Education Cuts for California Despite Prop 30 Victory

Image from Flickr, by Double-M

The California Teachers Association (CTA) lobbied heavily for passage of Proposition 30, mobilizing thousands of teachers to phone bank and canvas neighborhoods. Together with other state unions, they spent $50 million to get the initiative passed. They claimed it would save public education and restore funding to the schools. However, with more than $18 billion slashed from K-12 education since the recession began, the $6.6 billion in projected revenues from Prop 30 won’t even come close to restoring public education funding to pre-recession levels, especially considering the state budget deficit is now estimated at more than $15 billion. It will do nothing to bring back the 80,000 teaching jobs lost since the recession began nor reopen any schools that were shut down, the WSWS reports.

What Proposition 30 will do is prevent $6 billion in trigger cuts that had been built into the last state budget as a way to blackmail California voters into approving the tax hikes. Rather than restoring public education, Prop 30 simply maintains the status quo of an $18 billion hole in the state’s K-12 funding and one of the very lowest per pupil funding rates in the nation. While it does raise taxes on those making more than $250,000 per year, the increase is only a nominal 1-3% increase on their payroll taxes (i.e., the taxes withheld from their salaries) and it leaves the tax rate on their capital gains (which makes up the majority of their income) unaffected. At the same time, Prop 30 raises the state sales tax from 9.25% to 9.75%—a regressive tax increase that disproportionately affects poor and working class people.

While the California State University (CSU), University of California (UC) and state community college systems are all planning to increase course offerings and some, like CSU, are planning modest tuition refunds ($249 per semester, according to the Los Angeles Times), they are also planning other fee increases and service cuts. CSU, for example, is still planning to implement fee increases for students taking more classes than they need to graduate, and the UC system is planning on increasing fees for graduate and professional programs by 1.5% to 35%. UC, which threatened 20% tuition hikes if Prop 30 failed (and promised no new fees this year if it passed), is leaving open the possibility of raising undergraduate tuition again next year.

In response to the proposed cuts and the unwillingness of UC to go beyond a tuition freeze and actually lower tuition, UC students have been protesting at UC campuses and at meetings of the university’s regents. Students staged a sleep-out in Berkeley on Wednesday night. Hundreds of students were joined by faculty and unionized workers on Thursday to protest budget cuts that have resulted in slashed course offerings, layoffs and large tuition hikes. They blocked roads leading to the meetings and then disrupted the meeting so effectively that the regents had to call a temporary recess.

Students do not simply want a reduction in tuition—many want a completely subsidized higher education system. Last Friday, KPFA’s “Up Front” news program broadcast protesters chanting, “No cuts! No fees! Education must be free!” Until recently, California did subsidize both the UC and CSU systems to the point that neither charged tuition and both charged fees that were relatively affordable for middle income families. Back in the early- to mid-1980s, for example, it only cost $1,000-1,200 per year to attend UC. By 1995, it was over $4,000. By 2010, it has risen to more than $11,000. Last year, tuition at UC was $13,218. (Click here for more on the history of UC tuition).

With the passage of Prop 30, Los Angeles Unified (LAUSD) is planning on restoring the five school days that had been cut from the school year the Los Angeles Times reports, as well as restoring teacher pay for the 10 days which they had lost to furloughs. However, Superintendent Deasy warned of a new round of cuts (implying the furloughs and pay cuts could return) if Congress and President Obama cannot resolve the “fiscal cliff” crisis, as this would leave LAUSD with a new $60 million budget shortfall.

Of course, if this happens, many districts in the state could suddenly find themselves with large deficits, too. This is because Prop 30 is only a bandage over a gaping wound. Education at all levels, from pre-K to graduate school, has been eviscerated over the past decade and Prop 30 does nothing to restore the cuts. Prop 30 does little to close California’s current budget deficit and it does nothing to stabilize California’s revenue stream or prevent future deficits and education cuts.

There is a glimmer of hope for education funding in the future. One of the reasons California has had so much difficulty in balancing its budget for the past decade is that voters approved a law requiring a two-thirds supermajority in the legislature before any new tax increases can be approved. The most recent election, however, gave the Democrats just such a supermajority in both houses of the state legislature for the first time in nearly 80 years. This will not only allow lawmakers to pass tax increases, but it also gives them the power to override the Governor’s veto.

Whether or not they will use their power in this way remains to be seen, but seems unlikely considering that every one of them would be negatively affected by a serious tax increase on the wealthy. This is not only because they are all wealthy themselves, but because they would be biting the corporate hand that feeds them, keeps them in office, and provides them jobs when they get termed out.

CSU Considering Large Fee Hikes Regardless of November Tax Initiative

California voters will have a chance in November to vote for Proposition 30, which is predicted to bring in more than $7 billion to temporarily bail the state out of its now perennial budget deficits. Governor Jerry Brown has threatened extreme austerity measures should the bill fail in November, including large across the board cuts to K-12 and higher education. This would trigger an automatic $250-million cut to the California State University system (CSU) system, leading to a 5% tuition hike for in-state students, plus a 7% increase in supplemental fees for out of state students.

