PPIC examines use of parcel taxes

From the Public Policy Institute of California

Lowering the vote threshold for passage of local school parcel taxes would likely allow far more to pass. But there is no evidence that it would expand their use beyond the sort of wealthy Bay Area school districts that already have them. These are the key findings of a report released today by the Public Policy Institute of California (PPIC).    The report assesses the potential effect of reducing the vote required to pass these taxes from two-thirds to 55 percent—a proposal the state legislature has been discussing. Although a parcel tax is one of the only local revenue options available to school districts, these taxes are not widespread. Only about 10 percent of districts have passed one, and the money raised amounts to less than 1 percent of total K–12 revenue.

For the full report, click here.

Parcel taxes have been approved mainly in school districts in the San Francisco Bay Area. Overall, the Bay Area was home to more than 80 percent of school districts with parcel tax revenue in 2010–11. Districts with parcel taxes tend to be smaller and have fewer school-age children per household. They also tend to have fewer low-income students, students of color, and English Learners. Median household income averages more than $85,000 in districts where these taxes have passed, compared with about $60,000 in districts that have never proposed a parcel tax.

A lower vote threshold for parcel tax passage is unlikely to do much to bridge these basic inequalities, according to report coauthors Eric McGhee and Margaret Weston. McGhee and Weston, PPIC research fellows, drew their conclusions after examining school parcel tax measures since 1995. Had the 55 percent vote threshold been in effect during this time period, the passage rate of parcel tax measures around the state would have been much higher—89 percent rather than the actual 59 percent. But the measures that cleared the 55 percent threshold were proposed by districts that closely resemble—in their finances, demography, and location—the districts in which parcel taxes actually passed. These districts include Pleasanton Unified, Millbrae Elementary, and Santa Rosa City Schools.

In contrast, the districts in which tax measures failed to get 55 percent of the vote were far more disadvantaged. These districts include Long Beach Unified, Los Angeles Unified, and San Diego City Unified.

“It is hard to say that lowering the vote threshold for parcel tax passage would expand their reach into new areas of the state or to more disadvantaged students,” McGhee said. “This change would likely make it easier for more of the same kind of districts to pass parcel taxes and for districts that already have them to pass more.”

The authors note that districts with parcel taxes may also have higher costs. Because they tend to operate in higher-wage regions of the state, these districts may need extra revenue to cover higher salaries.

To help assess the impact of changing the vote requirement for parcel taxes, the PPIC report also looks at what happened after California lowered the threshold for school construction bonds—from two-thirds to 55 percent—in 2000. After that change, the number of successful bond measures and the amount of money in each bond increased. But there is no clear evidence that the change encouraged more districts to put bond measures on the ballot.

The authors note that even though a lower vote threshold would likely benefit only wealthy districts, it could be helpful at a time the state is implementing a new statewide school finance system. This system directs more revenue to districts with many disadvantaged students while allocating to other districts just enough money to return to pre-recession funding levels. Giving wealthier districts more control over their finances could help ease the transition to the new system.

The report, Parcel Taxes for Education in California, is supported with funding from the S. D. Bechtel, Jr. Foundation.

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Ed’s Note: PPIC provides independent, objective and nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.