California’s Per Pupil Spending

David Crane
Lecturer and Research Scholar at Stanford University and President of Govern for California

New Haven Unified School District students are finally returning to school this week after the district and teachers reached agreement on a new contract. But a close vote and angry words are signs no one is happy. The settlement is temporary, just as in LA and Oakland earlier this year. That’s because the district and the teachers want more money but the state already boosted school spending, already raised taxes, and already moved higher among US states in per pupil funding.

California’s per pupil spending has risen  >50 percent this decade:

The top income tax rate was raised to 13.3 percent in 2012:

Because California taxes capital gains at that same rate and the country has enjoyed a ten year bull market, state tax revenues climbed to record levels:

And according to a 2018 report from the Legislative Analyst’s Office, “California per-pupil spending ranks in the middle among the states.”  Because that assessment was based on 2014-15 and the state’s per pupil spending has grown 25 percent since then, the LAO added that “given California has increased school funding significantly [since 2014-15], its ranking likely will increase as new data are released over the next few years.”

Yet New Haven Unified reduced spending on teacher salaries:

That’s because New Haven had to boost spending on retirement costs:

If schools couldn’t increase spending on teacher salaries during a ten-year bull market and after a 30 percent tax increase and >50 percent increase in state revenues and per pupil spending, how are they going to boost spending on teacher salaries going forward?

They can’t — until they reform retirement spending. New Haven’s pension costs grew because state officials were too afraid of special interests to boost pension contributions in 2006. Had they done so at that time there would be no pension crisis now. But they didn’t — and now the solutions are much harder because pension liabilities accrete at a high rate.

Unless state legislators reform retirement costs, new money will not reach teachers. To reform retirement spending, lawmakers will have to empower and encourage school districts to suspend automatic pension increases, reduce un-accrued pension rates for years not worked, and means-test retiree health insurance subsidies. To save schools, California’s legislators will have to exhibit courage their predecessors lacked last decade.

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