Money Inequity Leaves Schools Tough Choices


Nearly 20 years ago, lawmakers decided that basing school funding on local property values was unfair. The system, they argued, gave preferential treatment to children who happened to live in wealthy areas and penalized other children just because their parents weren't rich.

New laws were passed to change the system, and they worked--but at a price. The lawmakers, in effect, won short-term victories by mortgaging the future for schoolchildren, say school business managers.

Now the mortgage is due, and the payments are going to be astronomical, the business managers say.

"School districts across California are in for a hard time," said John Perry, assistant superintendent for business services in the Orange Unified School District.

Because of a complicated system of funding based on what the business managers say is now-archaic legislation dating back to 1972, schools in Orange County receive vastly varying amounts in state education aid. In some cases, the gaps represent millions of dollars that could be used for critically needed--and costly--programs, such as bilingual education and computer instruction.

The financial problems have manifested themselves in sharp cutbacks, with the elimination of programs and personnel once thought essential to a quality learning environment, such as music classes, art courses and school nurses.

And despite news of state increases in education aid and development of new, innovative methods of raising funds by district business managers, hard times will continue for the foreseeable future.

With more than 170,000 new students expected to flood California schools next year, coupled with teachers' demands for higher salaries and the increased cost of school operations, all of the education money in the state budget--including an expected 8% increase--is already accounted for, Perry said. That means finding new ways of making money, or simply not spending any more money. That, in turn, means more cuts in programs already pared to the bone.

"A number of districts in the past have gone through those steps when there's been a shortfall in state funds," said Terry Bustillos, an administrator in the Orange County superintendent of schools office. "They really just have to tighten the belt. Unfortunately, that will have an impact on what students can do in the classroom."

According to district business managers, the impact is that many districts will be able to offer little beyond the state-mandated "base program" of courses. Bustillos said merely maintaining those programs will cost each district about 5% of an 8% increase in education funding in the proposed state budget. Gov. George Deukmejian has proposed setting aside 3% of the increase to maintain current programs.

Bustillos added that with another 4% already set aside to handle the hundreds of thousands of new students expected to enter school systems next year, and even more earmarked for class-size reduction, the budget "increase" actually amounts to a decrease.

Perry said the total amounts to about a 2% shortfall, or $19 per pupil. With millions of pupils statewide, the gap could be staggering, he said. For example, the Santa Ana Unified School District, which has an enrollment of about 43,000 students, could, at $19 per pupil, face an $817,000 drop in funding compared to last year.

"It's going to be yet another year where we're going to have to look at all of our programs and decide where we're going to cut back," Perry said.

"We're down to things like a school nurse," added Russell Barrios, a member of the Orange Unified School District Board of Trustees. "Everybody remembers a school nurse in elementary school. We've got maybe five for our entire district of 25,000 students."

For the parents, students, teachers and administrators of Orange County schools, such cutbacks are nothing new.

For more than a decade, school districts in Orange County struggled through financial difficulties mainly caused by plummeting student enrollment. Simply put, fewer students meant fewer dollars from the state.

In the Ocean View School District, which covers most of Huntington Beach, the enrollment was more than 14,000 students in the early 1970s, said James L. Jones Jr., the district's assistant superintendent for business.

"It dropped from that point down to a low last year of about 8,300," Jones said.

Under the pre-Proposition 13 system, Jones said, the district survived because, although school funding levels were based on property values, the high student enrollment kept enough funds coming in from the state. But since property values no longer have any impact on education allocations, the district has been left in a financial bind, he said.

"It's just totally flip-flopped to where now we've lost our kids, but we have this really valuable real estate all around," Jones said. "But we're not under that system now, we're under the revenue-limit-per-kid system."

The current system was formed after a 1972 law was passed that basically cut school funding ties to property values.

"It became effective for fiscal year 1973-74," Jones said. "What they did was look at the funding you received in '72-73 . . . and simply divided that by that year's average daily attendance, and that established a revenue limit."

That formula, Barrios said, was rife with inherent inequities that have lasted ever since. Since funding was in part based on district revenues in 1972, any district with a high funding level that year was a step ahead of "low-wealth" districts.

"Places like Newport Beach obviously always had a high-assessed valuation (of property)," Barrios said. "Fifteen, 20 years ago, when this came in, much of Orange was still orange groves, and our assessed valuation was completely different. It was a screwy formula to begin with."

The disparity led to lawsuits that resulted in the landmark 1976 California Supreme Court ruling in Serrano vs. Priest, which held that unequal funding between school districts was discriminatory.

