Schools Look to Gobble Up Surging State Revenues

shocked-kid-apAs Gov. Jerry Brown prepares to release his revised state budget for the coming fiscal year next week, educators around the state are looking forward to hearing about the additional funds they will receive, a dramatic departure from the bleak years of the recession, when they braced themselves for further cuts.

Even for the state’s most experienced school finance experts, predicting how much California’s schools will get in new revenues is a next to impossible task.

This year the task is especially challenging because of the unanticipated interplay between two voter-approved initiatives – Proposition 98, approved by voters in 1988, and Proposition 2, championed by Brown and approved by voters just last November – on top of many unknowns about how much tax revenue the state will generate from a variety of sources.

One thing is clear: Schools and community colleges will be the big – and possibly only – winners when it comes to dividing up the extra revenues.

The Legislative Analyst’s Office and others estimate that California’s surging economy could generate between $4 and $8 billion more than the state had projected.

“Schools are the big winner,” Mac Taylor, the state’s legislative analyst, said at EdSource’s 2015 symposium, held last week in Sacramento in collaboration with the California State PTA.

The additional funds will arrive at a welcome time for schools, which are still digging out from the impact of deep cuts made during the recession. Schools are also implementing a range of reforms, including the Common Core State Standards and the Local Control Funding Formula, which prescribes eight priority areas in which school districts are expected to show improvement.

Complicating how the new revenues will be allocated is the unanticipated interplay of Prop. 98 and Prop. 2, which could result in all non-education social services and state government departments winding up with little additional money or none at all.

That’s because Prop. 98, setting the minimum levels of school funding, requires that the state’s first priority in revenue-rich years is to bring funding levels for schools and community colleges up to the level they would have enjoyed if there had not been a recession. That amount, called the “maintenance factor,” currently totals $2.6 billion.

Prop. 2, meanwhile, mandates that the state set aside the first 1.5 percent of state revenue, plus additional dollars when the state is flush with tax receipts from capital gains, to pay down state debt and build a rainy-day fund. Money for Prop. 2 would be diverted from funding for non-education programs and services.

“It is a very unusual situation for my bosses – the members of the Legislature and the governor – that they may have to deal with this very strange world,” Taylor said. “They will have to take some actions to balance all the competing demands.”

Under one possible scenario that Taylor and the LAO laid out, the non-Prop. 98 side of the budget could receive $1 billion less next year than they got this year, possibly even requiring spending cuts that would put the Legislature in a bind and pit school advocates against a range of other interest groups. Taylor said programs subject to cuts could range from health and social services to higher education and criminal justice programs.

“There are many scenarios where the bottom line will be worse, where the Legislature will have to act to bring the budget in balance,” Taylor said.

Mike Herald, legislative advocate for the Western Center on Law and Poverty in Sacramento, said he expected legislators would find it “unpalatable” to reduce funding for human services in a year where there is going to be a substantial surplus. “It’s hard to explain to disabled adults surviving at poverty levels on Supplemental Security Income that they can’t get any increases for food when there are billions of dollars more in state revenue,” Herald said.

Brown’s budget for next year, which he proposed in January, assumed $7.8 billion more from Prop. 98 through a combination of increased state and property tax revenues for 2014-15 and 2015-16. About $4 billion of that will go toward ongoing funding for the Local Control Funding Formula, which provides extra money to school districts with high numbers of low-income children, foster youth and English learners.

“That is an enormous amount of new money in a relatively short period of time,” Taylor pointed out.

But school districts also face rising expenses, including increases in pension obligations for teachers and administrators that will be phased in, reaching $3.7 billion more per year by 2020-21.

Taylor noted that despite the massive inflow of funds to the schools in inflation-adjusted dollars, schools will only receive on average about $200 more per student than they did in the  2007-08 school year, when funding peaked.

“But if you think about what we went through, the worst recession in decades, the fact that we have bounced back and are above where we were at the beginning of the Great Recession, that is not bad,” he said.

Louis Freedberg is the executive director at EdSource. Email him or Follow him on Twitter.

John Fensterwald covers education policy.

This piece was originally published by EdSource

The Money Man Exits the Lobby

John Mockler cast a long shadow over the modern history of public education in California. “I once suggested in print that California needed a constitutional amendment requiring [John] Mockler to live forever,” wrote Zócalo Public Square columnist Joe Mathews of the man who authored Proposition 98, the 1988 constitutional amendment that earmarked 40 percent of the general fund budget for K–12 education. Mathews did not get his wish, of course. On March 3, at the age of 73, Mockler died of pancreatic cancer and prominent Californians marked the passing of a legend.

