Schools Call New O.C. Fee ‘Devastating’

A new law that allows counties to levy a fee against cities and school districts for assessing and collecting property taxes will have a potentially devastating financial impact on Orange County schools and ultimately could lead to layoffs and program cuts, according to education officials.

The law, which goes into effect Jan. 1, will allow counties to determine how much it costs to collect the taxes--until now, a service provided by the counties--and pass on that cost to cities and school districts. Orange County auditor Steve Lewis said preliminary studies indicate that the county would have to assess fees of 1.25% of total property tax revenues to recoup the costs of tax collection.

For Orange County school districts--which receive anywhere from a third to nearly all of their base revenue from property taxes--that translates into fees of as much as $700,000. And that, school business officials said, further translates into cuts in programs, services, supplies and, in the long run, personnel.

“We’ve had to reduce some things we planned to do this year,” said J. Kenneth Jones, superintendent of the Fullerton Joint Union High School District, which is faced with a fee of nearly $272,000.

“In our case, (the fee) is about the cost of a 1% pay raise for teachers and staff. If you look at it another way, we’re looking at about $25.90 per (student)--we’re beginning to look at the inability to buy textbooks for kids.”

Carl DeWing, a spokesman for Sen. Ken Maddy (R-Fresno), the bill’s sponsor, dismissed such dire predictions as “a lot of scare tactics to get people all excited.” The legislation, he said, was intended to help bail out counties “hit so heavily by the $6-billion (state) budget gap.

“The Legislature felt duty-bound to try to relieve that situation,” DeWing said. “Everybody is helping in defraying those costs to the county.”

Education officials, however, charge that the fee is a thinly veiled attempt to shift money woes from one financially strapped public agency to another.

“We’re robbing Peter to pay Paul for this,” said Gayle Wayne, a spokeswoman for the Orange Unified School District, which has long been gripped by severe budget problems and is now faced with a fee of more than $571,000. “We’ve already made some cuts that have been painful and unpopular, and we’re not finished.”

Fullerton Supt. Jones formed a steering committee of other superintendents and local educators to study the impact of the law and to discuss lobbying efforts and possible legal action. He said the law will hit especially hard in Orange County, where all school districts combined receive 54.61% of their revenue from property taxes. In Los Angeles County, property taxes account for roughly 22% of the school districts’ base revenue, he said.

Some individual districts in Orange County will feel the effects more than others, Jones said. Six school districts and one community college district are anticipating bills of more than half a million dollars, with South County districts--all heavily dependent on property taxes as a result of large-scale development there in recent years--expecting heavy fees.

The Capistrano Unified School District, for example, is anticipating a fee of nearly $688,000, the highest in the county. Saddleback Valley Unified School District is expecting to be hit with a $591,000 fee, and the Newport-Mesa Unified School District, which receives nearly 97% of its base revenue from property taxes, faces a county bill of more than $665,000.

“We’re already billing (the fee) into our budget,” said Saddleback Valley Supt. Peter A. Hartman. “We’ll put a hold on things like the purchase of textbooks and literature books.”

Newport-Mesa Supt. John W. Nicoll said the district will be able to avoid drastic cutbacks or layoffs this year by borrowing the fee money from its reserves. “But those monies have to be repaid,” Nicoll said. “It may have the net effect in (the 1991-’92 school year) of making some unpleasant choices.”

Wayne said that in the Orange Unified and other districts, layoffs could be among those unpleasant choices if expected court challenges fail and the fee becomes a high-priced yearly expense. “We don’t know what’s going to be cut or if anyone would be laid off, but since 85% of a budget is people, you can’t go too far without affecting people’s jobs,” she said.

Although the bill for the new fee will not arrive at school district offices until next January, and despite talk of lawsuits seeking to enjoin counties from charging the fees, district business officials said their hands are tied because the fee will hit them in the middle of the current fiscal year and, therefore, must be budgeted now. In effect, the business officials said, millions of dollars in funds are being set aside for a fee that could be struck down in court.

“If I were to bet, I would bet that eventually the school districts are going to win this issue in the courts,” said Peter Birdsall, a Sacramento lobbyist retained by the Saddleback Valley Unified School District. “But in the short run, the school districts have got to plan as if they don’t have this money. . . . That’s the only prudent management thing to do.”

Bob Wells, director of governmental relations for the Assn. of California School Administrators, said that legal action is almost a certainty because education officials see the new fee as a violation of both Proposition 98 and Section 41000 of the state Education Code, which Wells said clearly states that counties may not charge school districts for the costs of collecting property taxes.

Paul Goldfinger, a consultant with School Services of California Inc., a Sacramento-based research group, said the law violates Proposition 98 because it reduces tax revenues without increasing state aid. Under Proposition 98--which calls for at least 40% of the state budget to go to education--any reduction in revenue must be compensated for by the state.

Goldfinger said the legislation attempts to circumvent Proposition 98 by arguing that the fee is not a reduction in taxes but merely a necessary district expense. But Goldfinger said attorneys probably will argue in court that “this is nothing more than a property tax shift from schools to counties, and when the schools lose property taxes, the state is going to have to make up the shortfall.”

Wells said attorneys for school districts also will use several loopholes in the law to resist paying the fee.