Yet, even if the bill passes, the CSU system will not be able to close its budget gap. Consequently, the governing board for CSU is considering numerous fee increases that would go into place even if Prop. 30 does pass. These would include a per unit supplement of $372 for seniors who have already accumulated 150 semester units, the Los Angeles Times reports, as well as a $100 per unit fee for students who want to repeat a class. Official estimates suggest that roughly 40,000 class spots are filled with students who are repeating classes. They also want to add a $200 per unit fee for any units over the usual 16 per semester. This is intended to discourage students from enrolling in large numbers of classes and then dropping them later.

It’s the Money, Stupid, Not the Teachers

The results are in from the latest public opinion poll on teachers. According to the 44th annual Phi Delta Kappa/Gallup Poll of public attitudes toward the public schools, 71% of respondents say they have trust and confidence in the nation's teachers. 43% of parents and 35% of Americans in general say money is the biggest issue, up from 17% in 2002.

While it is heartening to know that two-thirds of respondents are willing to pay higher taxes to improve the schools, it also shows a lack of understanding about the main causes of the  achievement gap and other K-12 education problems: high poverty among the students and low taxes for the wealthy. The former is the main cause of low student achievement. The latter is the main cause for shrinking school budgets.

Increasing property and income taxes would certainly add more money to state and local budgets that could be used for schools. However, to actually end the yearly uncertainty over education budgets and provide the kind of surplus necessary to shrink class sizes, increase course offerings, renovate dilapidated facilities, hire adequate nurses and librarians, and provide the quality that parents really desire, there will have to be substantial tax increases on the wealthy, including large increases in capital gains and inheritance taxes, in contrast to nominal income and sales tax increases that would disproportionately impact middle and lower income families, as proposed in California’s Proposition 30.

$1 Billion School Bond Scam in Poway

Poway Unified School District (San Diego County) borrowed $105 million from investors last year to complete a decade-long renovation of its schools. According to the Voice of San Diego, PUSD promised voters in 2008 that it would get the money without raising taxes. Without the increases, it could not afford to purchase a bond and pay it off over 20-30 years, as school districts normally would do. Instead, they took out a capital appreciation bond, which allows it to make no payments for 20 years, accruing interest all the while, resulting in a net cost to taxpayers of more than $981 million over the next 40 years, nearly 10 times what they borrowed. (In a normal school bond, a school typically pays two to three times what they borrowed).

In addition to the substantially higher costs, capital appreciation bonds are also extremely risky, as they depend on future growth in property values to pay off the original debts. If the current housing market does not recover quickly or another bubble busts during the lifetime of the loan, Poway taxpayers could get screwed even worse. Even in Michigan, where lawmakers seem to enjoy bankrupting school districts so they can invoke their Financial Martial Law rules and give the districts over to private business, capital appreciation bonds have been deemed too risky to taxpayers and banned.

Michael Turnipseed, executive director of the Kern County Taxpayers Association, said such loans are "way worse than loan sharking," calling Poway’s behavior “absolutely insane."

PUSD’s behavior, while seemingly crazy, is actually quite rational in today’s political and economic climate. States have been running regular large deficits and balancing their budgets by slashing education funding, inspiring school districts to engage in ever more risky and unconventional methods of fundraising. At the same time, politicians are scared to antagonize the powerful anti-taxers and worry that the public—still reeling from the recession, high unemployment and the huge losses to middle and working class personal wealth—would not support a tax increase, even for school facilities improvements.

Starting in 20 years, PUSD will have to make its first payment toward the loan: just over $30 million, $24 million of which is interest. After that, payments will increase to roughly $50 million per year for 20 years. Since the money must come from property taxes, the assessed values of Poway property will have to quadruple, or property taxes will have to be significantly raised without an increase in values.

Tax Dollars at Work: CSU Spent $2 Million on Presidential Homes

Tuition at the California State University (CSU) system increased from $1,428 per year in 2001-2 to $5,472 in 2011, with another 9% rate hike planned for the fall of 2012. Because of budget cuts and financial insecurity, the university has also cut course offerings and services. Yet in that same 10-year period, CSU spent over $2 million renovating eight university-owned presidential residences, including such extras as expanding garages and hiring interior designers, according to a report this week in the Bay Citizen.

In 2012, alone, CSU spent over $400,000 remodeling presidential homes at CSU Fullerton and CSU Northridge, in the Los Angeles Area. In 2011, it spent $257,000 on kitchen upgrades and swimming pool replastering at San Diego State, and another $230,000 on kitchen upgrades and lighting at Cal Poly San Luis Obsipo. Cal Poly also spent $200,000 on renovations in 2010--$831,000 total since 2004, 99% of which was paid for through state funding.

11 university presidents live in these lavish homes at tax-payers’ expense. Another 12 university presidents are getting $60,000 per year in housing allowances to covering living costs off campus. All this is on top of their six-figure salaries (some have also received raises), which alone ought to be sufficient to live comfortably within easy commuting distance of any of the CSU campuses.

