Association seeks backers for $15 billion tax on the wealthy
By John Fensterwald
The California School Boards Association is exploring whether to place a $15 billion tax for K-12 schools, early education and community colleges before voters, creating the possibility of dueling tax initiatives on the statewide ballot in November 2020.
Together with the Association of California School Administrators, the California State PTA and the Community College League of California — its partners so far — the school boards association has created a “Full and Fair Funding” (www.fullandfairfunding.org/) election fund and website to solicit support. Assemblyman Kevin McCarty, D-Sacramento, who chairs the Assembly Budget Subcommittee on Education Finance, is shopping the idea around the legislature to see if there’s enough support to ask legislators to put the tax proposal on next year’s ballot.
“We’re talking to anyone who will listen,” McCarty said. That includes the administration of Gov. Gavin Newsom, said Dennis Meyers, assistant executive director for governmental relations for the California School Boards Association. “They know what we are doing.”
The association’s move coincides with the announcement this month by the organizers of another tax plan that they are rewriting their initiative, which already had qualified for the November 2020 ballot, to exempt more small businesses. The initiative from the Schools and Communities First Coalition (schoolsandcommunitiesfirst.org/) would revise Proposition 13’s 40-year-old limits on property taxes to increase the take from business and commercial properties. Organizers say they will replace the text with the latest version once they’ve again collected the more than 1 million signatures needed to put the initiative on next year’s ballot — an expensive and possibly daunting challenge.
Their proposal for a “split-roll” tax would leave Proposition 13’s tax protections for residential property owners intact while raising an estimated $11 billion annually from business and commercial properties. About $4.5 billion would go to schools and community colleges and the rest to cities and counties, which provide the bulk of the state’s social services and health care.
The school boards’ proposal would bring in triple the amount of money for K-12 schools than the $4.5 billion estimated under the split-roll proposal. That will be tantalizing to education groups and the California Teachers Association (CTA), whose financial and organizing prowess the school boards and administrators would need to qualify the measure for the ballot.
But the CTA, the California State PTA, the California Federation of Teachers, United Teachers Los Angeles, individual school district boards and nonprofits such as Public Advocates and Californians for Justice already have joined dozens of housing, social justice and local government officials who have endorsed the split-roll initiative (schoolsandcommunitiesfirst.org/endorsers/).
That could create a dilemma regarding whether to support either or both — or whether to actively discourage one initiative from moving ahead out of fear that two tax proposals on the same ballot would lower the chances that either would win.
“It is fair to say that the more confusion there is on a ballot and the more measures can be framed as competing, the more concern there would be about any of them passing,” said Micah Weinberg, CEO of the nonprofit civic leadership group California Forward (www.cafwd.org/). “Opponents often tie measures together to muddy the waters.”
One recent case in which similar measures didn’t result in both failing was in 2012, when, at Gov. Jerry Brown’s urging, voters approved Proposition 30, a temporary sales and income tax increase to raise money for education and the General Fund, over Proposition 38 (mk0edsource0y23p672y.kinstacdn.com/wp-content/uploads/old/edsource-californiaschoolinitiatives-10-15cs41.pdf), a broader income tax increase exclusively for education. Prop. 38 was funded by philanthropist Molly Munger and had the backing of the state PTA.
For now, the CTA said there’s nothing to comment on, since there’s no concrete proposal from the school boards association. If there is a proposal, it will go before the CTA’s State Council, which meets in October, said Claudia Briggs, communications assistant manager for the California Teachers Association.
The jockeying over potentially dueling tax initiatives, plus a possible state bond for school construction, underscores the confidence among advocates that an expected high turnout in next year’s elections presents an opportunity to raise revenue for schools. The Democratic presidential primary is in March and the presidential election is set for November. Several recent polls of likely voters (see Public Policy Institute of California Poll link at the end of the story and edsource.org/2019/support-grows-nationwide-for-paying-teachers-more/616509) have reinforced the assumption of strong support for more funding.
Newsom is the big unknown. He hasn’t stated his position on either tax or whether he might step forward with his own tax reform plan for next year. A spokesperson for Lenny Mendonca, Newsom’s chief economic and business adviser, declined to comment.
