Is it time to change how funds are allocated?

A growing number of education leaders believe that it is time to change the archaic, outdated way that California funding is parceled out to schools. Most would like to see a stable, adequate and reliable stream of funding that protects public schools — even during times of economic turmoil.

"One way or another, Californians are likely to take some actions to change the school funding system over the next few years," predicts EdSource in its report, "Rethinking How California Funds Its Schools."

While many leaders agree it's time to reform school funding, it will be far from easy to reach a consensus about just how that should occur, especially in a state as large, complex and diverse as California.

One thing is clear: The state will have to spend more than it currently spends to improve schools in California, which is among the lowest states in per-pupil spending and far below the national average, according to a study by Education Week. Once considered among the best in the nation, California schools are now overcrowded and lacking basic resources in many districts.

Revamping school funding will likely raise many questions, including:

Should the amount of money per student be equal throughout the state? Do some schools need more money for each student because their students are more challenging to educate — such as those who come from poverty or are second-language learners? CTA has fought hard to obtain additional funding for Schools of Greatest Need, which test in the lowest deciles on state accountability measures. Other states — and the San Francisco Unified School District — have adopted "weighted funding" formulas which dispense money to sites based on the kinds of students at each school.

Should ADA funding be eliminated in favor of enrollment funding? Under the current system based on Average Daily Attendance, schools can lose money if there is a flu epidemic or other situations beyond their control.

Should all secondary students receive the same rate of reimbursement? Presently, high school students in unified (K-12) districts receive a lower rate of funding than students enrolled in high school districts. Because there is a slowdown in elementary student growth and a higher percentage of students in secondary schools, unified school districts face increasingly difficult economic challenges in the future.

The adequacy model: Stanford University professor Michael Kirst believes we should throw out the current system of financing our schools and start over. "It is broken in every way," he says. "Our finances have no relationship with student outcomes in any progressive way. Perhaps we should do what more progressive states do. We should start with our academic standards and say, 'What would it cost to reach those standards?' We could ask ourselves what is adequate to meet pupil standards and goals. Right now we have no leadership and no vision to even think about the school finance problem in an appropriate way."

Kirst, co-director of the research group Policy Analysis for California Education, says he would like to see the state guarantee an adequate level of funding or "adequacy model" for all pupils to meet academic standards. "We need to have a revolution and start thinking about this."

Jean Ross, executive director of the California Budget Project, believes an "adequacy model" might also be looked at in terms of what parents want for their children. "Other states have surveyed parents and asked what they wanted from schools. They were asked if they wanted art, physical education, advanced placement classes, etc. There may not be enough money to pay for everything people want, but at least those things will be prioritized. To me, the challenge is to change the way we come at problems. Instead of saying, 'Here's the money. What can we do with it?' we should say, 'Here's what we want to do and let's try to make that a reality.'"

Many other states, including Massachusetts, New York and Maryland, are working on adequacy models, says Peter Schrag, who writes about education funding for the Sacramento Bee and is the author of Final Test: The Battle for Adequacy in America's Schools.

"It's happening in other places where they have seriously started to address the question, 'What does it take to educate a kid? What does it take to educate different kinds of kids in different kinds of circumstances?' At least they are asking the question. I would like to see us ask that question in California."

In 2002, the Legislature established the California Quality Education Commission to develop a model to link performance standards with finance. Under the plan, seven members would be appointed by the governor and approved by the Senate. Two members would be appointed by the Senate Rules Committee, two by the speaker of the Assembly and two by the superintendent of public instruction. When he took office, Gov. Arnold Schwarzenegger rescinded Gov. Gray Davis' appointments, but has yet to replace them with his own.

The cost of the commission is not an issue; the Gates and Hewlett foundations have offered to fund it with private donations. The commission was supposed to become "operative" in July 2003, and report its findings and recommendations to the governor and Legislature within a year. Without appointments from the governor, it cannot schedule a meeting.

Schrag believes the governor is reluctant to make appointments "because he is afraid that the commission may come up with something that has dollar signs attached to it."

Recently, the governor proposed to eliminate the commission and replace it with the Governor's Advisory Commission on Education Excellence.

Revisiting Prop. 13: Making modifications to Proposition 13 would also be a way to restructure school financing, although Schrag jokingly says it might be easier to remove the top of Mount Everest. "The only way to do it would be to have a split roll and have commercial property taxed on a different basis," he says. "That's the only thing that has a shot." Prop. 13, originated to help struggling homeowners, has provided big businesses with a big tax loophole.

