2024 Feb 14 Oppose letter Governor's Proposed Charter School Eligibility for ERAF

February 14, 2024

State Senator Scott Weiner
Chair, Senate Budget Committee
1021 O Street, Suite 8620
Sacramento, CA 95814

Assemblymember Jesse Gabriel
Chair, Assembly Budget Committee
1021 O Street, Suite 8330
Sacramento, CA 95814

Re: Governor's Proposed Budget: Charter School Eligibility for Education Revenue Augmentation Funds – OPPOSE

Dear Senator Weiner and Assemblymember Gabriel,

On behalf of the Marin County Board of Supervisors, I write to oppose the Governor's budget proposal that purports to "clarify" that charter schools are eligible to receive Education Revenue Augmentation Funds (ERAF)¹. This is the latest in a series of attempts by the State Department of Finance (DOF) to take constitutionally protected funds from local governments for State use at the expense of local health and safety programs and services.

ERAF allocations are constitutionally protected.

Faced with a fiscal crisis in 1992, the Legislature, seeking to meet State minimum educational funding obligations under Proposition 98, required local governments to shift a significant portion of their local property tax revenues into a newly established Educational Revenue Augmentation Fund (ERAF). Under that scheme, once school funding levels were met, any remaining property tax contributions in the ERAF were considered “excess ERAF”. Excess ERAF must be returned pro rata to the county, cities, and special districts that originally contributed those property taxes to ERAF.

To satisfy the State’s constitutional school funding obligations, the Legislature has periodically mandated additional funding shifts, significantly impairing local government budgets and planning efforts. In 2004, as a State budget balancing compromise, the Legislature and the Administration agreed to a one-time local shift in funding (known as “the triple flip”) in exchange for putting a measure on the ballot (Proposition 1A), which was adopted by fully 83.7 percent of the State’s voters. That constitutional amendment prohibits the Legislature “from reduc[ing] for any fiscal year the percentage of the total amount of ad valorem property tax revenues in a county that are allocated among the county, cities, and special districts in that county below the percentage that was allocated among those agencies on November 3, 2004.”²

The Legislative Analyst's Prop 1A ballot summary stated that the measure “[e]nsures local property tax and sales tax revenues remain with local government thereby safeguarding funding for public safety, health, libraries, parks, and other local services.”³ “Proposition 1A was intended to prevent the Legislature from statutorily reducing the existing allocations of property taxes among cities, counties, and special districts. In essence, it was intended to stop the periodic funding shifts of property tax revenues from local agencies to satisfy the State’s school funding obligations.”⁴

The Governor’s Proposal, in any case, in unconstitutional.

One of DOF’s most recent attempts was to erroneously assert that excess ERAF decreases school funding statewide. They also supported the California School Boards Association in a lawsuit challenging the State Controller’s determination that charter schools are not entitled to receive ERAF5. Both the trial and appellate courts rejected their arguments6. DOF now seeks to “clarify” a matter already addressed in statutes and expressly decided by the courts. DOF’s proposal to change the law to use excess ERAF to fund charter schools, even if successful legislatively to provide the “clarity” they seek, would explicitly violate the California Constitution because it would reduce the total percentage of property tax revenues allocated to counties, cities, and special districts below the amount that was in effect on November 3, 2004 when Proposition 1A was enacted.

The Governor’s Proposal would have significant consequences to local governments.

Apart from conflicting with Proposition 1A, the proposal would yield no additional funding to charter schools or school districts. State law already provides a mechanism for charter schools to receive "local" funding through "in lieu" payments from their host school district7. However, the impact to the affected local governments, including Santa Clara, San Mateo, San Francisco, Marin, Napa, and Alpine Counties, would be significant.

In Marin County, the proposed budgetary change affects 65 governmental entities and would cost the Marin community $1.1 million per year, including approximately $713,000 per year to the County of Marin and the Marin County Free Library; $179,000 to Marin’s eleven cities and towns; and $173,000 to various special district agencies. This latest effort by the state to take local revenue would compound local fiscal challenges, including critical public programs and safety net services to our most vulnerable populations.

We respectfully urge the Legislature to reject this latest State taking of property tax revenue, which violates the clear voice of the voters of the State of California when they approved Prop 1A in 2004 – and purportedly does so in the name of charter schools when, in fact, charter schools will not benefit.

Sincerely,

Matthew Hymel
Marin County Executive

Cc: Senator Mike McGuire
Assemblymember Damon Connolly

¹Governor's Budget Summary-2024-25, p. 18, available at https://ebudget.ca.gov/budget/2024-25/#/BudgetSummary.
²Cal. Const. art. XIII, § 25.5(a)(l)(A), emphasis added. This provision protects counties, cities, and special districts from State actions to shift local property taxes to schools because it defines "local agency" for these purposes as "a city, county, and a special district." (Cal. Const. art. XIII, § 25.5(b); Rev. & Tax Code, § 95(a).)
³Official Voter Information Guide-November 3, 2004 General Election, p. 3, available at https://repository.uclawsf.edu/cgi/viewcontent.cgi?article=2237&context=ca_ballot_props.
⁴City of Cerritos v. State of California (2015) 239 Cal.App.4th 1020, 1041.
⁵The evidence submitted by CSBA in its lawsuit included a declaration and other documents from DOF staff.
⁶California School Bds. Ass'n v. Cohen, 2023 WL 4853693 (3rd Dist. Court of Appeal, unpublished) ("CSBA"). Although the appellate decision is unpublished, it constitutes a final judicial determination that charter schools do not receive ERAF.
⁷See Educ. Code§§ 42238.02(i)-(k), 42238.03(a), (e), 46735; CSBA, 2023 WL 4853693, *4. This in lieu payment is a percentage of the school district's property tax revenues based on the ratio of the school district's average daily attendance (ADA) and the charter school's ADA. Non-basic aid school districts are effectively reimbursed from ERAF for their charter school in lieu payments.