By Stan Rose
Can California cook its budget pie for 2012-2013 with a recipe of cuts alone? Longtime state finance analysts say no. The state budget has plummeted in revenues since 2007-2008, from $102 billion to $88.5 billion. At the same time, demands on services paid by state budget dollars have increased. Increases in unemployment have created more tax receivers, while the number of taxpayers has decreased. In the meantime, public education remains the best investment in the future of our society. Yet, schools have funded over 60 percent of the cuts in state general fund expenditures since 2008. At this point in our budget history, analysts argue that the unprecedented cuts to education and other state programs must be balanced by increases in state revenues. Yet, many are still skeptical of the state’s ability to manage its affairs with increased revenues.
If increased revenues are to be a part of the solution to the current budget gap, estimated to be $12 billion through June 2013, then consideration must be given to voters’ feelings on the subject. School Services of California, perhaps the most respected advisor to schools by districts and the state alike, offer these important considerations going forward:
* Any permanent tax needs to be broad based; everyone who benefits needs to pay;
* Temporary taxes should be phased out as the economic recovery gains momentum;
* Revenues from a new tax should be targeted to the one area for which voters continue to show the greatest support-public education; there should be no possibility that the Legislature will have the opportunity to divert the new revenues to other uses;
* The expenditure of these funds should be subject to strict oversight by taxpayer groups to ensure appropriate use of the revenues and to avoid supplantation.
Given these general considerations, what specific taxes could be considered as sources for additional revenues to support the state’s public education system?
Property taxes on businesses – Property taxes on businesses are paid by owners, based on the assessed value of the property. These taxes are ultimately passed on to businesses’ tenants or customers. Businesses property, however, tends to be under assessed, and therefore businesses tend to pay a lower effective property tax rate. This underassessment is particularly evident when the property changes hands by selling shares in a corporation rather than through direct sale of the property.
Sales taxes-Sales taxes are paid by final consumers of goods that have not been exempted from the tax. But the exemption of food, services, and other commodities reduces the base of the sales tax.
Petroleum severance tax-This is a tax on the extraction of oil from the ground. California is unique among the states because it does not impose such a tax, thus foregoing millions of dollars that other states collect.
Would the Legislature and the state voters support any changes to these or any other taxes to provide more resources to public education? No one knows for sure, but analysts do know that what we are doing now isn’t working. Budget analysts and others argue that we cannot continue to cut opportunities for children and expect to live long comfortable retirements. As stated by School Services of California (December, 2011), “The ‘land of the free and the home of the brave’ was not created by the meek. We are in danger of losing our leadership position in the world.”
Last week the Governor pulled the “triggers” prescribed in the adopted 2011-2012 state budget. Over $900 million were cut out of this year’s budget because projected revenues were not realized by December 15, the “trigger” date. For education, this meant that previously approved budgets were cut in mid-year by an estimated $50 per student, including cuts to transportation and basic general fund revenue. Districts on the brink of insolvency due to prior cuts may be pushed over the edge with this latest round. Others who have been more fortunate and/or better prepared have been able to weather the storm so far.
What most people around school finance-or for that matter, around the economy-believe is that we will only resolve our budget shortfall through some combination of revenues and reductions in expenditures. Given that the reductions have been occurring since 2008, as noted above, some form of revenue will be needed to eliminate the remaining gap. Whatever the solution, the time is now. Our children cannot wait any longer.
Stan Rose is superintendent of the San Benito High School District.
Version:1.0 StartHTML:0000000182 EndHTML:0000012393 StartFragment:0000002628 EndFragment:0000012357 SourceURL:file://localhost/Users/kkosmicki/Desktop/12.23%20rose%20guest.doc @font-face { font-family: “Times New Roman”; }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }table.MsoNormalTable { font-size: 10pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; }
State Budget for Schools; What’s Next?
By Stan Rose
Can California cook its budget pie for 2012-2013 with a recipe of cuts alone? Longtime state finance analysts say no. The state budget has plummeted in revenues since 2007-2008, from $102 billion to $88.5 billion. At the same time, demands on services paid by state budget dollars have increased. Increases in unemployment have created more tax receivers, while the number of taxpayers has decreased. In the meantime, public education remains the best investment in the future of our society. Yet, schools have funded over 60 percent of the cuts in state general fund expenditures since 2008. At this point in our budget history, analysts argue that the unprecedented cuts to education and other state programs must be balanced by increases in state revenues. Yet, many are still skeptical of the state’s ability to manage its affairs with increased revenues.
If increased revenues are to be a part of the solution to the current budget gap, estimated to be $12 billion through June 2013, then consideration must be given to voters’ feelings on the subject. School Services of California, perhaps the most respected advisor to schools by districts and the state alike, offer these important considerations going forward:
* Any permanent tax needs to be broad based; everyone who benefits needs to pay;
* Temporary taxes should be phased out as the economic recovery gains momentum;
* Revenues from a new tax should be targeted to the one area for which voters continue to show the greatest support—public education; there should be no possibility that the Legislature will have the opportunity to divert the new revenues to other uses;
* The expenditure of these funds should be subject to strict oversight by taxpayer groups to ensure appropriate use of the revenues and to avoid supplantation.
Given these general considerations, what specific taxes could be considered as sources for additional revenues to support the state’s public education system?
Property taxes on businesses — Property taxes on businesses are paid by owners, based on the assessed value of the property. These taxes are ultimately passed on to businesses’ tenants or customers. Businesses property, however, tends to be under assessed, and therefore businesses tend to pay a lower effective property tax rate. This underassessment is particularly evident when the property changes hands by selling shares in a corporation rather than through direct sale of the property.
Sales taxes—Sales taxes are paid by final consumers of goods that have not been exempted from the tax. But the exemption of food, services, and other commodities reduces the base of the sales tax.
Petroleum severance tax—This is a tax on the extraction of oil from the ground. California is unique among the states because it does not impose such a tax, thus foregoing millions of dollars that other states collect.
Would the Legislature and the state voters support any changes to these or any other taxes to provide more resources to public education? No one knows for sure, but analysts do know that what we are doing now isn’t working. Budget analysts and others argue that we cannot continue to cut opportunities for children and expect to live long comfortable retirements. As stated by School Services of California (December, 2011), “The ‘land of the free and the home of the brave’ was not created by the meek. We are in danger of losing our leadership position in the world.”
Last week the Governor pulled the “triggers” prescribed in the adopted 2011-2012 state budget. Over $900 million were cut out of this year’s budget because projected revenues were not realized by December 15, the “trigger” date. For education, this meant that previously approved budgets were cut in mid-year by an estimated $50 per student, including cuts to transportation and basic general fund revenue. Districts on the brink of insolvency due to prior cuts may be pushed over the edge with this latest round. Others who have been more fortunate and/or better prepared have been able to weather the storm so far.
What most people around school finance—or for that matter, around the economy—believe is that we will only resolve our budget shortfall through some combination of revenues and reductions in expenditures. Given that the reductions have been occurring since 2008, as noted above, some form of revenue will be needed to eliminate the remaining gap. Whatever the solution, the time is now. Our children cannot wait any longer.
Stan Rose is superintendent of the San Benito High School District.
