Revamping California's Education Finance System: Education Leaders Need to Understand How the State Got into This Budget Mess in Order to Craft Long-Term Solutions That Provide School Districts with Greater Stability

By McFadden, Brett | Leadership, March-April 2003 | Go to article overview

Revamping California's Education Finance System: Education Leaders Need to Understand How the State Got into This Budget Mess in Order to Craft Long-Term Solutions That Provide School Districts with Greater Stability


McFadden, Brett, Leadership


California's budget crisis is topic No. 1 in Sacramento and throughout the golden state. The complexity and enormity of the problem has engulfed virtually every aspect of public policy discourse. Hardly a day goes by without a newspaper article or television broadcast focusing on the state's budget woes and its impact on individuals, programs or specific locales.

And why not? California's economy and budget have been on a roller-coaster ride. Over the past three years, California has gone from record level budget surpluses to unprecedented budget deficits. It was not too long ago that our state's economy was riding the wave of the dot-com and high-tech craze, and reaping the benefits of their economic windfalls. As dramatically as the economic boom began, it ended, sending the state's revenues and budget into a multi-year tailspin.

How and why did this occur? How did it get so bad, so fast? These are important questions fin anyone affected by the state budget. For K-12 educators, it is imperative that we understand how we got into this mess in order to craft policies to get ourselves of it.

More importantly, understanding the characteristics of California's tax and revenue structure is key to designing long-term solutions that provide school districts greater stability and freedom from the state's economic ups and downs.

This article will focus on why California's budget condition went from boom to bust in such a short time. Attention will be given to how the state's revenue structure contributed to the problem, and what impact it has had on education finance. Finally, possible solutions and options for the K-12 education community and individual school districts will be explored.

How did we get into this mess?

When you consider the state went from a $13 billion budget surplus in 1999-00 to an estimated $36.4 billion deficit for 2003-04, that's a good question to ask. The culprits behind this problem have been the nature of the economic downturn and our state's revenue structure--particularly the types of revenues we rely on to pay for public services.

Revenue volatility has long been a characteristic of California budget making. Tax receipts rise during good economic times and fall during periods of decreased economic activity. Such volatility should not come as a surprise when you consider the dynamic nature of California's economy and the fact that a majority of our state taxes are closely linked to cyclical variations in the economy.

In recent years, however, the cyclical nature of the state's revenues has become exacerbated due to changes in the California economy and the revenues that are derived from it. During much of the 1990s, the high tech sectors of the economy realized significant growth and development. California realized a higher benefit from this growth, since a large percentage of high tech firms and businesses are located in the state.

Job growth and salary/benefit compensations within this sector were some of the highest of any segment of-the economy. As a result, personal income and the related economic activity associated with higher incomes increased dramatically throughout the last half of the 1990s.

The impact of these economic changes increased exponentially due to California's progressive personal income tax structure. Under this structure, higher income levels are subjected to higher tax rates. As a result, revenues have a tendency to grow faster than income during economic expansions, and decline more than income during periods of economic recession.

Although revenue volatility has always been around, it increased in the late 1990s. Year over year revenues increased by 23 percent in 1999-00, but then fell to 14 percent in 2001-02 (LAO, 2002, p. 38). Such fluctuations had not been seen since the early 1960s.

Over-reliance on personal income tax

With recent changes in California's economy came changes in the types of revenues the state receives. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Revamping California's Education Finance System: Education Leaders Need to Understand How the State Got into This Budget Mess in Order to Craft Long-Term Solutions That Provide School Districts with Greater Stability
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.