More Cuts for Cali, Even With Tax Increase

Gov. Brown Squeezing Blood From a Turnip

In January, Gov. Jerry Brown told Californians that if they didn’t pass his tax increase initiative in November, he would have no choice but to slash over $5 billion from public education. Since then, tax revenue has been much lower ($3.5 billion) than anticipated, prompting Brown to threaten much deeper cuts, even if his tax initiative passes.

The tax initiative would impose a regressive sales tax on all Californians, including the poor, in addition to a short-term tax increase on incomes of $250,000 or more. It is projected to generate $9 billion, which would have barely maintained the status quo before the latest projections, and hardly made a dent in the $20 billion cut from public education over the past 3 years.


The new round of cuts will likely target health and welfare programs. However, Brown is also expected to squeeze unions. According to the Los Angeles Times, he has already been meeting with Yvonne Walker, president of SEIU local 1000, and he has been actively lobbying for cuts to public sector pensions. But the details of his proposed cuts have not been released, nor has the true size of the deficit, which some believe may be as high as $15 billion. However, one can predict some of his likely demands on the public sector unions: more furloughs, cuts to health care and pensions, layoffs and decreases in certain public services.

RIF is Gonna to Git Yo Mama

The 4LAKids Blog suggests that a new term has taken hold in California schools: "the RIFing season," which refers to the time of the year in which "reduction in force" letters are sent out notifying teachers they may be laid off at the end of the school year.

Lately the numbers have grown ridiculously high. In March, 20,000 RIF letters went out to California teachers. Yet in the previous three years, only 25% of those receiving RIFs actually lost their jobs. While this is still a large number of layoffs (11% of the state’s entire teacher workforce) and it is certainly anxiety-provoking for those who receive RIFs, it seems excessive, cruel and unnecessary to send out layoff notices to 3 times more teachers than will actually be laid off.

The layoff notices destroy teacher morale and create uncertainty in school communities that negatively impacts students. The process is also costly to schools, costing around $700 per noticed teacher ($14 million for the 20,000 RIFfed teachers), when one factors in the expenses of having to send RIF notices by certified mail and the appeal hearings before administrative law judges.

To make matters worse, some districts may be using the fear and uncertainty of the RIF process to pressure teachers into accepting furloughs, pay cuts and other concessions and it is regularly brought up by Ed Deformers as justification for doing away with seniority and even tenure.

Of course the most immediate and logical solution to the problem is to increase revenue by increasing taxes on the wealthy and their corporations, something Jerry Brown and the CTA hope to do in November with their “Millionaires Tax Initiative.” However, this tax increase will barely maintain the status quo and restore virtually none of the $20 billion that has been looted from California K-12 public education over the past 4 years. There are also attempts in the works to create legislation that would delay the RIFfing season by a few months.

Paying to Play: How Financial Institutions Rip Off School Districts

Huck/Konopacki Labor Cartoons

The left has criticized attempts to privatize public education for years now, especially since No Child Left Behind took privatization to new heights. (See my own No Capitalist Left Behind and NCLB’s Biggest Winners).

During the last 10 years, we’ve seen an escalation in the number of for-profit charter schools. Obama’s Race to the Top required states to transfer billions of tax dollars to textbook publishers and open their doors to more charter schools. Cafeteria services are now dominated by just a few large corporations like Sodexo that rip off school districts and abuse their workers (see here, here and here).

No Capitalist Left Behind (The Prequel)

Yet corporate raiders have had their eyes on the public trough well before NCLB and they had numerous tricks up their sleeves for obtaining public education tax dollars. One of these has been to constantly lobby for lower taxes for the wealthy and their corporations, which keeps money in the pockets of the ruling elite and decreases revenues available for schools.

In addition to the direct benefit to the wealthy, this also provides lucrative opportunities for financial institutions to take advantage of school districts as they increasingly rely on bonds to finance their operations. According to a California Watch report (covered in the San Francisco Chronicle), financial firms donated $1.8 million to school bond measures in California over the past five years. In nearly every case, school district officials turned around and hired those same underwriters to sell the bonds for a profit.

The practice occurs nationwide and probably occurred well before the current financial crisis and even before the passage of NCLB. However, it is especially distinct in California, where underwriters gave 155 political contributions since 2007 to successful school bond campaigns. They have been so successful that only 5 donors (out of 111 successful bond measures) failed to receive a bond-selling contract from the school district (and in 4 of these cases, a competitor that also donated to the campaign did win the contract).

This is a clear cut case of “paying to play.” You donate a modest amount of money to get the bond measure passed and a virtual guarantee of being able to profit handsomely from it once it does pass. However, it is legal and all parties seem to be content with the arrangement.

School districts are forbidden from using their own resources to promote a bond measure, so they rely heavily on outsiders (including unions, parents, developers and construction companies) to do the promotion for them. Since they are almost always desperate for the funds provided by the bond, any help getting it passed is considered a blessing. Yet having prearranged contracts with underwriters eliminates competitive bidding and makes it unlikely that districts are getting the best deal available.