McGeorge School of Law

Proposition 88

Proposition 88:
Education Funding. Real Property Parcel Tax.

By

Matthew Christy
JD, McGeorge School of Law, University of the Pacific
to be conferred May, 2008
B.A., Political Science, University of California, San Diego, 2001

 

Copyright © 2006 by University of the McGeorge School of Law


Table of Contents

I. Executive Summary
II. The Law
III. Drafting Issues
IV. Public Policy Considerations
V. Conclusion


I. Executive Summary

Proposition 88, billed as the Classroom Learning and Accountability Act, attempts to address some of the most significant shortcomings of California’s public schools. This initiative asserts that California students are falling behind. California Official Voter Information Guide, Text of Proposed Laws, Proposition 88, § 2(a) (Secretary of State, 2006). In support of this assertion, the text of the initiative points out that education funding in California is “chronically below” the national average and that California ranks among the bottom six states in both reading and math. Id.

Proposition 88 would provide additional public school funding for kindergarten through twelfth grade (K-12) by establishing a statewide $50 tax on each real property parcel. Id. at §§ 3-4. Most of the revenue that the statewide parcel tax generates will be transferred into a new state special fund called the Classroom Learning and Accountability Fund, and any allocation from this fund must be for one of the purposes specified in the initiative. Id. Proposition 88 dictates that funds be used for class size reduction, instructional materials, school safety, academic success facility grants, and a data system to evaluate educational program effectiveness. Id. at § 3. Proposition 88 grants the legislature the power to distribute the revenue from the statewide parcel tax according to the initiative’s dictates, while allowing school districts discretion on how to spend the allotted funds toward the purposes set out in the initiative. Id. at § 3(d). Proposition 88 requires regular school district audits and provides penalties for grant misuse. Id. at §§ 3, 8.

Proposition 88 also includes provisions to alleviate some of the harsh effects of the statewide parcel tax. To ensure that the statewide parcel tax does not affect funding for other government programs, Proposition 88 provides for reimbursement to the General Fund to offset losses in income tax revenues due to increased deductions attributable to the new parcel tax. Id. at § 4. Certain elderly and disabled homeowners are exempt from the assessment because of concern about the effect of the statewide parcel tax on those with limited income. Id.

Proposition 88 is an Initiative Constitutional Amendment and Statute. Id. at Preamble. It would expressly amend the California Constitution by adding sections thereto, would amend a section of the Government Code, and would add sections to the Education Code. Id. If passed Proposition 88 would take effect July 1, 2007. Id. at § 14.

II. The Law

A. Existing Law

1. Public Education and Equal Protection

In Serrano v. Priest, the California Supreme Court found the state’s then-existing, property-tax-based education finance system to be unconstitutional. Serrano v. Priest, 5 Cal. 3d 584 (1971). This case spanned three California Supreme Court opinions between 1971 and 1977. Arthur F. Coon, Separate And Unequal: Serrano Played an Important Role in Development of School-District Policy (Dec. 1, 1999), http://library.findlaw.com/1999/Dec/1/129939.html. Under California’s then-existing, property-tax-based education finance system, a poor community had to have high tax rates to generate relatively low per-pupil revenue, while a wealthy community could have low tax rates yet still generate relatively high per-pupil revenue. Public Broadcasting Service, The Merrow Report, http://www.pbs.org/merrow/tv/ftw/serrano.html (accessed Sept. 17, 2006) [hereinafter The Merrow Report]. The California Supreme Court held that basing large differences in per-pupil spending between school districts on district wealth violated the equal protection clause of the 14 th Amendment because the resultant discrimination against students in poorer districts was not based on a “compelling state interest.” Serrano, 5 Cal. 3d at 617. In 1977, the court ordered the state legislature to change California’s school finance system to achieve greater per-pupil spending equality, which would comport with the government’s guarantee of equal protection. Serrano v. Priest, 18 Cal. 3d 728 (1976).

