Economics 147

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Economics 147

• Winter 2005
• Lecture 17

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Outline for today

• History of school finance in California
• Overview of public education in California today

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Legislative timeline school finance in
California

• 1971 Serrano v. Priest (CA Supreme Court)
• Ruled that revenue per pupil must be equalized
  across districts
• 1978 Proposition 13 (referendum)
• Local property tax limitation measure
• 1979 Gann Initiative
• Each govt entity (state, local, etc.) must limit
  growth rate of real spending to growth rate of
  pop
• Would mean real per pupil spending frozen at
  1978-79 level
• 1980 Amended to exclude school districts

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Motivation for Serrano

• Before Serrano
• Spending correlated with local property values
• Low property value districts had to tax
  themselves at higher rates

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Source Sonstelie, Brunner, and Ardon.
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Source Sonstelie, Brunner, and Ardon.
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Source Sonstelie, Brunner, and Ardon.
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Source Sonstelie, Brunner, and Ardon.
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Source Sonstelie, Brunner, and Ardon.
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Serrano v. Priest

• CA State Supreme Court overturned lower rulings
  and ruled
• Education is a fundamental right
• Property wealth per pupil is a suspect
  classification
• Californias system was unconstitutional
• Did not rule that property tax cannot be used in
  some way

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Proposition 13

• Response to Serrano?
• Enacted June 1978
• Rolled back assessed property valuations to
  1975-76 level
• Valuations can grow at 2 per year
• Only can grow beyond that when actually sold
• Local property tax rate fixed at 1 (10 mills)
• CA went first, many states followed

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Enrollment growth

• Changes in CA law occurred while CA had more
  enrollment growth than rest of country
• 1980s CA enrollments ? 21
• Rest of US ? 4!
• Trends and comparisons depend on measure chosen
• Total education spending
• Per capita education spending
• Per pupil education spending

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CA school finance

• Why did average spending per pupil fall in the
  1970s and 1980s?

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from Silva and Sonstelie
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Bare-bones version of median voter theorem

• Make a lot of assumptions
• Then the outcome of majority voting will reflect
  the preferences of the median (not mean) voter

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Mean vs. median voter

• Income distribution is skewed towards right
• So median voter has lower income than mean voter
• Under local SF, avg median voters in districts to
  get mean voter in state ? mean educ exp in state
• Under state SF, median voter in state ? mean educ
  exp in state

income
median
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Silva and Sonstelie approach

• Break down changes in spending per pupil to those
  caused by
• (1) Changes in demand for education (numerator)
• Changes in tax price ? substitution effect
• Tax price how much you pay to get 1 more of
  spending
• Tax price fell on average so this should ? D for
  educ
• Change from local to state system ? income effect
• Mean voters income used to determine statewide D
  for educ
• Now it is median voters income, so this should ?
  D
• (2) Changes in enrollment (denominator)

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Silva and Sonstelie findings

• Decreased educ spending per pupil comes from both
  decreased spending total, and more pupils
• Changes in demand for education
• Income effect (? D) swamps price effect (? D)
• Changes in enrollment
• Account for significant share of decline also

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PPIC report
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PPIC
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PPIC
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PPIC
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PPIC