The legislation “says that counties may send school districts a bill (for the fee),” Wells said. “It doesn’t say we have to pay it.”

Orange County Auditor Lewis also said that “there’s a good chance schools wouldn’t pay” the fee unless amendments are passed to clean up what he called “poorly worded legislation.” Still, the county--which Lewis said spends $23 million a year to assess and collect property taxes for cities and districts--intends to forward bills for the fee on Jan. 1, he said.

DeWing, the spokesman for Sen. Maddy, said amendments to clear up disputed language in SB 2557 are likely to pass in December when the Legislature, which completed its two-year session Friday, will return for a brief session.

ESTIMATED PROPERTY TAX FEES FOR SCHOOL DISTRICTS The following chart shows projected effects of Senate Bill 2557 on Orange County school districts. The first column shows total base revenue for each district; the second and third columns break down the total by estimated amount of revenue from state funding and property taxes. Column four indicates the percentage of each district’s total revenue from property taxes. Column five shows estimates of how much each district will be charged if the county levies a 1.25% fee for property tax collection and assessment, and column six projects the amount per student each district could lose due to the new fee. For example, the Anaheim City School District has a total base revenue of $37.6 million, of which $14.8 million comes from state aid and $22.8 million--or 60.72% of its base revenue--from property taxes. If the county charges a 1.25% assessment and collection fee, the district would be required to pay $285,790, or about $29.60 per student.

Total Base Estimated Property % Revenue Estimated Revenue State Tax from Fees at Aid Revenue Prop. District (Millions) (Millions) (Millions) Taxes 1.25% ELEMENTARY DISTRICTS Anaheim $37.6 $14.8 $22.8 60.72 $285,790 City Buena 11.1 5.9 5.2 46.64 64,920 Park Centralia 12.2 6.8 5.4 44.51 68,191 Cypress 10.8 5.0 5.8 53.67 72,670 Fountain 15.9 8.4 7.5 47.06 93,461 Valley Fullerton 28.2 15.0 13.2 46.75 164,876 Huntington 14.7 4.6 10.1 68.76 126,587 Beach City La Habra 12.1 6.6 5.5 45.14 68,510 City Magnolia 12.5 8.1 4.4 35.32 55,184 Ocean 22.7 10.4 12.3 54.21 154,016 View Savanna 5.0 2.5 2.5 49.31 31,076 Westminster 21.4 13.3 8.1 37.93 101,303 HIGH SCHOOL DISTRICTS Anaheim 71.2 47.6 23.5 33.08 294,564 Union Fullerton 37.3 15.5 21.7 58.32 271,952 Joint Union Huntington 50.5 19.3 31.2 61.82 390,215 Beach Union UNIFIED DISTRICTS Brea-Olinda 13.6 6.1 7.5 55.31 94,374 Capistrano 72.3 17.3 55.0 76.04 687,937 Garden Grove 105.2 71.4 33.7 32.11 422,147 Irvine 59.0 18.6 40.3 68.37 504,545 Laguna Beach 7.8 0.3 7.5 96.02 94,744 Los Alamitos 20.4 9.3 11.1 54.38 139,144 Newport-Mesa 55.1 1.8 53.2 96.67 665,861 Orange 70.6 24.9 45.7 64.72 571,768 Placentia 66.3 40.4 25.9 39.05 323,036 Saddleback 70.5 23.1 47.3 67.13 591,630 Valley Santa Ana 119.6 75.0 44.6 37.29 557,730 Tustin 30.7 6.3 24.4 79.36 305,208 Total K-12 1,055.1 478.9 576.1 54.61 7,202,237 COMMUNITY COLLEGE DISTRICTS Coast 81.8 48.8 33.0 40.37 413,237 North 67.1 43.3 23.8 34.45 297,662 Orange County Rancho 46.0 27.5 18.5 40.17 231,159 Santiago Saddleback 43.7 3.2 40.5 92.70 507,312 Total 238.8 122.9 115.9 48.54 1,449,369 Community Colleges County Dept. 32.7 6.9 25.7 78.77 322,205 of Education GRAND TOTAL 1,326.7 608.8 717.9 54.11 8,973,812

Estimated Cost per District Student ELEMENTARY DISTRICTS Anaheim $29.60 City Buena 15.90 Park Centralia 15.65 Cypress 19.82 Fountain 16.07 Valley Fullerton 15.94 Huntington 23.33 Beach City La Habra 15.32 City Magnolia 11.97 Ocean 18.38 View Savanna 16.82 Westminster 12.95 HIGH SCHOOL DISTRICTS Anaheim 14.19 Union Fullerton 24.90 Joint Union Huntington 27.92 Beach Union UNIFIED DISTRICTS Brea-Olinda 20.32 Capistrano 27.89 Garden Grove 11.69 Irvine 25.06 Laguna Beach 46.86 Los Alamitos 22.00 Newport-Mesa 41.53 Orange 23.61 Placentia 15.66 Saddleback 24.64 Valley Santa Ana 13.59 Tustin 29.06 Total K-12 20.55 COMMUNITY COLLEGE DISTRICTS Coast 14.73 North 11.19 Orange County Rancho 12.24 Santiago Saddleback 34.79 Total 16.45 Community Colleges County Dept. 94.54 of Education GRAND TOTAL 20.30

Source: Orange County Dept. of Education