After a quarter-century of explosive increases in California, charter schools experienced all-time lows in growth the last two school years. And charters may also be facing an era of much harsher treatment from school boards allied with teachers unions who more than ever see charters as taking away resources that should go to conventional schools.

That was many education observers’ takeaway this week from the Los Angeles Unified School Board’s decision to approve a local moratorium on approvals of new charters until their impact on the state’s largest district is freshly assessed. District leaders had agreed to pass the resolution as part of their deal with United Teachers Los Angeles to end a strike that shut LAUSD schools for six days earlier last month.

Charters are privately operated public schools that hope to attract students from regular schools with their freedom to follow different teaching regimens. Some also offer specialized language or academic programs. Most are non-union.

From 1992 to 2016, charter schools went from zero students to more than 600,000 – about 10 percent of total K-12 students in California. The last two years, however, there was less than 2 percent growth in the number of total charters for the first time.

Charters initially faced brisk opposition from the California Teachers Association and the California Federation of Teachers, which had heavy influence in many districts thanks to the board members that union local chapters helped elect.

But in 2000, California voters approved Proposition 39 related to school financing. One provision requires that “school districts make available to all charter schools operating in their school district … facilities that will sufficiently accommodate all of the charter’s in-district students, and that facilities be ‘reasonably equivalent’ to other classrooms, buildings, or facilities in the district,” according to the state Department of Education page outlining how school districts should comply with the state law.

CalSTRS bailout spurs scrum for limited resources

Proposition 39 gave charters a potent tool to fight attempts to block them, leading to something of a cease-fire from unions. But the passage in 2014 of the California State Teachers’ Retirement System bailout not only isn’t having the effect of stabilizing school finances that some hoped, it’s created a more intense battle for district resources than ever.

Under the bailout, total contributions to CalSTRS will nearly double from 2013-14 to 2020-21 as hikes are phased in. But districts are required to contribute 70 percent of the new money – or close to $4 billion when the phase-in ends. Even with two more contribution hikes awaiting in 2019-20 and 2020-21, many districts across the state are already struggling to make their budgets balance.

That list starts with L.A. Unified, whose board was warned by the Los Angeles County Office of Education that the district couldn’t afford the two retroactive 3 percent raises it gave teachers to end the strike. The county office raised the possibility that the district’s finances could be so broken by 2020-21 that it could be subject to an outside takeover based on a state law requiring districts maintain minimum reserves.

L.A. Unified leaders hope to get the state Legislature to provide more funding for next school year. But the L.A. teachers union also wants the district to stop providing so much funding to the district’s 225 charters, which teach 112,000 of the district’s 486,000 students.

The wild card in a new cold war between teachers unions and charters is Gov. Gavin Newsom. While he has often praised charter schools as an important part of public education, he said while campaigning last year that he would sign legislation “requiring charter schools to be more transparent with their finances and operations and to adhere to stricter conflict of interest rules on their governing boards,” according to the EdSource website.

Charter school critics see this as an obvious response to the messy finances and scandals seen in some charters. Charter advocates see it as an ominous first step toward rolling back the charter movement. They backed former Los Angeles Mayor Antonio Villaraigosa in the 2018 governor’s race.

Schools and universities from the smallest unified school district to the top-tier university systems in the state issued more bonds in 2015 than they had i

A CalWatchdog analysis of data for the year shows 465 securities issuances from education entities. Some were refunding issuances — refinancing existing bonds — but the majority were general obligation bonds, which rely on taxation for repayment.

Most of the issuances came from school districts, charter schools and education districts, while 64 were directly tied to a single community college district or public university system.

A driving factor in the boost in issuances is the increase in real estate values in much of the state, said Kevin Carlin, a San Diego-based public interest attorney with a public works construction background.

“There is a limit in bond measure (regulations) that says you can’t issue more than a certain percentage of assessed value in a district. So once you get maxed out on the value limit, you have to wait for those limits to go up.”

The voter-approved bonds are part of a continued spending surge on education in the state.

In November, voters will decide on $9 billion in school construction bonds. It’s the first statewide education bond measure since 2006. The issue is propped up by big money from the construction and engineering industries and so far has drawn little opposition. The measure was qualified for the ballot via a push from the California Building Industry Association.

Bond measures are easier to pass now than they were before 2000, when Proposition 39 allowed for passage with 55 percent of the vote rather than two-thirds, as before, said Mike Turnipseed, a watchdog in Kern County.

