Initiative: $10B for K-12, preschoolMolly Munger's plan: Raise income tax
An initiative that would raise $10 billion for K-12 education and preschools by raising the state income tax, primarily on the rich, will be submitted to the Attorney General’s office for review this week, the first step for placing it on the November 2012 ballot. The initiative would target low-income students, who’d get a larger piece of the funding.
The Advancement Project, a national civil rights organization that’s been active in California, is sponsoring the initiative. Its primary creator and financier at this point is Molly Munger, a wealthy Los Angeles civil rights attorney who co-founded the Advancement Project. The daughter of Charles Munger, Warren Buffett’s investment partner and vice chairman of Berkshire Hathaway, she says she and others will put up the millions of dollars needed to qualify and promote it. The California State PTA has already endorsed it exclusively – ahead of other tax initiatives for schools that are being floated about.
Despite a flagging economy and an unemployment rate stubbornly in the double digits, supporters of more money for schools say they’re heartened by recent polls showing Californians are disturbed by severe cuts to public schools and are willing to pay higher taxes. That includes one by pollster Mark Mellman for the Advancement Project that found that 57 percent of very likely voters would favor its plan, with a third of respondents opposed and 9 percent undecided, a result that “stunned” her and “suggests a once in a generation opportunity,” Munger said.
Last week the Think Long Committee for California, a tax reform group led by billionaire Nicolas Berggruen, also floated a plan to raise an additional $10 billion, but only $5 billion would go to K-12 schools and community colleges, and it would do so primarily by extending the sales tax to services, from car washes to attorney fees, while lowering the personal and corporate income tax rates.
The state’s 5 percent personal income tax raises about $50 billion; Munger’s plan would bring in an additional 20 percent by raising the rate an average of 1 percentage point. But it would keep the current system’s progressivity, so 92 percent of the extra money would be paid by families earning more than $70,000, with 50 percent, or $5 billion, coming from those earning more than $300,000, Munger said. For those couples with taxable income above $5 million, the marginal tax rate would rise 2.2 percentage points to 12.5 percent; they’d pay the most.
The personal income tax has fueled growth in state spending, but it’s a volatile tax, tied to the stock options and fortunes of a sliver of rich Californians. That’s why tax reformers behind Think Long want to broaden the sales tax.
Munger’s plan would take a different approach to leveling the roller coaster ride. Annual revenue that exceeds the increase in the average per capita income in the state would be set aside to pay down the state’s debt for school bonds, which accounts for about half of the state’s indebtedness, she said. That should free up money for future needs.
Money to follow the student
Between property taxes and the state’s general fund, about $45 billion funds Proposition 98 K-12 spending, so Munger’s plan would immediately boost money for schools by nearly 20 percent (community colleges would not be included) . However, the new revenue would go into a separate fund, protected from the Governor’s and Legislature’s subverting Prop 98 and finagling with its arcane rules.
Fifteen percent of the $10 billion would go toward supporting and expanding early childhood and preschool programs, which currently reach only 30 to 40 percent of qualified children, according to a summary of the initiative (the exact wording wasn’t yet available). The remaining 85 percent, or $8.5 billion, would be divvied up as follows:
- 70 percent of the total in a flat grant per public school student, including students in charter schools, with middle school students getting 20 percent more than elementary school students and high school students getting 40 percent more – reflecting the higher cost of educating older students;
- 18 percent would provide additional per capita money (about $670) for low-income students eligible for federal Title I aid;
- 12 percent per student funding for instructional materials, school site technology, and teacher training.
The initiative will state that the new money is not to be used to increase school salaries and benefits; no more than 1 percent can be used for administration.
The money-follows-the-student formula, weighted toward the poor, combines elements of transparency and equity that school finance reformers have been clamoring for. Schools will be required to show how the extra revenue has been used, and the information will be posted on a state Department of Education website, Munger said; parents will then know if districts have heeded their recommendations on how the money should be used in their children’s schools, such as to restore arts, hire more teachers to reduce class sizes, expand STEM (science, technology, engineering and math) offerings.
Assemblywoman Julia Brownley, who chairs the Assembly Education Committee, has similar elements in AB 18, the main finance reform bill that will be worked on next year.
The initiative would begin the transformation, Munger said. “When the model is out there, it gives a push to change the larger finance structure without piling it all in one ballot initiative.”
Hers and Think Long’s are two of several education initiatives that could collide on next November’s ballot. Gov. Brown and the California Teachers Association have yet to announce their plan to raise money for K-12. A proposal to tax oil and natural gas production, with money to K-12 and higher education, is gathering signatures.
Some tax advocates are hoping proponents will split their differences and put one initiative on the ballot that business, labor, and education reformers can agree on.
For her part, Munger said she’s open to talk in the next month and a half, while her initiative awaits the AG’s review. But she and supporters don’t want to substitute a progressive tax – the personal income tax – for a divisive, more regressive tax, she said. “We are pleased with a proposal that seems to be most reflective of what voters want to do this year,” she said.