Education Funding

Education is the single most important investment any society makes. The better educated children and young adults are at every level of the educational ladder, the stronger the workforce and the very fabric of society becomes, and the better off these young people will be as they go forward in life. Education is especially important for California, a world capital of innovation and industry. Some of the most significant and innovative engines of economic growth and technological progress in the world call California home, which means that a great many of these companies’ employees ARE Californians. If California is to continue to be a most hospitable place for these industries, the state’s talent pool needs to be second to none.

Yet, according to a January 10th, 2015 Sacramento Bee article, Education Week ranked California in the lowest quintile of states for per pupil spending, teacher preparedness and academic achievement, among other benchmarks.[1] Thus, by any measure, California has endemic challenges with its K-12 education system. One of the primary sources of the state’s education challenges is a perpetual dearth of proper funding to facilitate the kind of learning outcomes the state needs. At a statewide level, the problem is uneven; school districts in well-off areas with high property values and substantial wealth are under comparatively less financial pressure than school districts in poorer communities. Indeed, lower income school districts often lack the most basic tools to facilitate and enhance effective learning.

As a candidate for the California State Assembly in 2016, I am proposing innovative ideas to help alleviate some of California’s most vexing issues—and education funding is primary among them. While many politicians often, and predictably, offer platitudes when campaigning for office (“we all want better schools” or “I want to improve our state’s education system”), such sentiments are often constricted by the limitations of a year-in and year-out state budgeting model exclusively reliant upon taxation.

That noted, there are pioneering statewide efforts toward improvement being made within the confines of this model—and these efforts amount to far more than the normal platitudes one often hears. For instance, California recently implemented the innovative Local Control Funding Formula (LCFF) for K-12 schools, replacing prior funding systems. For school districts and charter schools, the LCFF creates various grants to replace previously existing K–12 funding strategies. County Offices of Education (COEs) receive separate funding for instructional programs and oversight. The 2013–14 Budget Act provided $2.1 billion for school districts and charter schools as well as "$32 million for COEs to support the first-year implementation of the LCFF. Until full implementation, however, Local Educational Agencies (LEAs) will receive roughly the same amount of funding they received in 2012–13 plus an additional amount each year to bridge the gap between current funding levels and the new LCFF target levels."[2]

The LCFF is such a huge reorganization, it was projected to be phased-in over the course of the next eight years. However, it is heartening to see that the phase-in is moving much faster than expected, and has already been 90% implemented! Moreover, Governor Jerry Brown unveiled a $71.6 billion budget package for schools on January 7th, 2016 [3], which is a nearly $7 billion increase over his $65.7 billion budget proposal for 2015 (itself a $5 billion increase over the previous year). [4]

The rapid implementation of the LCFF and the steady increase in (or restoration of) school budget levels are both welcome news, indeed.

Yet, the state, and its counties and municipalities can only tax their way toward so much progress; local school districts can only raise what funds their economic environment, share of state funding and property tax base can provide them. And, now—as a reaction to overall dissatisfaction with our schools—there is a growing privately funded movement to expand charter schools to the point of endangering the very public school system upon which we as a society depend. As Justice Louis Brandeis stated early in the 20th century, "the states are the laboratories of democracy." However, while that logic works well with Federalism, it does not follow that we should replace public schools with the laboratories of our school districts—charter schools. Charters have their place and are sources of great innovation. But, they should not become the system.

This paradigm has to change. But, what is to be done? Must we, as the greatest state in the union, live with such continued educational disparities and shortcomings? Need we abandon the public school system as we know it altogether? Can this all be surmounted?

Perhaps….

One possibility is by redefining the relationship between states and corporations when it comes to education, creating timely assistance—a “shot in the arm”—rather than any form of reliance upon corporate money.

The Bullock Policy Prescription: A Public-Private Education Funding Partnership, Based Upon Graduated Tax Incentives

Many large corporations nationwide are literally awash in money—money they are largely not spending. Profits have remained consistent, and even grown significantly in the recent past (as layoffs increased during the financial crisis, corporate and individual worker productivity stats soared).[5] But, this wealth has not necessarily translated into rising wages or large amounts of investment by corporations; many have been largely sitting on the money.

This is true about many of the corporations that base themselves, or operate a great deal, in our great state. At the same time, California’s corporate tax rate is among the highest in the union—but taxation is, of course, only applied to a corporation’s present earnings, and not a corporation’s accumulated wealth. The impetus of the policy thus stems from these two fundamental questions encompassing the "why" and the "how": 

  1. Why not offer a way to connect this great, accumulated wealth with our greatest educational needs, in a voluntary way?
  2. What if we offered tax relief on present earnings to corporations in exchange for an opportunity to give back out of their accumulated assets and invest in the Golden State's future: its children and their K-12 education?