“The threshold was changed, and today, over 80 percent of bond proposals are approved,” he said. “If cities want to issue bonds, it takes the two-thirds approval, but not schools.”

With the bond issuances come big projects. Add to that numerous funding mechanisms. The state’s School Facility Program earlier this year signed off on $113.6 million for 22 districts to use for various voter-approved projects. The program helps school districts with matching funds or to reimburse districts for finished endeavors.

Higher education spending grows faster than enrollment

At California State University in Sacramento, where enrollment grew 2 percent between 2003 and 2014, a $91 million science building has been approved.

The University of California Board of Regents approved spending $7 million for what will eventually be a $150 million research building for the Riverside campus. It will house 40 to 50 new faculty members. Enrollment at UC Riverside has increased 2 percent since 2012. Full-time employee ranks, meanwhile, have grown 20 percent.

“The only way to best serve our students and California is to grow our faculty,” UCR Chancellor Kim A. Wilcox told a subcommittee of the Regents at a September meeting.

The Milpitas School Board in San Jose agreed to pay architectural firm Gould Evans $2.2 million for the design of an elementary school. The school board is set to purchase 6.7 acres from the city for $21 million.

The school district in Oakland this month issued a request for proposals to upgrade kitchens in 16 schools with a budget of $15 million.

Meantime, schools and colleges continue to hire.

The City College of San Francisco will bring on 55 new full-time faculty and 46 administration workers.

University of California regents in July approved salary increases to executives. One executive, UC Berkeley Chancellor Nicholas Dirks, received a 3 percent increase to $516,446 annually.

RELATED:  Developer lobby promoting $9 billion education bond

Between 2001 and 2014, California voters approved $146.1 billion in bond debt for school and college districts, according to a study published in July by the California Policy Center.

“The idea that people are forming is this assumption that property values will skyrocket forever,” said Kevin Dayton, the author of the study. “That way it won’t be so painful for the kids to pay it off as adults. But this is all built on predictions and we have no idea if this will come true.”

The bond debt comes in addition to the billions of dollars handed over to school districts from the passage of Proposition 30 in 2012 which included an additional levy on income over $250,000 as well as a ¼ cent increase in the state sales and use tax.

The revenue is earmarked for education. To date, $13.1 billion has been raised through the taxes.

Many of the schools are spending the money on salaries and benefits, according to the state’s Proposition 30 tracking site. For example, at Harnett Community College District, $5.3 million went to salaries and benefits while $103,000 went to athletics, art, diesel mechanics and a theater group, Western Stage.  

The figures cover the 2012-2013 school year; the usage report for the 2013-2014 year is not completed yet.

Steve Miller can be reached at 517-775-9952 and avalanche50@hotmail.com. His website is www.Avalanche50.com

Previous bond oversight language was far stricter. It only allowed the use of long-term borrowing to pay for school buses if there were a reasonable expectation that they would last at least 20 years. But in Proposition 39’s wake — especially when operating funds were squeezed because of the state revenue plunge from 2008-2012 — bonds have been used for everything from graffiti cleanup, minor repairs and painting to purchases of short-lived laptops, iPads and other tablet computers.

SEC wades into LAUSD mess

But now regulators with the federal Securities & Exchange Commission are questioning the propriety of what California school bonds have been used to buy. Their angle isn’t the legality of these uses under state law. It’s whether these uses conform with what bond buyers were told — specifically when it comes to L.A. Unified’s troubled iPads-for-all program:

The federal agency is charged with protecting investors and maintaining fair, orderly and efficient markets. Its enforcement division frequently looks into “misrepresentation or omission of important information about securities,” according to the commission.

With the help of an outside law firm, L.A. Unified prepared a presentation, dated March 31, that outlined measures it took to inform the public and potential investors about how the taxpayer-approved bond funds would be spent. …

California law allows school construction bonds to be spent on technology; districts also list the intended uses of bond funds in ballot materials available to voters.

L.A. Unified clearly designated funds for technology, but did not mention tablets. At the time of the district’s most recent bond issue, in November 2008, iPads were still two years away from entering the marketplace.

But officials have maintained that tablets are a modern equivalent of the traditional computer lab and therefore a legal and appropriate use of bond funds.

That’s from the L.A. Times.

Boilerplate bond language used across state

Though the SEC probe is informal for now, it could have alarming implications for school districts throughout California that have used 30-year borrowing on short-lived electronics. That’s because the bond descriptions that LAUSD provided to potential buyers were boilerplate of the sort routinely used by all districts.

