BACKGROUND
State and local governments in California impose
several types of taxes and use the resulting revenue
to support a variety of government activities.
The most significant state taxes are on personal
income, the sale of most types of goods (such as
cars, appliances, and furniture), and corporate
profits. At the local level, the most significant tax is
on the assessed value of property (such as family-owned land and houses, retail stores, and industrial
facilities). In California, the revenue generated from
these various taxes is used to fund many types of
government programs, including education, health,
social, and environmental programs.
Local Property Taxes. Local governments in
California impose a tax based on the assessed
value of property. Under such a tax, the amount
owed increases as the value of the property
increases. Some local governments also impose a
type of property tax known as a parcel tax. Under
this type of tax, the amount owed is typically the
same for each parcel—or unit—of land. (Currently,
state government does not impose either type of
property-related tax.)
Use of Local Parcel Tax Revenue. Local parcel
tax revenue may be used for virtually any designated
purpose. In recent years, for example, parcel taxes
have been approved by voters in several school
districts and used to fund class size reduction (CSR),
school libraries, education technology, and other
education programs. In those school districts that have
a parcel tax, this revenue can be a significant source
of funding for kindergarten through grade 12 (K–12)
education programs. Statewide, however, the parcel
tax is a minor source of funding for school districts.
PROPOSAL
Proposition 88 creates a statewide parcel tax
and uses the resulting revenue to fund specific K–12
education programs. It would take effect July 1, 2007.
Creates a Statewide $50 Parcel Tax
The measure adds a new section to the State
Constitution that establishes an annual $50 tax
on most parcels of land in California. (This dollar
amount would not change over time.) For purposes
of the measure, a “parcel” is defined as any unit
of real property in the state that currently receives
a separate local property tax bill. This definition
would result in the vast majority of individuals and
businesses that currently pay property taxes being
subject to the new parcel tax. The measure exempts
from the new tax any parcel owner who: (1) resides
on the parcel, (2) is eligible for the state’s existing
homeowner’s property tax exemption, and (3) is
either 65 years of age or older or a severely and
permanently disabled person.
The measure also includes a provision that
ensures funding for other government programs is
not affected. Specifically, the measure authorizes
a transfer of parcel tax revenue to the state General
Fund to offset any loss in state income tax revenue.
A loss would occur because of additional property-related deductions resulting from the state parcel tax.
Funds Specific K–12 Education Programs
With Tax Proceeds
Most of the revenue generated by the statewide
parcel tax would be transferred to a new state
special fund. Of the monies initially deposited in
this fund, the measure allocates $470 million for
various K–12 education programs and initiatives, as
shown in Figure 1. The annual allocation of funding
would be adjusted on a proportional basis—up or
down—to reflect actual revenues received. These
monies would have to supplement existing monies
provided for these programs.
The measure allocates monies to school districts
(and other local education agencies) in various
ways. The bulk of funding (amounts for K–12 CSR,
instructional materials, and school safety) would be
allocated to school districts, public charter schools,
and county offices of education using a new per
student formula to be created by the Legislature.
The formula likely would provide higher per
student funding rates for higher-cost students.
(Specifically, the formula is to account for cost
differences resulting from students’ disabilities,
English language skills, or socioeconomic status.)
Facility grants would be allocated to school districts
and public charter schools using a flat funding
rate (capped at $500) for each student enrolled
in certain schools performing above average. For
the data system, the measure does not specify how
or to whom funding would be allocated. (Future
legislation likely would be needed clarifying such
issues.) School districts receiving any Proposition
88 funds would be required to conduct an annual
independent audit showing how they spent these
monies and post the audit reports online.
| FIGURE 1 |
|
| Proposition 88: Allocation of Parcel Tax Revenues |
|
| Program |
Annual Target Amount
(In Millions)ª |
| |
|
| K—12 class size reduction |
$175 b |
| Instructional materials |
100b |
| School safety |
100 b |
| Facility grants |
85 c |
| Data system |
10 d |
| Total |
$470 |
ª Amounts adjusted annually, on a proportional basis, to reflect actual revenues available.
b School districts, county offices of education, and public charter schools would be eligible to receive funding. Funding to be distributed using a weighted per student formula.
c School districts and public charter schools meeting certain criteria would be eligible to receive funding. Funding to be based on an equal per student amount that is capped at $500.
d The measure does not specify how or to whom funds would be distributed. |
|
K–12 CSR. Currently, the state provides $1.8
billion for the CSR program for kindergarten
through grade 3 (K–3). This program funds
school districts for reducing the size of their K–3
classrooms to no more than 20 students. The
additional $175 million provided by this measure
could be used to further reduce class size in grades
K–3 or for any other CSR initiative. For example,
the funds would be sufficient to reduce the average
class size of fourth grade by about four students
(reducing it from a statewide average of about 29
students to 25 students).
Instructional Materials. Currently, the state
provides over $400 million annually for instructional
material purchases. This equates to about $66 per
K–12 student. This is sufficient to purchase one new
core textbook for most students in most grades each
school year. The additional $100 million provided
by this measure could be used for purchasing any
textbooks or other instructional materials that were
approved by the State Board of Education. Funds
likely would be sufficient to provide about 25
percent of K–12 students with one additional core
textbook each year.
School Safety. Currently, the state provides $548
million (or about $90 per student) for after school
programs, $97 million (or about $40 per grade 8–12 student) for general school safety programs, and
$17 million (or about $3 per student) for competitive
school safety grants. The additional $100 million
(or about $16 per student) provided by this measure
could be used for school community policing and
violence prevention, gang-risk intervention, and
afterschool and intersession programs.
Facility-Related Grants. Currently, the state
provides funds for school facilities primarily
using general obligation bonds. In addition, it has
provided $9 million annually for the last several
years to help public charter schools in low-income
areas cover some of their facility lease costs. The
$85 million provided by this measure would be
for school districts and charter schools that have
not yet received any state general obligation bond
monies for school facilities. In addition, charter
schools are only eligible if they are governed by or
operated by a nonprofit public benefit corporation.
If those conditions are met, then school districts
and charter schools would receive funding for each
student enrolled in a school ranking in the top 50
percent based on the state’s standardized test scores.
They could use the grants for any general purpose.
Districts and schools receiving such grants would
be prohibited from receiving future state general
obligation bond monies unless the bond expressly
allowed them to receive such funding. We estimate
that about 40 noncharter schools (serving less than
1 percent of all noncharter enrollment) would be
eligible for grants. For charter schools, we estimate
about 100 schools (serving about 25 percent of all
charter enrollment) would be eligible for grants.
Data System. Currently, the state provides
virtually no state funding expressly for the
ongoing collection and maintenance of student-
level and teacher-level data. The additional $10
million provided by this measure would be for
an integrated longitudinal data system. Such a
system would allow the state to measure student
and teacher performance over time. The measure
requires school districts to collect and report the
data needed to create and maintain the system.
FISCAL EFFECTS
We estimate the statewide parcel tax would
result in roughly $450 million in new tax revenue
each year. Given that the dollar amount of the tax
would not increase, total parcel tax revenues would
grow slowly over time as new parcels of land were
created (such as by new subdivisions of property).
Roughly $30 million of the parcel tax revenue would be transferred annually to the state General
Fund to offset a projected decline in state income tax revenues (due to increased property-related tax deductions). In addition, the measure sets aside no more than 0.2 percent (or approximately $1 million annually) for county administration of the parcel tax. The remainder of new tax revenue would be allocated to schools for the specified education programs. These revenues likely would be somewhat less than that needed to meet the measure's designated funding levels. If so, the program allocations would be adjusted downward proportionally. |
|
