewide education funding solution that does not increase reliance on local taxation.”

One rejection and a close call don’t necessarily create a trend. Last year, Kentfield voters passed a lower tax increase with smaller annual increase, and results from other parcel tax votes last week show it may be premature to proclaim that a rebellion has begun.

Four out of five parcel taxes statewide passed with at least 73 percent of the vote, including the renewal of a 12-year, $589 parcel tax in the Reed Union School District in Marin County. The one parcel tax that appears to be losing, for $149 per year in Redwood City, was less than a half-percentage point below the two-thirds majority needed for passage, with some votes still to be counted.

But Ramanathan, the CEO of Pivot Learning, a nonprofit school district consulting organization, and Melnicoe, a senior program manager at Pivot Learning, insisted at a PACE seminar last week that, as the study’s title asserts, Marin County may be “a harbinger of perilous political dynamics around pensions, taxes and education funding for rest of the state.”

Ramanathan and Melnicoe produced a report earlier this year, “The Big Squeeze,” about the “threat” of unfunded school pension costs’ impact on equitable funding through the Local Control Funding Formula. Koedel, an associate professor of economics and public policy at the University of Missouri-Columbia, was the principal author of a study of the rising costs of school pensions for the Getting Down to Facts studies that PACE and Stanford University produced last fall. This was their first effort to gauge the public’s awareness of mandated pension expenses and other rising costs.

They focused on parcel taxes because they’re the only source of taxation that school districts have to supplement state funding. Parcel taxes must be a flat rate per property, regardless of whether it’s a small home or big office building, which has led to criticism that it’s a regressive tax.

Only about 10 percent of students in California are in districts with a parcel tax. Those districts are primarily in the San Francisco Bay Area — and most common in Marin County, one of the state’s wealthiest and most politically liberal counties, where 15 of 18 school districts have had them. Three years ago, voters in the Kentfield School District, where Gov. Gavin Newsom lived before moving to Sacramento this year, rejected the renewal of a parcel tax they had passed easily in 2008. In the Mill Valley School District, voters approved a parcel tax providing 20 percent of its budget — but with a margin of only two dozen votes.

Through focus groups, budget analyses and interviews with three dozen district and community leaders, the study’s authors found a growing frustration that increasing pension costs were crowding out school districts’ budgets, forcing cuts to programs that parents valued and competing with salary increases for teachers needed to keep pace with fast-rising housing expenses in the Bay Area.

The study projected that from 2011-12 to 2020-21, the cost of benefits — primarily pension contributions and health care — would rise from 18 to 25 percent of county districts’ budgets. Meanwhile, reflecting staff cuts and larger class sizes, teacher salaries would fall from 48 to 45 percent of the budgets.

“Due to growing concern that dollars are not reaching schools, but instead being used to fund pensions, parcel taxes have faced increasing opposition in Marin County,” the study said, while acknowledging that other costs, including special education — up about 20 percent in inflation-adjusted costs in a decade — and a loss of revenue from a decline in enrollment, are added pressures.

Soaring pension expenses

School districts’ share of contributions toward school employees’ pensions have more than doubled statewide since 2014, when the Legislature passed legislation to gradually pay down the huge unfunded liabilities of CalSTRS, the pension fund for teachers and administrators, and CalPERS, which administers pensions for employees without a teaching credential, such as bus drivers and secretaries.

Employees’ contributions and the state’s contribution, in the case of CalSTRS, have risen, too, but districts bear the bulk of the costs. By 2020-21, districts’ CalSTRS contributions will have risen from 8.25 percent to 19.1 percent of a teacher’s salaries. Because teachers’ pay is above the state average in most Marin County districts, their state-mandated pension contributions are higher, too.

Newsom did provide significant short-term pension relief, absorbing about half of districts’ increases to both state pension funds this year and next, but they will rise after that. Ramanathan and Pivot Learning have called on the state to permanently take on more of districts’ share of the costs and to consider alternative, less expensive retirement plans for new teachers.