If elected, I would propose legislation to allow corporations a voluntary opportunity to fund a “list of need” in a school district of their choice (the school district, for instance, in which a corporation is headquartered, or in which it primarily operates—where many of its employees live). The "list of need" would be produced by the local school board, crafted out of input by ALL of the schools within the district (thus reflecting each school's unique needs). The school board would aggregate and rank the results from critical items to “would be nice to have” items for the district writ large and advance them up to the State Department and Board of Education. HOWEVER, in order for a corporation to participate in the program, the corporation would also have to adopt a low-income school district that is struggling—that may not have a corporate benefactor with the necessary resources to help them—and fulfill that district's "list of need" to the same extent and level as the corporation fills its chosen school district's "list of need." Such low-income school districts, which often do not have the benefit of a large local tax or corporate base, would then be pulled up—given a fighting chance—by this additional funding and support.

The graduated tax incentive structure might look something like this, divided into quintiles of contribution (yes, we might want to tweak the numbers, but you get the picture with these two examples):

Graduated Tax Incentive Structure: Option 1

(Contributions per District, not Aggregate)

Corporate Contribution Tax Relief Level per $ Contributed
1st $5 million contributed $.20 per dollar tax reduction up to $5 million
2nd $5 million contributed $.40 per dollar tax reduction from $5 to $10 million
3rd $5 million contributed $.60 per dollar tax reduction from $10 to $15 million
4th $5 million contributed $.80 per dollar tax reduction from $15 to $20 million
5th $5 million up to full list fulfillment  dollar for dollar tax reduction beyond $20 million

Graduated Tax Incentive Structure: Option 2

(Contributions per District, not Aggregate)

Corporate Contribution Tax Relief Level per $ Contributed
1st $40 million contributed $.20 per dollar tax reduction up to $40 million
Next $20 million contributed $.40 per dollar tax reduction from $40 million to $60 million
Next $20 million contributed $.60 per dollar tax reduction from $60 million to $80 million
Next $20 million contributed $.80 per dollar tax reduction from $80 million to $100 million
All dollars over $100 million dollar for dollar tax reduction

These two examples are only representative of the concept; the final numbers would, of course, need to be determined in committee(s) during deliberation in the legislature.

The fundamental idea is to incentivize corporations that are based, or operate a great deal, in California to utilize some of their accumulated wealth to provide funding for two school districts' educational "lists of need" by offering state tax relief on these corporations' taxable income for the year of contribution. It would be a graduated scale of state tax relief on present profits to incentivize fulfillment in total of each school district's "list of need." The state would potentially lose corporate tax revenue, but not to the level of the full contributions made by these corporations. Thus, a truly public-private funding partnership: the state indirectly "contributes" extra funding through tax relief, while participating corporations contribute some of their accumulated wealth.

But, it must be noted that the increased economic activity resulting from these corporate contributions would also likely generate additional tax revenue for the state, drawing from added consumption and, potentially, job creation—offsetting some of the lost revenue that resulted from the tax incentives.

The annual funding schools and their districts receive is almost completely claimed year to year. Schools and their districts provide what they can, but budget constraints prevent certain improvements and investments in resources and infrastructure. These "lists of need" would be intended to provide what schools and their districts cannot quite budget for, but need in order to enhance and facilitate the educational experience and better outcomes.

Implementing the Public/Private Partnership

The First Six Months: Upon passage of the bill, each of California's 343 school districts' "lists of need" would be developed organically, from the bottom-up. School boards would be mandated to inquire about and collect requests from each school in the district—this would include charters that exist prior to the initialization of the plan (thus, this plan could not fund new charter startups) and already existing private schools—and aggregate those needs, ranking them based upon frequency of items requested and importance (a categorized scale would need to be developed for consistency—e.g., textbooks would outrank benches, classroom infrastructure would far outrank parking lot repavement, etc...), ultimately comprising a final district-level master “list of need,” based upon district-wide priorities with a specific price range.

Schools and districts would need to adhere to, and be able to answer affirmatively to, at least one of the following three guiding questions in formulating their lists:

  1. Can the fulfillment of this request reasonably be expected to improve our projected or anticipated educational outcomes?
  2. Can the fulfillment of this request reasonably be expected to improve our overall educational environment?
  3. Will the fulfillment of this request positively modify, effectively enhance or discernibly improve our student-centered educational mission?

An evidence-based and verifiable affirmative answer to at least one of these three questions should allow the request to pass muster throughout the review process at the school district/board and state levels.

The largest school districts would be subdivided into communities. There are large disparities in funding and quality of educational results to be found within some large school districts. Exemplary of this is LAUSD (the second largest municipal school district in the United States). A district such as LAUSD would ultimately have to produce several "lists of need." Needs of schools in South Los Angeles may deviate a great deal from needs of schools in the West Valley, for instance. In this way, corporations wishing to participate can adopt a more realistic, achievable funding objective. A school district like LAUSD would, then, not suffer from being "too big to help."

As stated above, charter and private schools' needs within a district would not be excluded from this program, either. They, too, would contribute to the “lists of need” for the districts within which they operate, and their unique educational needs would be submitted with the district’s needs—enhancing the very real educational benefits charter and private schools provide.

