To say that education funding in California is affected by the broader economic conditions is an understatement. Historically, total state revenue has proven extremely sensitive to the performance of the economy in general, and increasingly, to the performance of equity markets. Given the uncertainties that cloud the fiscal horizon – from high-interest rates to global conflicts – it is hard to be optimistic about the state’s economy in 2023. And, given the connection between the economy and K12 funding, the outlook for education resources in the coming year isn’t pretty.
In a new paper, OI’s Patrick Murphy, Director of Resource Equity and Public Finance, lays out a rather grim vision of the near-term future for education resources in California. While K12 spending is at an all-time high this year, an economic downturn in 2023 will lead to declines in state revenue and consequently have a negative impact on education funding.
What causes these dramatic swings in funding? Proposition 13. Since its passage in 1978, California has had to rely heavily on sales and income taxes to pay for most state programs, as well as a significant portion of K12 education. While California now has the most progressive tax structure of all of the states, it also means that the state has one of the most volatile revenue systems, with total tax collections rising and falling dramatically from one year to the next.
The paper delves into one of the factors behind the dramatic swing in education funding, Proposition 13, and concludes with a call for California to begin to address its structural fiscal problems. It asks that researchers, policymakers, advocates, and funders to begin to invest in the work of developing policy alternatives to the state’s current revenue structure, with a specific emphasis on reforming Proposition 13.