As California Budget Goes, So Go School Districts’

Teachers are calling the painful cuts made by the Los Angeles Board of Education last week the Tuesday Night Massacre. To many, they are a tragic replay of a budget meltdown that scalded the schools 10 years ago.

During that crisis, the board leaned on teachers to make up the deficit by taking a 10% pay cut. Now, having fought for a decade to restore their pay and then add a few percentage points, the teachers view increased class sizes and reduced health benefits as merely a more devious way of saving money, and they are in a finger-pointing mood. They blame the district’s old bugaboos of bureaucracy, inefficiency and heedless spending for the estimated $400-million gap in the proposed $5.2-billion general fund budget.

No one, including officials in charge of the 735,000-student district, would deny that many of its troubles are self-inflicted. But school finance experts around the state insist that the root of the problem is a state funding mechanism that causes school dollars to yo-yo with the state budget and the overall economy.

“What L.A. is facing is a microcosm of what all districts are or will be facing as we go through this budget process,” said Brett McFadden, finance specialist with the Assn. of California School Administrators in Sacramento. “I don’t think the average voter realizes that in a week and a half we’ll have final data that will indicate we’re going to have the worst state budget crisis in ... history.”

Dozens of other large and mid-sized districts are already making similar cuts, including teacher layoffs and class-size increases. Budget deficits being reported around the state include $3 million by Burbank Unified School District, $5.4 million by Berkeley Unified, $8 million by Monterey Peninsula Unified, $10 million by Moreno Valley Unified and $56 million by Tustin Unified, according to reports gathered by the state’s Fiscal Crisis and Management Assistance Team.

Although the amounts are much larger in Los Angeles because of its size and demographic makeup, some other districts are proposing cutbacks that are arguably more severe. At least five, for example, are considering raising the 20-student class size in kindergarten through third grade, a state reform initiated during the boom of the 1990s. Los Angeles’ class sizes may increase, but only in the older grades, officials say.

The forces buffeting school budgets are a result of the normal economic swings that affect all tax-supported agencies. But they are compounded by the state’s enormously complex education funding scheme as well as a few cost factors that are unique to schools.

Schools take up the largest share of the state budget--roughly 40%--and therefore cannot be easily held immune from the cycle of recession and boom.

“When you have good times, spending on schools soars,” said Stephen Carroll, senior economist at the Rand Corp. think tank. “But the same budget can’t soar all the time.”

From the perspective of Los Angeles’ superintendent, the former governor of Colorado, it’s easier to administer a state budget than L.A. Unified’s.

“The finance is very much more perplexing here,” Roy Romer said. “At the state level, I had more flexibility to find cures.”

School districts have expenses they can’t always control, said Scott Plotkin, executive director of the California School Boards Assn. and a former consultant to the state Senate Education Committee.

The major one is teacher salaries, which come with less obvious costs such as built-in increases for seniority and educational advancement.

“Just about every school district in the state has its salary schedule on automatic pilot,” Plotkin said.

Those increases eat into a district’s state funding, which rises according to the cost-of-living index. In recent years, average staff increases have been in the 8% to 10% range, McFadden said. “When you get in a budget deficit, you have to look to lay off people--school counselors, psychologists and other specialized staff that assist kids in need.”

In fact, some say the biggest beneficiaries of the district’s spending over the years have been teachers. Their salaries comprise more than half of this year’s budget.

In Los Angeles Unified last year, three dissenting board members protested as irresponsible a new teacher contract that cost the district more than a 15% average increase in salary, benefits and bonuses.

But school district officials said the boost was needed to keep teachers’ pay competitive with other districts’ and to avert a threatened strike.

For their part, teachers say the district should be cutting consultants, lawyers and administrators rather than teachers or school costs.

“The district has gotten itself into a mess because they have done nothing since 1992 when they had to cut teachers’ pay to restructure the budget so that the classroom is the priority,” said United Teachers Los Angeles President-elect John Perez said.

The pressures on school district budgets, however, stem from more than staff salaries, Plotkin said. They face double-digit increases in health-care costs and utilities, he said. Workers’ compensation claims are also climbing nationally, as are unfunded federal mandates for special education.

This year, L.A. Unified budgeted $50 million more for special education, but because of mandated increases in services, had to spend $65 million, said chief financial officer Joe Zeronian.

L.A. Unified is particularly hard pressed. As it begins to open new schools to relieve pervasive overcrowding, its operating costs will rise even more.

The state’s method of dealing with these forces has changed radically in the last 30 years, from nearly total reliance on local property taxes to a complex funding model designed to assure schools a minimum share of the state’s budget.

The property tax system provided stable income but was grossly inequitable because communities with higher property values could easily pay for better schools.

A 1970s court decision forced the state to devise an equitable school funding system.

That system takes the property tax base from each district and adds to that a portion of state general funds that has gradually been adjusted over the years to reduce differences in per-student spending across the state.

Proposition 13, the 1978 initiative that slowed property tax growth, has increased the reliance on general state tax revenues, thus also increasing the vulnerability of school funding to economic swings.

Carroll of Rand thinks the euphoric spending during booms needs to be curtailed and the excess money put in reserve for the bleak periods that are sure to follow.

“Then, when the state budget tanks, even it out with the reserve fund,” he said.

Zeronian sees limits to how well that would work. The district built up a $600-million reserve, he said, but it wasn’t enough to stave off cuts.

“You dip into your reserve and have an unbalanced budget for a year or two and that keeps your programs going, but you can’t continue doing that. Eventually, at some point, you have to restrict programs or you can’t survive.”

More radical thinkers are calling for an entirely new model based not on the amount of money in the state pot from year to year, but on the calculated cost of providing the required number of classrooms, schools, counselors and other resources. The drawback is that it would require the state to come up with new taxes in an economic downturn to keep school districts whole.

Advocates of full school funding see the boom-bust cycle in a different light. During the best years, they say, school districts spend every available dollar to catch up for years of neglect. During hard times, they slip back again.

“The bottom line is that since Proposition 13, there has never been a good year for education in California,” said L.A. board President Caprice Young.

“You can argue over statistics of whether we are at or near the bottom. The fact is none of us who care about our kids want to be anywhere but near the top. We’re nowhere close.”