The Ensuing Three Months: The California State Board of Education and the California Department of Education would develop a task force by order of the legislature that would review the lists (some lists may require revision in some extreme cases), ranking the districts based upon not only the nature of their requests/need, but upon financial needs as well.

The Final Three Months: Corporations that decide to participate in this program would then communicate their desired district to the Board and/or Department of Education, and would be paired with that district, along with at least one other lower income district in need. To qualify, the corporation must be willing to fulfill in full at least the top three items of both districts' "lists of need," either by monetarily donating the funding for the cause(s) to the school board for distribution among its constituent schools, or in the form of school board approved direct donations of materiel.

A Few Caveats

What if there is some corporate participation, but not enough for all of the districts to be assisted? This is a real possibility for such a voluntary program—especially in its inchoate stages. The answer to this is, however, simple: the funds that are pledged would be held in abeyance up to the point that the corporate volunteer period (three months) expires, or until all districts are adopted for assistance—whichever comes first. If the three months expire, and some districts are still left without help, then the entire pool of money is subdivided among all school districts, funding as much of each district's top priority as possible. If enough money remains, then each district gets enough to fund—at least partially—the second tier of their "list of need," and so on.

It is important to note that such a bill would have explicitly written in an unambiguous stipulation that state and local governments would be prohibited from ever decreasing school funding before, during or at the conclusion of such a program. The state, therefore, may not abandon or diminish its own role in educating our children and young adults. The corporations participating would not, and should not, ever fund education in lieu of the state. This program seeks to accentuate, but not to abdicate, the state's responsibilities to its children.

The program would have a very short-term sunset clause, allowing for evaluation, adjustment and renewal by the legislature. This partnership is designed to be a "shot in the arm" for California's school districts. If "lists of need" are fulfilled quickly, there may not be a need for this program to continue in the short-term. It could simply be sunsetted as suggested above until need for it is determined again. Its results and efficacy can also be studied longitudinally, following students throughout their K-12 careers to see if this injection of funding fulfilling these lists of need enhances educational outcomes.

It must finally be acknowledged that—as stated above—the more successful this program were to become, the more tax revenue the state could potentially lose in a given fiscal year. The Legislative Analyst's Office (LAO) would need to study the bill carefully for its potential fiscal effects to the overall budget. This would help to determine a reasonable and appropriate graduated tax incentive structure. When implementing such a bill, the legislature would need to plan for these temporary losses. In essence, there would need to be a balance struck between establishing incentives robust enough to encourage participation, while keeping the potential tax revenue losses the incentives could generate to an absolute minimum. However, as noted above, the release of such funds to these school districts, and the concomitant spending that would occur, would undoubtedly generate tax revenue of its own accord—to an extent offsetting the corporate tax revenue lost.

A Shot in the Arm

This program would not be, and is not intended to be, a panacea for all of California's education ills. As hard as we try to improve conditions and enhance results, we will always have more to do. What this public/private partnership could eliminate, however, are otherwise cost-prohibitive needs that otherwise would go unfulfilled in the foreseeable future. This program, in essence, is designed to be a "shot in the arm," energizing school districts across the state by fulfilling needs that otherwise persist because their fulfillment lies outside of normal budgetary constraints.

Why should California corporations participate? Despite a tax break, California corporations still "lose" money—just like the state—in this public/private partnership. What do California corporations get out of this? Fundamentally two things:

  1. The ability to invest in the young people that will become the talent pool from which these corporations primarily draw.
  2. An opportunity to be philanthropic without dictating the terms. Many already feel corporations have too much power, too much influence and frankly too much control. Philanthropically contributing to such a bottom-up, organic plan to improve a public good such as education could literally redefine what is meant by the term public/private partnership in the most positive of ways. It would be far more than just good PR....

Such a plan may reduce California's tax revenue to a certain degree, but the benefits if this were to be implemented could be immense and long-lasting. California and the corporations that reside here could fundamentally change the educational and social paradigm forever.

If enough large California corporations are willing to participate in this innovative public/private partnership, then this plan can and will work.

[1] Read more here: http://blogs.sacbee.com/capitolalertlatest/2014/01/california-schools-rank-low---again---in-education-week-report.html#storylink=cpy

[2] Read more on the LCFF here: http://www.cde.ca.gov/fg/aa/lc/lcffoverview.asp

[3] See it here at https://calmatters.org/articles/by-the-numbers-analysis-governor-budget/.

[4] http://www.cabinetreport.com/politics-education/browns-budget-would-add-billions-to-k-12-funding

[5] According to a 2012 Reuters Report, there is some $5.13 trillion in idle corporate wealth. See http://blogs.reuters.com/david-cay-johnston/2012/07/16/idle-corporate-cash-piles-up/ and http://www.federalreserve.gov/releases/z1/20131209/accessible/l102.htm for more information.

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