State Superintendent of Public Instruction Tom Torlakson called Mockler a “giant.” He was the “brilliant wonk” responsible for steering $65.7 billion to public schools in the coming year, $5 billion more than last year, wrote Sacramento Bee editorial page editor Dan Morain. He was a man who “cared deeply about schools.” Governor Jerry Brown tweeted that Mockler “knew education law like no one else and was able to put school finance on a solid footing that endures even today.” Former governor Arnold Schwarzenegger called Mockler “a true champion for our children,” and a man who was “honest and provided excellent advice on how best to improve our educational system.”

Aside from Prop. 98, Mathews observed in his obituary, Mockler was “deeply grounded in the realities of kids” and “he also had a great devotion to facts.” But more than a few important facts were missing from the eulogies, most notably Mockler’s lucrative career as a lobbyist. Mockler personified the stereotype of the “revolving door” in politics, moving back and forth every few years from consulting and lobbying to the public sector. In the mid-1960s, Mockler became a consultant to the state assembly’s education committee, and from 1974 until 1977 he served as a senior staffer to Wilson Riles, the state superintendent of public instruction. In 1977, Mockler left Sacramento for a post with the Los Angeles Unified School District, the second largest in the United States. One year later, Californians passed Proposition 13, which limited the power of government to raise property taxes, which were a prime source of revenue for schools. Mockler was not a fan. In 1980, he formed Murdock, Mockler and Associates, a lobbying firm specializing in education policy. But before long, he returned to government as Assembly Speaker Willie Brown’s education adviser from 1983 to 1985, when public education reform was a raging issue.

Mockler, a liberal Democrat, rejected the conclusions the National Commission on Excellence in Education reached in A Nation at Risk. In Mockler’s view, public education was not drowning in a “rising tide of mediocrity.” He often decried what he called the “California schools suck industry,” and people “who make their living hand-wringing about how bad California schools are.” Mockler persisted with his belief in the Golden State’s excellence until the very end. “If a kid goes out and steals a lunch, you’re going to hear about that,” Mockler said. “But how about a headline saying 93 percent of students went to school today and got along just fine? You’re not going to hear about that.” But Mockler also knew that evaluation was not his strong suit. “I feed the pig,” Mockler would often say when he lobbied for L.A. Unified. “Other people weigh the pig.”

In Mockler’s world the problem was simple: the education establishment was underfunded and needed more money—always. That was also the default position of the California Teachers Association and State Superintendent Bill Honig, who recently told the Los Angeles Times, “back in the ’80s we were so frustrated by the underfunding of schools.” Mockler conceived Prop. 98 as an “antidote” Prop. 13. Yet the school establishment’s complaints about poor funding persisted. So did the public’s complaints about dysfunctional and dangerous schools. Prop. 174, the Parental Choice in Education Initiative, appeared on the 1993 ballot as the antidote in turn to Prop. 98. At a San Francisco conference, I heard Mockler fulminate against the measure. The jovial man who joked that Prop. 98 would help send his own kids to Stanford was opposed to low-income parents choosing the schools their children would attend. Voters soundly rejected the choice initiative and preserved the status quo.

Soon afterward, Mockler formed the lobbying firm of Strategic Education Services, where his clients included the Association of American Publishers, California Public Radio and Television, the Los Angeles County Office of Education, and the California Association of Administrators of State and Federal Programs. Another client was L.A. Unified, not known as a bastion of achievement or accountability. Mockler’s lobbying connections came in handy when he served a brief stint as secretary of education and later executive director of the State Board of Education under Governor Gray Davis. There he would play a key role in selecting the textbooks the state would purchase. For some observers, that was troubling. San Jose Mercury News education reporter Jessica Portner noted that Mockler, “established personal financial relationships with lobbyists for the publishing industry.” After joining the board, Mockler “received loan payments from two textbook industry representatives who purchased his lobbying firm.” Portner also reported that Mockler co-owned a Bodega Bay vacation home with state school board member Marion Joseph. She remained on the state board after Mockler left, retaining “significant sway over which texts are selected.”

Whether those texts were any good is subject to debate. But as Portner saw it, they were certainly more expensive. The average price of English textbooks for students in kindergarten through eighth grade ballooned 212 percent in inflation-adjusted dollars between 1990 and 2002; the price of math books climbed 156 percent over the same period. Mockler never complained. Nor did he ever experience the sort of legal trouble that took down his friend Honig in 1993, when he was convicted of felony conflict-of-interest charges—specifically, making contracts in which he had a financial stake.

Californians should remember Mockler as a government success story in the style of Robert Klein, the real estate tycoon who made out well with Proposition 71 and the California Institute for Regenerative Medicine. Likewise, environmental zealot Peter Douglas gained a veritable state within a state in the California Coastal Commission. Like that pair, Mockler wielded great power but never once had to face the voters. His career confirms that California’s government education system has a for-profit subsidiary a clever insider can exploit for a lot of money, working both sides of the table.