An ‘All Cuts’ Budget Would Save PUSD

Emotion and Hysteria is No Basis for a School Parcel Tax

Writing in the Pasadena Journal on April 26, new PUSD Board of Education President Renatta Cooper, states that an “all cuts” state budget “could not close the (budget) gap we will be asked to close” and “this is a real crisis.”

This is to serve not so much as a rebuttal to President Cooper but to educate the taxpayers of Pasadena as to what the state’s real school financing situation and package of K-12 school financing reforms portends for PUSD. Contra Ms. Cooper, the sky is not falling on the state budget for K-12 public schools, although I agree that this is a “crisis.” But it is a spending crisis, not a funding crisis. As I will explain below, an “all-cuts” budget already saved PUSD and the K-12 public school system in the 2010 school year. And it can do it again. Not without pain, but without core teacher layoffs or the hysteric claims of doubling of class sizes or necessarily even music teacher layoffs.

Beyond all the budget crisis hysteria and unfulfilled threats of teacher layoffs that constantly comes out of Hudson Avenue, the disinformation from the Pasadena Educational Foundation and League of Women Voters, and its regurgitation by Larry Wilson at the Pasadena Star News, allow me explain in as non-partisan a manner as I can why this is a spending crisis, not a funding crisis.

In 2009, the Democratic-Party controlled California legislature passed Assembly Bill AB-X-4-2 (Noreen Evans, D – Santa Rosa)

Earmarks are Being Replaced with Block Grants

In a February report, the State Legislative Analyst’s Office charged: “virtually every aspect of K-14 (public school) mandate finance system is broken.” The report was titled, “Education Mandates: Overhauling a Broken System.”

The LAO report emphatically stated that if a mandated service does not serve a fundamental purpose, “the mandate should be eliminated.” The LAO’s package of suggested reforms would relieve schools districts and junior colleges of “hundreds of unnecessary activities that provide little value to students,” thus reducing the state’s annual obligations by more than $350 million.

The LAO added that the current system of funding mandates for K-14 public schools could have higher costs than anticipated. Reimbursement rates can reward inefficiency and ignore effectiveness. And recent court rulings are likely to make containing costs even more difficult. The LAO recommended establishing the following criteria for school-funding mandates:

  1. It must result in a “true” mandated new program or increased level of service rather than redundant or unnecessary programs;
  2. It must serve a statewide interest (not a politicized interest);
  3. It must produce results consistent with legislative intent (and not get diverted into “mission creep”);
  4. It must prove that the mandate cannot be achieved through a less-costly alternative.

In apparent response to the LAO’s report, State Assemblywoman Julia Brownley, D-Santa Monica, chairwoman of the Education Committee, has floated a draft bill. AB 18 would reform K-12 school funding formulas by replacing the existing earmark system with block grants.

What is at issue is not the layoffs of core teachers or how much administrative overhead a school district has. Rather, the issue is how many ancillary or even unnecessary services a school district can fund with reduced revenues.

Background – Deregulation Under ABX4 2

Following the recommendation of the Legislative Analyst’s Office, in 2009 the State Assembly passed ABX4 2, which deregulated $4.5 billion in categories of earmarks in the state budget. Collapsing funding categories allowed about a 15 percent reduction in K-12 public school funding without having to lay off core teachers.

The LAO recommended another round of funding simplification, including allowing modest increases in class sizes by collapsing 43 additional categorical programs totaling $7.4 billion into four block grants:

Base Block Grant;

Special Education;

Opportunity to Learn (for disadvantaged students);

Instructional Improvement.

A “block grant” is a grant of funds for discretionary use. It allows schools to decide how the money should be spent within a broad category of funds.

By contrast, “earmarks” are politically protected narrow categories of funds or job descriptions often meant to buy political patronage and votes. Block grants are a way of saying to school districts that they have to select what programs and jobs they want to fund. In a time of austerity, that means they can’t pig out at the cafeteria of possible programs and fund them all.

For example, a school district could choose to fully fund “vocational education” but curtail “personnel development” within the “Instructional Improvement” funding block. But it could not choose to eliminate funding for “Special Education,” which would be a separate block of funding. Nor could extra funding for disadvantaged students be eliminated, contrary to hysteria often spread by school districts, school financial consultants and newspapers.

Under the Base Block Grant, however, funding could not be eliminated or reduced for what is called “Incentive Funding” authorized by the voters in 1983 under AB 813. Incentive Funding provides an additional $1.4 billion for a K-12 public school slush fund, approximately equating to $226 per student. This is a protected “carve out” that is enshrined in the California Constitution.

Block grants with firewalls between them allow special funding for agreed upon priorities for the education of children to continue. But the block grants relax funding mandates for ancillary job categories and programs.