If the SEC decides the language is so vague as to be illegally deceptive, that would be a problem for dozens of school districts, only starting with LAUSD and the state’s second-largest district, San Diego Unified.

It is easily demonstrated that in some cases, no, revenue wasn’t depressed by a tax hike. Marginal increases in state sales taxes aren’t generally driving revenue decreases.

But it is also easily demonstrated with some other higher taxes that individuals and businesses do in fact respond with changes in behavior that decrease economic activity.

Incentives drive behavior

It appears a ballyhooed 2012 ballot measure closing a supposed corporate tax ‘loophole’ falls in the latter category. This is from Cabinet Report:

“Proposition 39 or the California Clean Energy Jobs Act changed a corporate tax law to require multi-state or out-of-state businesses to source their sales of services and intangibles to the state where they were sold, rather than the state where the majority of work to produce them was performed. As a result, supporters of the plan expected that California – the nation’s biggest consumer – would see a big uptick in revenues. …

“Anti-tax advocates have long argued that imposing new taxes on businesses and higher wage earners hurts California in the long run because those targeted adjust their practices or relocate to avoid paying more. … It is an issue that the Brown administration is reportedly keeping a close eye on because of the income tax hike another November measure – Proposition 30 – imposed on the state’s top earners.

“Proposition 39 was aimed at corporate taxes, but some of the same issues are at work.

“Based on 2010 income tax data, the Brown administration estimated that Proposition 39 would bring in $928 million in 2013-14 and nearly $1 billion annually the next four years. But 2011 data showing a drop in those revenues forced the governor to revise Prop. 39 figures downward to $675 million in the current year and $726 million in 2014-15 budget.”

Runner is right

Cabinet Report puts this in perspective by talking to former state Sen. George Runner, who’s now on the Board of Equalization:

“We do a terrible job in all of our estimating of doing any kind of dynamic analysis that takes into consideration what the behavior of a taxpayer’s going to be. … One of the issues I always keep telling people is that tax policy changes behavior, and as a result of that, often times you’ll find government over estimates what it is that revenues are going to be because they forgot to or they can’t, sometimes, take into consideration the behavior of the taxpayer.”

Or maybe it’s that they refuse to “take into consideration the behavior of the taxpayer.”

By Katy Grimes

With the 2012 election in full swing, everyone’s focus seems to be on the candidates and ballot initiatives.

We are inundated with ludicrous, often irrelevant political advertising. But what happens after the election? What happens if President Obama gets reelected and California passes all of the tax increase ballot measures, along with the 35 local sales tax increase measures?

The presidential race

Should Obama win reelection, he will still be stuck with a Republican U.S. Congress, and possibly even a Republican Senate. Either way, expect to see more of the last four years of gridlock and executive orders.

Obama will continue to “look at how we can work around Congress.” And for that

work-around, expect to see many more executive orders. Obama signed 140 Executive Orders during his first term.

Because of the country’s $16 trillion debt, and the reckless spending habits of the Obama administration, some in the finance world expect that the entire U.S. economy will crash if President Obama is reelected.

If Mitt wins…

If Mitt Romney wins, he has promised to repeal Obamacare on day two, and begin immediately to undo some of the business killing policies put in place by the Obama administration.

But perhaps even more importantly, Romney would eliminate and replace the entire cabinet of far-left extremists that Obama appointed.

Gone will be some of the more notorious statists with unchecked power:  Energy Secretary Steven Chu, Secretary of Health and Human Services Kathleen Sebelius, Homeland Security Secretary Janet Napolitano, Secretary of the Interior Ken Salazar, and Secretary of State Hillary Clinton.

What happens to California?

California already levies a 7.25 percent general sales and use tax on consumers, which is the highest statewide rate in the nation, according to the California Taxpayers Association.

California’s statewide gasoline taxes and fees total 48.6 cents per gallon, the second highest in the nation. Many counties add local sales taxes on top of that.

California’s personal income tax has the second-highest top tax rate, at 10.3 percent,  and one of the most highly progressive structures in the nation.

Only eight states have a higher corporate tax rate than California’s 8.84 percent flat rate, which CalTax reports is the highest corporate tax rate in the Western states.

Even with Proposition 13, California’s property tax rate is 14th highest in the country. While each tax may or may not be the highest, put them all together, and Californians are living in a very high tax state.

According to the California Taxpayers Association, “California’s business tax climate will worsen and the state will have a tougher time attracting and retaining jobs,” if Propositions 30 and/or 38 are passed by voters.