Opposition to the 2016 parcel taxes led taxpayer activists in the county to form the Coalition of Sensible Taxpayers, which goes by the name CO$T. Founder and President Mimi Willard of Kentfield, a financial analyst, said the group is “not reflexively anti-tax.” Instead, it’s challenging school boards to justify the need for a parcel tax, to reduce the number of years a tax is in place and to switch from a flat dollar to a per-square-foot tax, which is fairer to owners of smaller homes, she said. The group has indicated that it might oppose a parcel tax increase the Tamalpais Union High School District is considering for the March ballot.

CO$T also is pressing local school boards to take on the pension issue but “gotten nowhere so far,” Willard said. “We tell them, ‘Go to Sacramento to fix the problem moving forward,’ so that it isn’t foisted on us. But nobody wants to stick their head out of the foxhole.”

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  1. Jennifer Bestor 3 weeks ago3 weeks ago

    Sighting the canary in the coal mine, the authors missed the $70M elephant in the room. Marin schools are getting an ever-smaller percentage of the county's property tax. Marin is the highest-cost county in the state. The state's flat school funding formula means Marin schools can't make ends meet except in those districts whose property tax share can't be redirected. Voters, meanwhile, know how much they're paying in tax. … Read More

    Sighting the canary in the coal mine, the authors missed the $70M elephant in the room. Marin schools are getting an ever-smaller percentage of the county’s property tax. Marin is the highest-cost county in the state. The state’s flat school funding formula means Marin schools can’t make ends meet except in those districts whose property tax share can’t be redirected.

    Voters, meanwhile, know how much they’re paying in tax. They’re told half of it goes to schools. They assume it gets there. Logically, they feel school tax revenue is being wasted. Pension payments are an easy punching bag, given that today’s growing contribution is backfill for teacher obligations incurred 15 years ago, not now.

    The solution does lie in Sacramento — though the money is already in Marin. A 24% LCFF local cost supplement in Marin would be free to the General Fund AND would not touch the Prop 98 Minimum Guarantee. It would take 200 words in the Ed Code.

    Marin County is redistributing $70 million of “excess” education-allocated property tax this year to its county and city governments (see “excess ERAF” under “Where Your Tax Dollars Go” on the Marin County website). $50 million of that should go to the schools as a regional cost supplement. Most would head to Novato and San Rafael, but Mill Valley is only allowed 85% of the state average LCFF — which is insufficient … and, in light of “excess” ERAF, cruel and unnecessary. Assymbr. Mark Levine and Sen.Mike McGuire should be held accountable.

  2. Todd Maddison 3 weeks ago3 weeks ago

    Good news in general. While we could certainly debate whether education in CA is still under funded or not, there is no debate that all the money we gave them from the Prop 30 and 55 tax increases (and more) is going to increased pay and pension costs, not to "improving education" as we were pitched during those campaigns. It is regrettable that our education industry has mismanaged their funding so badly - and in such self-serving … Read More

    Good news in general.

    While we could certainly debate whether education in CA is still under funded or not, there is no debate that all the money we gave them from the Prop 30 and 55 tax increases (and more) is going to increased pay and pension costs, not to “improving education” as we were pitched during those campaigns.

    It is regrettable that our education industry has mismanaged their funding so badly – and in such self-serving ways – that it makes it harder for those of us who do believe that education money is something we want our taxes to go to to support increases in that funding.

    We have several statewide measures heading for the 2020 ballot, I intend to do my part campaigning against them not because I necessarily feel education should not be funded but because it’s inherently obvious from past behavior that when we give the education business more money they route it to their paychecks and retirement, not to the classroom for our kids.