CTA attempted such an undertaking last year with an initiative that would have provided more than $4.5 billion a year in new funding for education by raising the tax on commercial property from 1 percent to 1.55 percent, with an exemption for small business owners. The association decided to postpone pursuing the initiative because there were so many other initiatives on the state ballot last November.

"If I had my druthers, I would extend the sales tax we have on goods to a sales tax on services," says Kirst. "Why tax goods only? That concept is 50 years old, and pertains to a time when the economy was based on goods and not services. Now we're a service economy and we have no way to tax it. We could tax tanning salons, lawyers' fees and a whole set of services. Other states do it. I think we're stuck in conceptual cul-de-sacs in California. I get stimulated when I leave the state and see the innovative things going on in other places."

Under Prop. 13, all new taxes must be passed by 66.7 percent of the voters. Business and government leaders in Silicon Valley have formed a new group, Taxpayers for School Improvement, dedicated to changing this. The goal is to place a statewide initiative on the ballot allowing local school districts to pass parcel taxes with the same 55 percent majority vote that is currently required for local school bonds. The initiative will be placed on the ballot in November 2006, says group leader Reed Hastings, a former member of the State Board of Education.

"We believe there is broad-based support for the idea of giving local school districts more control over local resources, and we expect to build a diverse coalition statewide to support local school funding as we move ahead," says Hastings. Between 1983 and 2002, there were 275 local parcel tax elections in school districts around the state and almost half of those measures failed despite receiving at least 59 percent of the vote.

While there is a perception that Californians are taxed to the max, the reality is that Californians are paying a smaller percentage of personal income tax on education than in the past.

"When I went to school, we spent 5.6 percent of personal income on schools," recalls education consultant John Mockler. "For every dollar that my mom and dad made, we put 5.6 cents in the pot, or almost 6 pennies per dollar. Now, we spend about 3.4 pennies per dollar on education. We're spending less on children now than we did then. Going from 5.6 percent of personal income to 3.8 percent cut $21 billion dollars from K-12 schools prior to Prop. 13. That's $85,000 per class of 25 students.

"We've been persuaded that having private goods is more important than the public good," adds Mockler. "We used to drive Chevrolets and eat cheddar cheese and have pretty good public schools. Now we drive BMWs, eat Brie and have mediocre public schools. It all has to do with the choices that we make."

There is also a misconception that taxes have gone up when, in reality, the percentage of what Californians pay in taxes has gone down. When Ronald Reagan was governor, 13.6 percent of personal income went to state taxes, says Mockler. "Now it's 11 or 12 percent. We have to remember that even 1 percent can make a big difference. One percent of personal income is $12 billion that stays in the private sector."

The majority of Californians believe that improving the state school system is the most important issue facing the state — more important than fixing the economy or reducing crime, reports the Center for the Future of Teaching and Learning, based at UC Santa Cruz. Improving schools is seen as the most important issue by all the people who were interviewed. But while everyone pays lip service to improving schools, there is reluctance for some to put their money where their mouth is.

Mockler believes that subtle racism plays a part in this reluctance. "Years ago, Californians would see schoolchildren who looked like them. Now, Californians see Latinos, African Americans, Asians and other minorities who don't look like them in public schools. Some Californians don't believe they are 'our' children and think that we shouldn't support them. Our politicians always say that public schools are our first priority. But they spend money in other places."

Williams v. California: Schools attended by poor and minority students tend to have fewer experienced teachers and less in the way of programs and resources. Recently a settlement was reached between Gov. Schwarzenegger's administration and the American Civil Liberties Union on a lawsuit — Williams v. California— that accused the state of denying poor children adequate textbooks, trained teachers and safe classrooms. The proposed agreement would require the state to devote as much as $1 billion over a period of several years for 2,400 low-performing schools to repair deteriorating facilities and $50 million to assess such needs. It would also provide nearly $139 million for textbooks.

Most education experts agree it was a step in the right direction, but far from enough money to solve the chronic underfunding of schools.

"Does the Williams settlement mean anything? It means that the governor is a great politician," says Mockler. "We have a $48 billion K-12 system and the governor allocated this amount and said it solved the problem. If you think that solves the problem, well, God bless you."

"I was so sorry when they settled Williams v. California the way they did, because a lot of the terms of the settlement were marginal," says Peter Schrag. "The ACLU settled for a little bit of funding, went away and said it was a great victory. I don't think it was a victory at all."