In the 2013 State Business Tax Climate Index, a new study by the Tax Foundation, “a survey of all 50 states, ranks California’s tax structure 48th — worse than all the other states except New Jersey and New York.”

The study  found that, if both Propositions 30 and 38 are approved, the results will “reduce California’s score in individual tax and overall.”

“The evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth,” according to the report.

Perhaps one of the most important issues to remember is, “States do not enact tax changes (increases or cuts) in a vacuum,” according to the Tax Foundation. “Every tax law will, in some way, change a state’s competitive position rela­tive to its immediate neighbors, its geographic region, and even globally. Ultimately, it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.”

This will impact business even more, including business decisions, job creation and retention, business location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy.

“Most importantly, taxes diminish profits,” the Tax Foundation reports. Taxes cut into a business and often prevent the business from reinvesting back into the community.

The Tax Foundation explains, “If taxes take a larger portion of profits, that cost is passed along to either consumers, em­ployees, through lower wages or fewer jobs, or shareholders. Thus, a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.”

It’s that simple, and that ugly.

Ending union dominance in CA

Proposition 32 would prohibit corporations and public employee unions from making direct contributions to political campaigns. And, it would ban automatic payroll deductions by corporations and unions of employees’ wages to be used for politics.

Should Prop. 32 pass, it would level the political playing field and give grassroots organizations and voters a political voice in California once again.

Labor union leaders call Prop. 32 a fraud, and claim that its backers have exempted themselves from the new rules. But with most of the Democratic state legislators handily assisted into office by the state’s  public employee unions, it is no wonder labor leaders are in a frenzy.

This should make every working man and woman in California ecstatic. If Prop. 32 passes, union employees will get to keep more of their pay, and unions will no longer have such a huge financial influence in elections.

Real reforms?

Proposition 31 is packaged with some real reform measures in it, but there are too many flaws in the measure for the reforms to really matter. However, if it passes, expect another layer of government bureaucrats added to California’s already top-heavy system. Prop. 31 would also prohibit future legislation on reducing taxes.

According to CalTax, Prop. 31 would “effectively prohibit legislation (including the state budget) from reducing taxes by $25 million or more unless the same legislation included a tax increase or spending cut.”

Prop. 39: Another corporate tax

Proposition 39 would require businesses headquartered out of the state to use the “single sales factor method,” in which their tax liability is based solely on their amount of sales in the state.

Prop. 39 is backed by wealthy hedge fund manager Tom Steyer, who stands to benefit from the passage of the measure. While the state stands to collect about $1 billion in added revenues each year, half of that money must be used on the Clean Energy Job Creation Fund for the first five years. After five years, all of the additional tax revenue would go to the state’s General Fund.

Steyer, who is pushing hard for passage of Prop. 39, is the co-chairman of the Clean Energy Job Creation Fund, and is heavily invested in green, clean-tech businesses, which many have said potentially stand to benefit somewhat from the $1 billion of additional tax money.

The measure is written to sound as if big business has a sweetheart deal with the state. But anything designed to squeeze more taxes out of any business right now could devastate California’s economy even worse.

Should Prop. 39 pass, expect to see more business shrinkage, jobs lost, and multi-state businesses pulling operations out of California.

Local tax increase measures

Thirty-five California cities have tax increase measures on the ballot, totaling a whopping  241 tax and bond measures. Of the 2012 local tax elections, the majority are school bonds.

There are nine local ballot measures proposing a 1 percentage-point increase in the sales tax, which would increase the tax on gasoline significantly. That would be on top of the 7.25 percent state sales tax levy, plus any local sales taxes already on the books. Cha-ching.

Final blow to California economy

Some cynics suggest that we should just allow everything to pass in order to speed up California’s demise. The more optimistic folks believe that California could be turned around, but only if unions are no longer running the state’s Democrats.

If these ballot measures pass, there will be much higher unemployment, and businesses large and small will not reinvest. Some businesses will shrink even more, some will close and even more will move, if possible. Taxpayers will be squeezed even more, shrinking everyone’s take home pay.

However, on a lighter note, Californians have rejected the last eight tax increases on the ballot. While another rejection of tax increases sends a loud message to Gov. Jerry Brown, he and the Democrat-controlled Legislature have demonstrated that they are not beholden to voters; their constituency is the unions.

However, if Prop. 32 passes, California voters and taxpayers just might get the ear of the Democrats.