In 1977, in response to Serrano, the California legislature passed Assembly Bill 65 (AB 65). Ed-Data, School Finance Chronology, http://www.ed-data.k12.ca.us/Articles/Article.asp?title=Chronology (accessed Sept. 17, 2006). This bill equalized school revenues by: increasing state funding for poor school districts; placing a cap on per-pupil revenue in wealthy districts; and redistributing some of the wealthy districts’ property tax revenue to poor districts. The Merrow Report. AB 65’s method of equalizing school funding was highly successful; by the late 1990s, per-pupil revenue limits were within a $350 range for 97% of California’s students. Id.

Despite the success of Serrano and AB 65 in equalizing school funding, they may have had the unintended consequence of making California taxpayers less willing to pay their property taxes. Id. Before the equalization of school funding, local voters could decide how much to tax their property for the benefit of local schools. Afterwards, affluent property owners lost their incentive to spend so much on schools; the property taxes they paid no longer exclusively benefited the schools in their communities. Id. The increased aversion to paying property taxes after Serrano and AB 65 may have precipitated the California property tax revolt of 1978 and the substantial decline in statewide school spending relative to other states. Id.

2. Proposition 13

In 1978, California voters passed Proposition 13, which limited property tax rates and capped annual increases on property taxes. Jennifer Sloan McCombs & Stephen J. Carrol, Who is Accountable for Education if Everybody Fails?, Rand Rev., http://www.rand.org/publications/randreview/issues/spring2005/ulttest.html [hereinafter Who is Accountable?]. While Proposition 13 did not preclude the imposition of a statewide property parcel tax, such as the one commanded by Proposition 88, it did institute broad constraints on state and local governments’ ability to tax. Under Proposition 13, a two-thirds majority in both houses of the legislature is necessary to increase any state tax, and the approval of two-thirds of the electorate is necessary for a municipality to pass any new tax. Id. According to John Mockler, a past Executive Director of the California State Board of Education, these broad constraints on the ability to tax and the centralization of power in Sacramento that resulted from the equalization of school funding “took all local power [over education] away.” The Merrow Report at http://www.pbs.org/merrow/tv/ftw/mockler.html.

In the wake of the equalization of school funding and Proposition 13, California’s per-pupil education spending has fallen well behind the rest of the nation. McCombs, Who is Accountable? Measured in year 2000 dollars, per-pupil spending in California went from more than $600 above the national average in 1978 to more than $600 below the national average in 2000. Id.

3. Subsequent Developments

In 1988, California voters passed Proposition 98, which guaranteed a minimum percentage of the state’s budget to public schools. Id. Despite its good intentions, Proposition 98 has had adverse consequences: it has subjected the state’s financing of public schools to the extreme fluctuations of the state economy, and, because more than a third of state funding under Proposition 98 has been earmarked for specific purposes, it has further limited local discretion. Id.

In 1996, the California legislature passed the Class Size Reduction (CSR) Program to increase student achievement by decreasing class sizes in kindergarten through third grade. Cal. Dept. of Educ., Fingertip Facts, http://www.cde.ca.gov/ls/cs/k3/facts.asp (accessed Sept. 17, 2006). The program succeeded in reducing class sizes. McCombs, Who is Accountable?. However, by increasing the number of classes necessary to teach the same amount of students, the program inadvertently forced the state to hire less-than-qualified teachers to staff the new classes, and other educational programs were cut to pay new teachers’ salaries. Id. It is not yet clear whether the program has raised academic achievement. Id.

California voters passed Proposition 39 in 2000; this initiative reduced the requirement of voter approval for local bonds from two-thirds of district voters to 55 percent. Id. This measure has enabled districts to address a substantial amount of the state’s K-12 facility needs, but only through the accumulation of considerable debt. Id. Even considering the greater spending that Proposition 39 facilitated, California still lags behind the nation in terms of adequacy of school buildings and per-pupil construction spending. Id.

B. The Effects of Proposition 88

1. Fiscal Effects

The Legislative Analyst’s Office estimates that Proposition 88’s statewide parcel tax would generate roughly $450 million in new tax revenue each year. California Official Voter Information Guide, Analysis of Proposition 88 (Secretary of State, 2006). Not included in this figure is the roughly $30 million that transfers annually to the state General Fund to offset the projected decline in state income tax revenue as a result of increased deductions due to the statewide parcel tax. Id. Proposition 88 sets aside no more than 0.2 percent of the statewide parcel tax revenue, or approximately $1 million annually, for county administration of the tax. Id. The remainder of the new tax revenue would be allocated to schools for education programs consistent with the dictates of Proposition 88. Id. If revenue from the statewide parcel tax falls short of expected funding levels, the program allocations would be adjusted downward proportionally. Proposition 88, § 3(e).