    If I were in the education business, I would spend the next few years doing everything I could to restrain my district’s spending in the hopes of convincing the voters that a new leaf has been turned – otherwise more and more people are going to see through the “give us more money so we can improve education” canard and understand what the money is really going to…

    Replies

    • Jennifer Bestor 3 weeks ago3 weeks ago

      Proposition 30 (2012) was not sold to voters as improving education but as the alternative to $6B in permanent cuts to education. Why? Because in 2004 the Governor and Legislature had forced schools to pick up its vehicle license fee obligations -- the so-called VLF Swap. By 2012, $6 billion was being removed each year from school property tax to pay cities and counties what the state owed them in VLF fees. … Read More

      Proposition 30 (2012) was not sold to voters as improving education but as the alternative to $6B in permanent cuts to education. Why? Because in 2004 the Governor and Legislature had forced schools to pick up its vehicle license fee obligations — the so-called VLF Swap. By 2012, $6 billion was being removed each year from school property tax to pay cities and counties what the state owed them in VLF fees. Then the Governor gave voters the choice of cutting school spending by $6 billion or passing Prop 30. The sleight-of-hand here was all between cities, counties and the legislators. Schools were the suckers. That $6B has just kept growing ($9B this year) …

  3. Jim 3 weeks ago3 weeks ago

    “Statewide and local leaders must prioritize the development of a statewide education funding solution that does not increase reliance on local taxation.” This statement displays profound ignorance. Since the Serrano decisions shifted K12 funding from local to statewide the amount of money provided compared to other states has constantly decreased. State legislators have no interest in continuing funding in general and K12 in particular. They see their best way to generate positive publicity as funding new … Read More

    “Statewide and local leaders must prioritize the development of a statewide education funding solution that does not increase reliance on local taxation.”

    This statement displays profound ignorance. Since the Serrano decisions shifted K12 funding from local to statewide the amount of money provided compared to other states has constantly decreased. State legislators have no interest in continuing funding in general and K12 in particular. They see their best way to generate positive publicity as funding new programs, not existing programs.

    Some of the recent teacher strikes would have been very effective in pressuring local politicians but have been ineffective in pressuring state level politicians.

  4. el 3 weeks ago3 weeks ago

    I am at a loss as to what they think local school boards can do. It's a state mandate. The pensions cost what they cost as a strict percentage of payroll. Why are they spending their energy trying to influence tiny school districts instead of going to Sacramento directly? These boards nor board members don't have any special influence in Sacramento... and I'm sure the board members already are very aware of and very frustrated … Read More

    I am at a loss as to what they think local school boards can do. It’s a state mandate. The pensions cost what they cost as a strict percentage of payroll.

    Why are they spending their energy trying to influence tiny school districts instead of going to Sacramento directly? These boards nor board members don’t have any special influence in Sacramento… and I’m sure the board members already are very aware of and very frustrated by the increasing pension costs.

    Replies

    • Todd Maddison 3 weeks ago3 weeks ago

      I attend board meetings in several districts time after time, and I routinely hear Board members blame their fiscal problems on "lack of funding from the state". I have likely been to hundreds of board meetings, and I have never - never - heard a single Board member mention the fact that their increase in pension costs (and pay) is driving their financial difficulties. "What could they do" would start with being honest with parents … Read More

      I attend board meetings in several districts time after time, and I routinely hear Board members blame their fiscal problems on “lack of funding from the state”.

      I have likely been to hundreds of board meetings, and I have never – never – heard a single Board member mention the fact that their increase in pension costs (and pay) is driving their financial difficulties.

      “What could they do” would start with being honest with parents about what is driving their financial problems, and then using their pulpit to push for changes in those pensions also, instead of just playing the victim and blaming it on the state.

      Not to mention that there are things under their control – the cost of healthcare benefits, for example as well as post-employment healthcare benefits.

      Both are outrageously excessive and could easily be reformed within the districts.

  5. Jack Owens 3 weeks ago3 weeks ago

    This was a very interesting and useful article and before commenting on its content would like to do more research. Having said that, one explanation for the possible lack of overwhelming support for the Redwood City ESD parcel measure may result from the closure of four RWCED schools at the end of the 2018/2019 school year. Likely this had a chilling effect, as might be expected. Just wanted to add this piece of information to the situation in RWC.