But despite legislation and periodic readjustments to reduce the disparity between districts, significant gaps continue to exist between neighboring districts. For example, the Capistrano Unified School District receives more than $300 per pupil less than Newport-Mesa Unified, according to the latest available figures.

"Parents are constantly amazed when we tell them that we received hundreds of dollars less than the district that is literally right across the street," said Capistrano Unified Supt. Jerome R. Thornsley. "It's such a complicated process that it doesn't allow each district to get what it should or what it needs."

A subsequent lawsuit was filed after Serrano-Priest in an effort to get the state to enforce the 1976 state Supreme Court ruling. But in September, 1987, the high court refused to hear an appeal of a lower court case that ruled against the schools. In that decision, the lower court ruled that the state was in "substantial compliance" with Serrano-Priest as long as funding levels are within $260 per student for neighboring districts.

Barrios described the effects of that ruling as "not fair."

"I'd say over the years we (Orange Unified) have probably lost $100 million in funding that should have been ours," he said. "Here locally, we use the example that some districts get as much as $400 per child more than we do--statewide, there are districts that get $1,500 more than we do. That's just plain not fair in anybody's mind."

Perry noted that in a district such as Orange Unified, which has an enrollment of 25,000, a $300 disparity compared to another district amounts to $7.5 million. "That's a helluva lot of money," he said. "What we have here is a vastly unequal system."

The result, Perry added, is that "we have the largest class sizes you can legally have, we maintain second-class buildings and grounds, and our teachers aren't that well paid."

The problem with teacher salaries has been among the most evident recently. Teachers in the Ocean View, Tustin, Huntington Beach City and Orange districts, among others are seeking new contracts. The fight, in many cases, has been bitter.

Business managers say they have been attempting to divert funds to raise salaries but claim that restrictions on how certain types of funds can be used have hampered their efforts. That is, while some state aid can be used to build schools, those same monies cannot be used to maintain the building, or pay higher salaries.

"We want to bring technology in in a big way," Barrios said. "We want to do things like air-condition schools, which would give us the option in many cases to go year-round. I'd like to do those things, but I can't pay the damned electric bill for the air conditioning, or for the computers, or hire the teachers I need to teach these kids how to use those computers."

Faced with stagnant state aid, business managers have found themselves forced to exploit loopholes in the strict regulations in an effort to raise funds. In the Ocean View district, Assistant Supt. Jones is among several financial chiefs who have instituted lease deals, in which school-owned property is leased out for other uses and the funds are funneled directly into the operating budget.

Jones explained that leasing is advantageous because proceeds can be used for any purposes, unlike sales proceeds, which are restricted. At least, that's what the district's lawyers believe.

Some business managers fear that distinction is too fine and have shied away from lease deals.

But even with such methods of creative financing, all the business managers interviewed agreed that there is little hope of closing funding gaps in the immediate future. Although Proposition 98, passed in 1988, requires the state to allocate 40.9% of its budget to education, rising costs will still result in shortfalls in most districts. Diverting more funds is possible, but they would have to come from other state-funded programs--and beneficiaries of those funds are not likely to surrender them without a fight.

In the meantime, Perry said, the districts are left with two options: cutting back programs and "continuing to cry out for justice wherever we can."

STATE FUNDING In Orange County


The following shows what Orange County school districts received per student from the state in 1988-89.


District Revenue Per Student Anaheim City $2,563 Buena Park $2,591 Centralia $2,595 Cypress $2,848 Fountain Valley $2,581 Fullerton $2,579 Huntington Beach City $2,570 La Habra City $2,563 Magnolia $2,563 Ocean View $2,558 Savanna $2,602 Westminster $2,561 Yorba Linda $2,575


District Revenue Per Student Anaheim Union $3,190 Fullerton Joint Union $3,198 Huntington Beach Union $3,219


District Revenue Per Student Brea-Olinda $2,758 Capistrano $2,755 Garden Grove $2,756 Irvine $2,777 Laguna Beach $2,887 Los Alamitos $3,213 Newport-Mesa $3,044 Orange $2,777 Placentia $2,757 Saddleback Valley $2,785 Santa Ana $2,752 Tustin $2,811

STATE FUNDING In Orange County

AVERAGE EXPENSES PER STUDENT The graph shows the rising cost to educate students in Orange County. Average Expenses Per Student Elementary '83-84: $2,580 '88-89: $3,477 High School '83-84: $2,788 '88-89: $3,870 Unified '83-84: $2,532 '88-89: $3,540 Source: Orange County Board of Education.

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