2. Allocation of Funds Generated by the Statewide Parcel Tax

Funds that Proposition 88 appropriates for class size reduction, instruction materials, and school safety would be allocated to school districts, county offices of education, and public charter schools on a per-pupil basis. Id. at § 3(d). The legislature would weight the per-pupil allocation to school districts to account for the additional costs associated with special-needs students, such as those with disabilities, lack of English proficiency, or low socioeconomic status. Id. Proposition 88’s allocations of funds for facilities grants and to create and maintain a data system are more intricate; the allocations of funds for these programs, along with the programs’ purposes, will be explained in detail below.

K-12 Class Size Reduction

California presently provides $1.8 billion for the CSR Program for kindergarten through third grade (K-3) to reduce the size of K-3 classrooms to no more than 20 students. Analysis of Proposition 88. Proposition 88 would supply an additional $175 million which could be used to further reduce class size in grades K-3 or for any other K-12 CSR program. Id. The Legislative Analyst’s Office points out that this additional funding would be sufficient to reduce the average class size of fourth grade by about four students (from a statewide average of about 29 students to 25 students). Id.

Instructional Materials

California currently provides $400 million, or $66 per K-12 student, each year, for instructional material purchases. Id. Proposition 88 would grant an additional $100 million that could be spent on any instructional materials approved by the State Board of Education. Id.

School Safety

California currently makes available $548 million for after school programs, $97 million for general school safety programs, and $17 million for competitive school safety grants. Id. Proposition 88 would provide an additional $100 million, or about $16 per student, which could be used to supplement any of these programs. Id.

Facility-Related Grants

At present, California provides for school facilities primarily through general obligation bonds; however, it has provided $9 million for each of the last several years to help public charter schools in low-income areas defray some of their facility lease costs. Id. Proposition 88 would allocate $85 million for “academic success facilities grants” to school districts and charter schools that met the specified qualifications. Proposition 88, § 3(b)(4).

Proposition 88 contains an intricate set of qualifications that a school district must meet in order to receive an academic success facilities grant. Only districts that have yet to receive any state general obligation bond monies for construction or modernization are eligible. Id. at § 9(b)(1). Also, in order to qualify, a school district must have at least two schools, other than eligible charter schools, rank in the top half on the Academic Performance Index as reported by the State Board of Education. Id. at § 9(b)(1)-(2). Charter schools are only eligible for an academic success facilities grant if they are governed or operated by a nonprofit public benefit corporation. Id. at § 9(b)(3). The Legislative Analyst’s Office estimates that about 40 noncharter schools, serving less than 1 percent of all noncharter enrollment, would qualify for an academic success facilities grant; it estimates about 100 charter schools, serving 25 percent of all charter enrollment, would qualify. Analysis of Proposition 88. Unless a future state general obligation bond expressly allowed otherwise, districts receiving facilities grants through Proposition 88 would be precluded from receipt of state general obligation bond monies. Proposition 88, § 3(b)(2).

Data System

As it stands, the state provides virtually no state funding expressly for the collection and upkeep of student-level and teacher-level data. Analysis of Proposition 88. Proposition 88provides $10 million to establish and maintain an “integrated longitudinal teacher and pupil achievement data system.” Proposition 88, § 3(b)(5). The text of Proposition 88 asserts that the purpose of establishing such a data system is to provide “a better means of evaluating the efficiency and effectiveness of educational programs and investments.” Proposition 88, § 3(b)(5). Toward that end, Proposition 88 requires school districts to “participate in the collection and reporting of information necessary for the creation and maintenance of the state’s integrated longitudinal teacher and pupil data system as defined by the legislature.” Id. at § 10.