The school boards and school administrators chose the $15 billion target as roughly the amount in new revenue needed to raise K-12 per-student spending to the national average. It’s based on Education Week’s often-cited annual state rankings that factor in California’s overall high cost of living. The most recent ranking (www.documentcloud.org/documents/6359142-EdWeek-Spending-Ranking-2019.html), based on 2015-16 data, placed California 38th among the states and Washington, D.C. While better than its ranking of 46th in 2013-14, it still was $2,475 per student below the national average. California also has ranked among the states that spend the lowest percentage of total taxable income on K-12 education (edsource.org/wp-content/themes/nakatomi/projects/states-in-motion/effort.html).
However, based on rankings that don’t factor in regional costs, California spent only $58 below the national per-student average of $12,201 in 2016-17, according to the latest data from the U.S. Census Bureau (www.census.gov/newsroom/press-releases/2019/school-spending.html).
The school boards’ and school administrators’ plan would increase taxes for corporations — earning more than $1 million by up to 5 percentage points and personal income taxes for those earning more than $1 million annually by 1.5 percentage points. The last state tax increase, which voters approved in 2016, also targeted the wealthiest 1 percent of earners, who alone provide more than half of state income tax revenue.
K-12 districts would get 89% of the $15 billion and community colleges the rest, the same ratio they get now, with additional money for early education, Meyers said. The Local Control Funding Formula, which factors in the percentage of low-income students, homeless students, English learners and foster youths, would determine roughly each district’s share, Meyers said.
Organizers of the split-roll initiative characterize it as closing an $11 billion corporate loophole. Under Proposition 13, property taxes can rise only 1% annually, unless a sale leads to a reassessment setting a new and higher fair market value. Initiative backers argue that some large commercial and industrial owners have been sold without a reassessment because the sales were done through “shell corporations.” As a result, they assert, the burden for paying property taxes has shifted inequitably toward homeowners, whose properties have been reassessed more frequently on average since Proposition 13 was passed in 1978. A study in 2016 by the Legislative Analyst’s Office (lao.ca.gov/Publications/Report/3497#Did_Proposition.A013_Cause_Residential_Properties_to_Pay_a_Larger_Share_of_Property_Taxes.3F) failed to find this pattern statewide.
The initiative would require all commercial and industrial properties to be reassessed every three years, generating additional revenue from higher fair market values. All business properties assessed at under $3 million would be exempt from higher taxes.
Two polls this year put support for a split-roll initiative in the mid-50s (54% of likely voters backed it in the Public Policy Institute of California poll and 55% of voters in a poll by the nonprofit PACE and USC). However, business groups are vowing to bankroll what could be an expensive effort to defeat it and are organizing already with FightforProp13.org (fightforprop13.org/), led by the California Business Roundtable, and Californians to Stop Higher Property Taxes (stophigherpropertytaxes.org/join-the-coalition/), led by commercial real estate interests.
The school boards association commissioned a poll (www.fullandfairfunding.org/wp-content/uploads/2019/08/F3-ppt-8-13-2019-polling.pdf) of its proposal, based on an earlier version that would have raised $11 billion in revenue. It found that 68% of voters supported the tax plan when read a description of how the money might be used to improve education. Negative messaging about the tax drove support down to 61%.
Public Policy Institute of California Poll link: www.ppic.org/wp-content/uploads/ppic-statewide-survey-californians-and-education-april-2019.pdf
PACE and USC poll link: www.edpolicyinca.org/sites/default/files/PACE_Report%E2%80%93PACE-Poll_201902_v2.pdf
John Fensterwald, staff writer, joined EdSource in 2012. Before that, he was editor and co-writer for the “Thoughts on Public Education (TOP-Ed)” website, a leading source of California education policy reporting and opinion, which he founded in 2009. For 11 years before then, John wrote editorials for the Mercury News in San Jose, with a focus on education. He worked as a reporter, news editor and opinion editor for three newspapers in New Hampshire for two decades before receiving a Knight Fellowship at Stanford University in 1997 and heading West. His wife is a retired elementary school teacher, and his daughter attends the UC Davis School of Medicine.