Block grants, where the funding decisions are diverted to the local level, are hated by local boards of education because special interests will descend on them rather than on far-removed state legislators. State legislators hate them because, where there is little payoff, they can’t buy votes or receive political donations from powerful unions.

AB 18 – Would Replace Earmarks with Block Grants

Assemblywoman Brownley’s AB 18 is apparently an attempt to respond to the recommendations of the LAO to deregulate school funding mandates by using block grants. Brownley’s proposed bill apparently follows the LAO’s 2009 recommendation to collapse existing funding mandates into four block grants.

Brownley’s bill is expected to meet stiff resistance from unions. The unions hold that school districts should not have the flexibility to prioritize funding that would result in fewer teachers should class sizes be increased moderately (from 21 to 24 student per classroom); or should adult education be reduced.

Michael Kirst, president of the State Board of Education, has proposed an alternative system based on weighting, which is already part of Brownley’s Target Pupil Equity Block Grant. Kirst is apparently pushing for legislative protection of more funding categories and Brownley for fewer.

PUSD Cutbacks Can Be Absorbed

PUSD’s Staff Report 61-B (Jan. 11, 2011) projects $8.8 million in budget cuts forthcoming to PUSD for the 2012 fiscal year, all entailing non-classroom ancillary personnel, as indicated by the State Legislative Analyst’s Report cited above. This would be about a 5% cut to PUSD’s existing operating budget, not considering its roughly $150 million separate special education budget. Moreover, it is not clear how much of these projected cuts are due to:

The continuing trend in declining school enrollments.
The consolidation of PUSD’s over-built facilities.
Retrenchment as a result of state reforms shifting certain ancillary jobs descriptions and programs from “mandatory” (categorical) to discretionary block grants in accordance with the State Legislative Analyst’s recommendations and pending AB 18.
Anticipated reduced building maintenance costs due to major renovation of all PUSD facilities.
In 2010, PUSD absorbed $35 million in budget cuts largely due to the cost savings from school financing reforms of AB-X-4-2, despite false claims that core teachers would be laid off, that music teacher positions and school librarians would be eliminated – none of which happened. The newspaper reports were unreliable and one-sided. The purported claims of imminent budget disaster by PUSD advocates attorney William Creim, economist Paul Hunt, professor David Dreier, and private investigator Larry O’Brien were all overblown. Their credibility should now be called into question.

Lack of PUSD Credibility Led to Defeat of Measure CC

In 2010, the State legislature held off announcement of the decision of a court appeal on SB-X-4-2, which provided for tapping excess redevelopment funds for K-12 schools, until after statewide parcel tax elections. After the parcel tax elections it was revealed that PUSD was to receive up to $16 million in redevelopment funds to plug a shortfall in state funding.

There was confusion during the Measure CC election in May 2010 as to whether redevelopment funds would replenish state funding or would add to state funding. PUSD claimed at that it would merely backfill the loss of state funding.

But PUSD’s claim that redevelopment funds would not add to its operating revenues was not credible at the time due to all the hysteria and outright lying by PUSD and its advocates.

PUSD Board member Ed Honowitz had stated in a public meeting that Federal Stimulus monies were only used on the Special Education side of its budget and were not used for its K-12 operating costs. This later was proven to be false.

PUSD’s lack of credibility led to the defeat of Measure CC. It took this writer to call the State Department of Education to determine that redevelopment funds did not add to PUSD’s revenue allocation but merely backfilled state funding. Conversely, any parcel tax approved by the voters would have added to its revenue base. But after the defeat of Measure CC, PUSD absorbed $35 million in state budget cuts without any layoff of core teachers, music teachers, or librarians as claimed. Measure CC was unnecessary.

Parcel Tax Could Result in Double Dip

If PUSD puts yet another proposed school parcel tax on the ballot this year, wasting yet another $500,000 on campaign and election costs, and AB 18 is approved afterwards to further deregulate school funding mandates, PUSD could realize a windfall of lowered funding mandates and higher taxes that would be tantamount to a double dip from the taxpayers.

According to the State Legislative Analyst, a second round of deregulation of funding mandates could realized a $7.4 billion reduction in mandated K-12 school expenses. This would be equivalent to $1,195 in cost savings per student statewide. In the Pasadena Unified District, this would equate to a parcel tax of about $300 per parcel per year that could be avoided.

Bottom Line

The bottom line is that PUSD does not need a school parcel tax. Proposed state budget cuts can likely be absorbed if PUSD would lobby the State legislature for a second round of deregulation of funding mandates under SB-X-4-2 and pending AB 18.

An “all cuts” budget would save PUSD just as it did in 2010. There would be pain for those affected, but PUSD would survive, albeit with lower ancillary service levels. Taxpayers should beware that there is no need for a school parcel tax in Pasadena to plug another round of state budget cuts as long as school funding mandates can be relaxed to absorb the cuts.