III. Drafting Issues

A. Future Challenge

The sections of Proposition 88 that require the creation and maintenance of an integrated longitudinal data system may be ripe for future legal challenge due to ambiguity. The text of Proposition 88 clearly sets out the purpose of the data system and the requirement that school districts participate, but it provides almost no direction to the legislature on how to implement the data system. The allocation of the $10 million that Proposition 88 appropriates for the data system is likely to be contentious because school districts are strapped for funding and ill-equipped to take on extracurricular responsibilities. Moreover, any action by the legislature to create the new bureaucracy necessary to administer the data system is also likely to inspire legal attack; because of Proposition 88’s lack of clarity concerning the contours of the data system, it will be impossible to determine whether the new bureaucracy is consistent with the measure’s dictates. A challenge to the portions of Proposition 88 that establish the data system could result in their invalidation, but such a challenge is unlikely to void any other provisions of the measure.

B. Severability

Proposition 88 includes the following severability clause: “The provisions of this measure are severable. If any provision of this measure or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.” Proposition 88, § 12. In case a provision of Proposition 88 is invalidated, this clause directs a court to strike down the void portion and to give effect to the valid remainder.

While a self-enacted severability clause “normally calls for sustaining the valid part of the enactment,” it is not dispositive of the issue. Santa Barbara Sch. Dist. v. Super. Ct., 13 Cal. 3d. 315, 331 (1975). A court must look at the entire measure before determining whether the law can stand on its own absent the invalid portion. Gerken v. FPPC, 6 Cal. 4th 707, 714 (1993). Toward that end, if a portion of Proposition 88 is held invalid, a court may subject the entire measure to the three-part test for severability set out in Gerken; under that test, the invalid provision of an initiative is severable from the remainder if it is grammatically, functionally, and volitionally separable from the rest of the initiative. Id. at 715.

While it does not appear likely that any provision of Proposition 88 will be held invalid, whether an invalid portion of the measure could be successfully severed is unclear. Proposition 88 is divided into ten discrete sections, and there is ample opportunity for grammatical severance where a single section addresses more than one of the measure’s main purposes; any invalid portion of the measure is likely to be held grammatically severable.

If a substantial portion of Proposition 88 was held invalid, it is questionable whether a remainder of the measure would be functionally severable. For example, if the statewide parcel tax was held to be invalid, a great deal of the remainder of the measure, which allocates the revenue generated by the new tax, would be inherently dysfunctional. On the other hand, if Proposition 88’s revenue allocations were held to be invalid, the statewide parcel tax might still be upheld as functional. In this circumstance, a California Court might find reformation of the invalid revenue allocations preferable to striking the entire measure.

In case of an invalidation of a substantial portion of Proposition 88, the volitional severability of the remainder is also uncertain. Proposition 88’s major objectives appear volitionally inextricable because there are many voters who would only approve the creation of the statewide parcel tax for the purpose of providing further funding for the state’s education system. However, if the portion of Proposition 88 pertaining to the creation and maintenance of the integrated longitudinal data system was held invalid, the remainder of the measure would likely be held volitionally severable.

IV. Public Policy Considerations

A. Proponents of Proposition 88

The central arguments of the proponents of Proposition 88 are that California’s schools are in a calamitous state due to under funding and immediate financial assistance is necessary. California Official Voter Information Guide, Argument in Favor of Proposition 88 (Secretary of State, 2006). In support of this assertion, proponents point to the inadequacy of instructional materials available to students, the overcrowding of classrooms, and the pressing need to make schools safer. Id.

Proponents also argue that Proposition 88 will restore some local control over the administration of public schools in California by allowing school districts discretion to spend funds within the dictates of Proposition 88’s broad allocations. Id.

Proponents frame Proposition 88 as a “prudent and fair investment.” Id. They assert that the statewide parcel tax is a nominal cost at only 14 cents per day per affected parcel owner ($50 annually). Id. Proponents assert that Proposition 88 is a necessary step toward fostering the skilled, educated workforce that will be critical to California’s economic prosperity in the future. Id. They attempt to alleviate concerns about the ability of some homeowners to pay the parcel tax by noting that senior and disabled homeowners are exempt from the assessment. Id. Proponents also argue that the funds raised through the statewide parcel tax will have optimal effect because Proposition 88 caps the administrative costs of the measure’s implementation. Id.

