An aerial view of San Jose, California
An aerial view of San Jose. Photo courtesy of The 111th Photography.

Santa Clara County may lose millions of property tax dollars to charter schools while teetering on the edge of a fiscal cliff.

That could happen under a law change that Gov. Gavin Newsom wants approved to tackle the state’s own cash-strapped budget this year. It stems from a yearslong fight between the state and five Bay Area counties whose high property values have brought in more than enough tax dollars to fund public schools — leaving an excess for other public services. But state officials say those counties have wrongfully excluded charter schools from this pot of cash, leaving the state on the hook.

Changing that could strip $36 million annually from Santa Clara County’s ability to fund critical safety net programs while absorbing its own $250 million budget hole formed by a slow housing market.

“We would have to identify and cut $36 million in programs and services,” County Executive James Williams told San José Spotlight. “It would cost an additional $11 million out of the cities in our county, and this is ongoing money — meaning we’re talking about an amount that’s going to grow every year.”

Newsom’s charter school request was made in January, when he released his budget proposal for the 2024-25 fiscal year. But it wasn’t reflected in the state Senate and Assembly’s own joint budget proposal released Wednesday. Now it may be one of the governor’s conditions for signing any agreement by the June 15 deadline.

“It’s definitely still a concern,” Williams said. “We are very pleased that the Legislature is pushing back on this proposal. We hope they hold firm. Everything now depends on negotiations between the governor, the Assembly speaker and Senate pro tempore. There’s a lot at stake.”

Assembly Speaker Robert Rivas, whose district includes Santa Clara County, did not respond to requests for comment.

Holding the line

The four other counties in addition to Santa Clara — Marin, San Francisco, Napa and San Mateo — would have time to prepare for the change if approved, according to H.D. Palmer, spokesperson for the State Department of Finance.

“For more than 30 years, these revenues have been directed to fund K-12 schools, but charter schools have been recently left out of the equation. This proposal would ensure that all local educational agencies receive these funds,” Palmer told San José Spotlight. “Furthermore, this wouldn’t take effect until July of next year, which gives local officials ample time to plan.”

A fact sheet provided by Santa Clara County officials argues the governor’s proposal would jeopardize services such as supportive housing for foster youth, respite care for foster parents and services at the Women and Children’s Center at Valley Medical Center.

The onus of public school funding has fueled a half-century tug-of-war between the state and local communities.

California’s most famous, influential ballot measure, Proposition 13, which limited property taxes to 1% of the assessed value, shifted much of the school funding responsibility to the state in 1978. In 1988, Proposition 98 established a complex set of formulas for how state dollars contribute to schools and community colleges. It was supposed to set a minimum funding guarantee every year.

But four years later, the state budget was in the red. Proposition 98 wasn’t enough, so lawmakers took even bigger portions of local property tax revenue.

That forced cities, counties and special districts to deposit the redirected money into a countywide account known as the Educational Revenue Augmentation Fund (ERAF), which would be allocated to schools and community colleges. Any remaining money is returned to a county’s non-school agencies to fund other public services and programs.

“From day one, ERAF was all about using local government money to pay for the state’s constitutional obligation under Prop. 98 to fund schools,” Williams said.

Yet the beginning of ERAF coincided with the establishment of charter schools in 1992 — and charter schools are not explicitly covered in ERAF’s funding rules.

That’s where the current dispute comes in. Newsom’s budget proposes to change state law to clarify that charter schools are eligible to receive ERAF money, as the state counters its own $73 billion deficit this year.

“The state has financial problems, but so do we,” Santa Clara County Assessor Larry Stone told San José Spotlight. “It is a significant financial problem if the governor is successful.”

Forfeiting the excess

After discovering the five Bay Area counties were excluding charter schools at least since 2019, lawmakers asked State Controller Betty Yee to issue guidance on ERAF and take legal action against counties that didn’t follow it.

But in 2021, Yee’s guidance allowed counties to continue excluding charter schools. In response, the California School Boards Association sued Yee’s office, arguing charter schools aren’t excluded from Proposition 98 funding. The trial and appellate courts rejected the lawsuit.

Troy Flint, spokesperson for the California School Boards Association, said the organization wholeheartedly supports Newsom’s latest proposal.

“If charter schools are, in fact, public schools, then the average daily attendance for charter schools should be included in the ERAF calculations that determine this slice of education funding,” Flint told San José Spotlight. “The Legislature created ERAF to meet its constitutional funding obligations to public schools and we cannot accept an end-around that sets the precedent of shortchanging students.”

Williams said there’s already a state mechanism for charter school funding, where the schools receive payments from their host school district based on average daily attendance. If it’s not enough to meet the charter school’s minimum funding level, a county fact sheet argues the state is supposed to make up the difference.

“We will pursue every channel to preserve this vital funding and hope the Legislature puts this bad idea to bed for good,” Williams said.

Contact Brandon Pho at [email protected] or @brandonphooo on X, formerly known as Twitter.

Comment Policy (updated 5/10/2023): Readers are required to log in through a social media or email platform to confirm authenticity. We reserve the right to delete comments or ban users who engage in personal attacks, hate speech, excess profanity or make verifiably false statements. Comments are moderated and approved by admin.

Leave a Reply