Tax Increase for Education Initiative, sponsored by Molly Munger, daughter to billionaire Charles Munger of Berkshire Hathaway fame, seeks to increase California’s state income tax rate for residents making over $7,316 per year for the next twelve years. Ranging between a 0.4% and a 2.2% increase dependent upon income, the initiative hopes that California can collect between ten and eleven billion dollars in added revenue, a number that they expect to increase over time. The initiative would earmark 85% of the anticipated revenue toward additional funding of K-12 schooling, and 15% toward early care and education programs, after a portion of it has been used to pay back some of the state’s debt.
California Tax Increase Initiative, sponsored by Governor Jerry Brown, hopes to circumvent partisan gridlock in the state assembly by putting a tax increase to a direct vote this November. The initiative seeks to increase the personal tax rate on residents making over $250,000 a year for the next five years, as well as to increase the sales and use tax by half a cent for the next four years. 89% of the anticipated three to seven billion dollars a year would be allocated towards K-12 schooling, and 11% of it would be allocated towards community colleges.
Increased Income Tax for Those Earning Over $1,000,000 Initiative, sponsored by the California Federation of Teachers (CFT), seeks to increase the personal income tax on those making over $1,000,000 by 3%, and on those making over $2,000,000 by 5%. The initiative estimates anywhere between six and nine billion dollars in added revenue the first year, between four and six billion dollars the following year, and expects that number to rise in later years. Of the increased revenue, 36% would be allocated towards K-12 schooling and 24% would be allocated towards public colleges. CFT has announced that they’re working with Governor Brown to consolidate the two initiatives, but are keeping this one alive in case the new proposal isn’t progressive enough.
It’s not difficult to see how these three initiatives with similar end-goals would split Californians’ support. This has led various political pundits to ponder which initiative will work best, but the most obvious question remains unasked: are any of these worth backing?
California, with a state budget of ninety-six billion dollars, already spends half of it on education. Thirty-six billion of those dollars are spent on the K-12 education of over six million students, yet we clock in at a mere 77% literacy rate. In comparison, India spends twelve billion dollars on education, coming in at 76% literacy, and China spends thirty-two billion dollars, coming in at 94% literacy. So how is it that we spend more, yet see worse results?
All three initiatives seem to argue that California simply does not spend enough on education, and they use various statistics to paint that picture. But it is an incomplete one. For example, Molly Munger’s Tax Increase for Education Initiative cites that California ranks 47th in per-pupil funding in the United States. However, that rank fluctuates from 28th to 48th based on the year, adjustment based on The Comparable Wage Index, and whether or not the source includes federal funding for education. Even so, this fails to give us the actual per-pupil funding, as it does not separate the bureaucratic and administrative costs, as well as waste in the system.
An average California class seats between 20 and 30 students, which means an estimated allocation of $200,000 to $300,000 for each class (using $10,259 federal-inclusive per-pupil funding figure from non-partisan organization, EdSource). The average California schoolteacher salary, however, is approximately $60,000, which leaves $140,000 to $240,000 that isn’t directly impacting students. While some administrative cost is necessary and unavoidable, the bureaucracy in the public school system makes it impossible to cut waste therein. CalTax, a nonpartisan research and advocacy association, lists a slew of abuses and wastes within California’s public education system, including continued renting of vacant buildings, hiring six-figured public relations spokesmen while laying teachers off, frivolous union-related lawsuits, and more.
And while those costs keep increasing, productivity in education has decreased in the last few decades. According to senior economics writer for the Wall Street Journal, Stephen Moore, “Over the period 1970—2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington.” Unfortunately, it’s nearly impossible to punish
this drop in productivity, as it costs anywhere between $200,000 to $500,000 to fire a bad teacher in the state of California, as per a May 2009 L.A. Times article. Even when they are fired, it’s unlikely that their pensions will be suspended. The recent L.A. Unified School District teacher under fire for sexual abuse is yet another byproduct of the overly complex bureaucracy within the public school system, not to mention the lack of oversight despite the large administrative costs.
Another problem with these initiatives is that their stated fiscal impacts use untested numbers. In fact, they are contrary to research done by U.C. Berkeley professors Christina Romer and David Romer for their paper, The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks: “Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent.” Considering that California is the ninth-largest economy in the world, weighing in at $1.9 trillion, it’s not much of a stretch to treat its gross state product as the gross domestic product. A ten billion tax, as at least one of the initiatives is banking on, equals a tax of a half a percent of the GSP. If this leads to even a one percent dip, the state loses out on nearly twenty billion dollars in tax revenue.
The earmarked ten billion by Molly Munger’s initiative, then, puts the state into further debt.
Even though the other initiatives calculate smaller returns, the truth is that those numbers are purely theoretical.
All of these demand a thorough questioning of the old adage that increased state spending guarantees higher quality of education, or even greater equality of education. California already outspends bigger economies on its students, yet lacks the results those economies have been able to provide. Will more spending actually improve that? Or will it lead to more waste in the system? And what happens if, as Romer and Romer predicted, revenues drop?
Students will suffer even more with deeper cuts to education. What needs to happen, then, is a comprehensive overhaul of our current educational system that addresses bureaucracy and wastes therein, so as to better utilize the funds already in place. A greater focus on oversight would be far more welcome that increased taxes, comforting parents and taxpayers alike that accountability is a priority. Until then, K-12 education, and specifically the students in California public schools, will continue to suffer.
Arpit Mehta is a graphic designer and photographer based in California with an interest in politics and entrepreneurship. He hopes to be directly involved in the political system one day.