Publication Date: Wednesday, May 11, 2005
Guest Opinion: Even parcel tax falls short of meeting
projected Palo Alto school expenditures
by Raymond Bacchetti, Robert M. Rosenzweig and John
Tarlton
Residents of the Palo Alto Unified School District feel strongly about their
schools. Not surprisingly, they also feel strongly about their taxes.
When those two come together on the ballot, as they do in the June 7
election's Measure A parcel-tax proposal, it is the responsibility of the school
board, which is asking for the taxpayer's money, to justify the need for it --
and it is the responsibility of the voters to judge the validity of the
explanation.
The voters' task is especially difficult. The arguments for and against the
tax are technical and are accompanied by reams of data and projections that are
really just best guesses and thus inherently subject to challenge. Last year's
campaign for a parcel tax narrowly failed to win the needed two-thirds approval,
demonstrating how volatile the matter has become.
This year's decision is no less difficult for voters and no less consequential
for the future of our schools.
We have analyzed the recent history of school finances and projected
expenditures and revenues ahead through the 2010-11 school year, the six-year
life of the proposed $493 per year parcel tax, up from the present $293. We
independently examined district assumptions and made some modifications. We
present our projections as a way to help clarify the issues, not as an argument
for or against the tax.
Starting in 1997-98 at a district budget of $67 million, we charted the
actual district budget that charted a steep rise -- during boom years of student
growth and reopening of schools -- to the present $112.3 million, following a
two-year plateau at $108 million when $6.5 million was cut.
Our projections split into three tracks:
The first projects the cost of existing expenditures -- the "cost of staying
the same" without considering available revenues.
There would be no improvements in educational programs and services or
restoration of recent cuts, but we do include increases in the cost of goods and
services, salary increases consistent with inflation and negotiated contracts,
increases in health-benefit costs, and predicted enrollment growth averaging 2
percent a year.
Our second projection assumes passage of the parcel tax June 7, but falls
$8.3 million short of the first projection, reaching just $138.4 million in
revenues by 2010-11. We assumed a 3.6 percent rise in tax revenue instead of the
2 percent increase that the district uses for budgeting, and inflation-based
increases in state categorical programs and revenue from leases.
The district would need to juggle expenditures. It could do some but not all
of the following: restore some of the recent $6.5 million budget cuts, meet cost
and enrollment increases, provide cost-of-living raises, or keep up with the
rising cost of health insurance. We assume no program additions or improvements.
Our third projection shows estimated revenue if the proposed parcel tax fails
-- and the 2010-11 shortfall would then be $17.5 million, or $127.2 million.
It would require an immediate $5.5 million in budget cuts with no capacity to
restore any prior cuts. Over the long haul, the Board of Education would need to
make continuing cuts to keep expenditures in line with revenues.
Our projections expose two gaps: First, the parcel tax alone won't be enough
to meet the long-term expenditure projections and cuts will likely be necessary
even with increased efficiencies. Second, if the parcel tax again fails even
more substantial cuts will be needed to balance the budget between 2004-05 and
2010-11.
Increased revenues from existing tax sources do not appear to offer a secure
solution. The district is heavily dependent on property-tax revenues, over which
it has no control. Since property assessments lag actual increases in value, no
early relief seems likely, and the assessment of commercial property, which has
fallen in recent years, shows no signs of an early, large rise.
There will certainly be some one-time increases as new developments come on
line, but there is no bonanza in sight from property taxes.
Since some budget cuts seem inevitable even with passage of the parcel tax,
the crucial question becomes: "How large can those cuts be without doing serious
damage to educational quality?"
We do not know the answer. We offer, instead, a breakdown of the 2004-05
operating budget to show the areas that must take the largest cuts.
Instruction -- both regular and special ed -- takes 67.3 percent of the
budget, followed by instruction-related services (principals, curriculum and
instructional support) with 11.6 percent. The closely allied pupil services
(guidance, testing, food-related, athletics) account for 4.4 percent. General
administrations takes up 5.9 percent and maintenance and operations relating to
school facilities is 10.8 percent.
Because more than three quarters of the budget is devoted to instruction and
instruction-related costs, it is clear that any significant cuts will affect
educational programs.
And the recent $6.5 million in cuts have come mostly from the
non-instructional areas, narrowing the latitude there.
The decision a voter must make on the parcel tax requires balancing the
amount of additional tax that will be required of each family against the extent
of anticipated reductions in the educational budget.
Our purpose in putting this piece together is to step back from advocacy and
distill from the mass of available data those relatively few pieces we believe
the voters need to understand in order to cast an informed vote.
We do not claim to lack views of our own on the parcel tax, though we have
not discussed them among ourselves. Our conclusions are not intended to advance
pro- or anti-tax positions.
We simply believe that good decisions are produced when the voters' values
are augmented by the best information available.
Ray Bacchetti is a former Palo Alto school board member; Robert Rosenzweig
is a retired university administrator; and John Tarlton is a Palo Alto-based
developer. All are members of Palo Altans for Governmental Effectiveness. They
can be e-mailed c/o robertmr at mindspring dot com.