They stress the measure’s requirement of annual, independent audits to assure accountability. Id. The proponents focus on the immediate need for action to improve public education in California, rather than on whether or not Proposition 88 is the best action to undertake.

B. Opponents of Proposition 88

Proposition 88 proves the modern applicability of the ancient adage that politics makes for strange bedfellows; opponents to the measure include the California Parent Teacher Association, the California Federation of Teachers, the Howard Jarvis Taxpayers Association, the California Republican Party, and the California Democratic Party. No on Proposition 88. Their central argument acknowledges that all Californians want better schools, but asserts that Proposition 88 is the wrong approach. California Official Voter Information Guide, Argument Against Proposition 88 (Secretary of State, 2006), http://www.ss.ca.gov/elections/vig_06/general_06/pdf/proposition_88/entire_prop88.pdf (accessed September 2, 2006).

Opponents of Proposition 88 argue that, rather than fostering decentralization of the administration of public schools in California, the measure will further centralize control in Sacramento. Id. Opponents note that the measure diverts proceeds from the statewide property tax to Sacramento, and the legislature then distributes the funds to school districts outside taxpayers’ own communities. Id.

Opponents suggest that California administrate current education funding better rather than implement new taxes for that purpose. Howard Jarvis Taxpayers Association, Help Fight the New State Tax on Your Home!, http://hjta.org/NoCLAA (accessed Sept. 16, 2006). They point out that Proposition 88 would impose the first statewide property tax since 1910, and they submit that other special interests will be encouraged to pass more and bigger property parcel taxes if Proposition 88 succeeds. No on Proposition 88. They argue that the passage of a statewide parcel tax would work in direct opposition to Proposition 13’s various limits on raising taxes. Argument Against Proposition 88. From the opponents’ perspective, Proposition 88’s statewide parcel tax merely takes advantage of a loophole to bypass Proposition 13’s dual requirements of a two-thirds vote in each house of the legislature to pass a state tax increase and two-thirds voter approval to impose a local property tax. Id. Opponents also argue that the tax is regressive because the assessment is the same for a large commercial property parcel as it is for a small residential one. No on Prop. 88, Long Beach Press Telegram, ¶ 5 (Aug. 26, 2006), http://www.presstelegram.com/opinions/ci_4244015 (accessed Sept. 6, 2006). Moreover, the opponents take issue with the infinite lifespan of the measure’s statewide parcel tax, especially in light of the prospect that the minor increase in funding will not be efficacious. Argument Against Proposition 88.

Opponents of Proposition 88 take particular umbrage with the measure’s allocation of funds for facilities grants. Id. They assert this provision of the measure is poorly designed because the rigid qualifications for receipt of facilities grants effectively make them unavailable to the schools educating 95% of California students. California Official Voter Information Guide, Rebuttal to Argument in Favor of Proposition 88 (Secretary of State, 2006), http://www.ss.ca.gov/elections/vig_06/general_06/pdf/proposition_88/entire_prop88.pdf (accessed September 2, 2006).

Finally, opponents argue that Proposition 88 is inefficient for relying too heavily on existing and newly created bureaucracy. Id. Opponents’ primary example of the measure’s tendency to rely too heavily on bureaucracy is its requirement of an integrated longitudinal data system. Id. They note that the measure underestimates the difficulty inherent in collecting new data from the over 1,000 school districts and over 9,300 schools in California. Id.

V. Conclusion

Proposition 88 aims to address some of the roots of the problem of underperformance in California’s schools. Toward that end, the measure amends the California Constitution, the Education Code, and the Government Code by establishing a $50 statewide parcel tax, allocating that revenue to fund a comprehensive set of education programs, and establishing a data system to track the programs’ effectiveness. Proponents assert that Proposition 88 is a necessary step in restoring the competitiveness of California’s schools. Opponents argue that Proposition 88 is the wrong approach and that it is only a partial solution for a system in need of wide-ranging change. Opponents specifically take issue with the measure’s establishment of a statewide parcel tax, its further centralization of power over the state school system, and its creation of new bureaucracy.