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Aug 9 / Jonathan

School parcel taxes are bad public policy

Last June, a parcel tax proposal by my local school district failed, for the fifth time in recent memory. This Tuesday, Californians will vote on Proposition 88, an initiative that seeks a perpetual statewide $50/year parcel tax.

Sidebar: California School Funding

California school districts are primarily funded by the state, through a complicated formula that needn’t concern us here. As a consequence of Proposition 13 (1978), school districts are limited to parcel taxes to raise money locally for operating expenses.

In California, parcel taxes differ from ad valorem property taxes in that they’re assessed at a flat rate per parcel. Amounts vary; my local district’s requests have varied from $75 to $250 per year, generally for a period of five years.

(This 1997 report from the Little Hoover Commission is nearly ten years old, but it’s still the best treatment of K-12 funding in California that I’ve ever seen.)

Reliance on local parcel taxes to supplement public education funding is bad public policy, for two main reasons.

Parcel taxes are regressive

First, parcel taxes are regressive. Whether you live in a 10,000 square foot McMansion in Beverly Hills or in a shotgun shack on a postage-stamp lot, your parcel tax assessment is the same (if you’re only renting the shack, the parcel tax will almost certainly show up as a rent increase).

Parcel taxes are inequitable

Second, affluent school districts are much more likely than poor districts to be able to pass substantial parcel taxes, and so supplement California’s rather low level of state funding for education, leaving poorer districts stuck at the bottom. This flies in the face of the state supreme court’s Serrano decisions in 1971 and 1976 that basing school funding primarily on local property taxes is unconstitutionally inequitable.

Maybe in an emergency…

There is some merit in the argument that, during an acute budget emergency, a short-term parcel tax may be justified on the grounds that it’s the only recourse available to the district (or at any rate the least bad recourse). I accepted that argument, for example (and made it myself) in 2003, though not in 2006.

55%: even worse

Various people have advocated lowering the election threshold for a parcel tax to 55%, from the current Prop 13-mandated 2/3, as was done some years back for facilities bonds. That’s a bad idea, and more than a little disingenuous. Lowering the threshold for parcel tax measures requires a constitutional amendment. But once we’re amending the constitution, we’re no longer bound by the strictures of Proposition 13, and are free to restructure public school funding equitably. That is, if we’re going to pass a constitutional amendment, why not fix school funding right?

Fix it right.

K-12 funding in California is broken and needs to be fixed, and one way or another that will require higher taxes. But parcel taxes, whether local or statewide, are the wrong way to do it.

What about California Proposition 88?

A statewide parcel tax, as proposed by Proposition 88, largely avoids my second criticism; it will be collected (and presumably distributed) more or less uniformly across the state. On the other hand, it does nothing to address existing inter-district inequity.

Proposition 88 introduces a variation not found in local parcel tax proposals: no time limit. Local parcel taxes run for a few years, often five, and generally in the range of three to seven. But the statewide parcel tax proposed by Proposition 88 has no time limit at all. It would become a permanent part of California public school financing, embedded in the state constitution.

Because Proposition 88 includes a constitutional amendment, it could have implemented a more progressive revenue source (such as income taxes) instead of relying on regressive parcel taxes. It’s a bad measure, and should be defeated.

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