Editor’s Note: Greg Simay worked for the City of Burbank for over 40 years and retired in 2009. He has written for myBurbank for a number of years as our Entertainment Reporter. He has a vast knowledge of the City of Burbank and its workings. We asked him to break down both the Measure P and Measure QS ballot measures on the November 6 ballot. – cs
In the upcoming November 6 election, the Board of Education of the Burbank Unified School District hopes voters will approve Measure QS, which would levy a qualified special tax on each parcel of taxable real property. For each parcel, this annual “parcel tax” would be 10 cents per square foot of improvements. To pass, Measure QS needs a two-thirds majority of the votes cast.
The parcel tax is expected to generate $9.0 million in annual revenues. The additional funding would enable the District to maintain and improve the quality of education, eliminate a $2.5 million deficit, and provide a 3% increase in pay to its employees.
The parcel tax would be levied annually beginning November 1, 2019, and it would continue until ended by the voters. There’s no automatic sunset provision.
Why does the District need $9.0 million in additional revenues?
In order to reduce its own share of pension expenses, the State of California has been, and continues to, unilaterally impose increasing pension liability payments upon California’s local school districts, including Burbank’s.
- Up through FY 2013-14, District employees paid 7% of their paycheck toward their retirement, the District chipped in 7% and the State of California took care of the rest.
- Beginning in FY 2014-15, the State has been increasing the District’s percentage each year until it tops out at 20% in FY 2020-21, less than three years from now.
- By then the District will be paying an extra $13.0 million per year compared to FY 2013-14 pension liability payments, before the yearly increases had begun.
Unlike the City of Burbank, the District has never had a legal option to forego its pension liability payments, even when the State’s pension funds were super funded. And more importantly when it comes to understanding the why’s of Measure QS, the District can’t forego its pension obligations even when they are being raised without its input or consent.
So, pension payment increases have, of necessity, been factored into the three-year budget for FY 2018-19, FY 2019-20 and FY 2010-21. And without the estimated $9.0 million in revenues from Measure QS, these pension payments will continue come at the expense of important goals for both the District and the community it serves:
- Retention of quality teachers and other District employees. Over the last three years, the District’s teacher salaries have been 45th out of 47 of unified school districts within Los Angeles County. Without Measure QS, the District can’t afford to give teachers and other District staff a cost-of-living raise.
- Eliminating a structural deficit. In spite of not raising salaries, the District is still having to grapple with a $2.5 million structural deficit. Injections of one-time funds have kept the deficit at bay so far. But without Measure QS, the School Board would have to cut programs when they adopt the District’s next three-year budget in June of 2019. On the chopping block: elementary school music programs, college and career courses, as well as reducing physical education instruction and professional development.
- To improve or maintain quality schools, the District has either expanded successful programs or launched new education initiatives. But without Measure QS, that all stops. The District would be debating which programs to drop.
With the $9.0 million from measure QS, the District would:
- Enable a cost-of-living adjustment (COLA) of 3.0% for teachers and other District employees, starting in July of 2019. Cost: $3.6 million.
- Permanently eliminate the structural deficit, thereby avoiding curtailments of existing programs. Cost: $2.5 million.
- Implement several education initiatives that would preserve or expand the scope and quality of public school education. Cost: $2.9 million.
These education initiatives would include:
- For kindergarten through third grade, maintain having only 24 students per class.
- Expand a Gifted and Talented Education (GATE) program.
- Provide additional supplies for Science, Technology, Engineering and mathematics (STEM) classes.
- Increase mental health support programs
- More funding to expand college and career programs, to increase arts education, and for more technology resources.
None of the funds would go for physical education and sports. Parent booster groups would continue to shoulder the lion’s share of the funding.
Impacts of the parcel tax on the taxpayer, the District and the students.
The impacts of the parcel tax include those on the taxpayers, on the District and the students it serves.
Impacts on the taxpayer.
There are zero impacts for those falling under either of two exemptions to the parcel tax:
- Any parcel owned and occupied by a person 65 years or older would be exempt from the parcel tax. However, they would have to first submit some paperwork to the District.
- Any property otherwise exempt from ad valorem property taxes in a given tax year would also be exempt from the parcel tax in the same year. So, non-profits would be exempt.
Overall, residential parcels would provide about 35% of the $9.0 million; commercial property, about 48% and apartment building owners, about $17%.
- For a single-family residence of 2,000 square feet, the parcel tax would add $200 yearly.
- A commercial building owner with 50,000 taxable square feet would pay $5,000 yearly, which could be passed on to the commercial tenant as an increase in the monthly lease, depending on the terms of the lease agreement.
- A major landlord owning 1,000 rental units, with an average of 1,200 taxable square feet per unit, would have 1,200,000 square feet subject to the parcel tax. At 10 cents per square foot, the tax liability would be $120,000 per year.
The example concerning rental units merits further discussion. Each landlord would have to decide how much of the parcel tax to absorb, and how much to pass along to renters. Note that Measure QS does not exempt senior citizen renters from increases due to the measure.
The values of rental properties depend importantly on the rates of return, which in turn depend on the extent to which rent revenues exceed expenses, both short-term and long-term. If the landlord merely offsets the parcel tax with an increase in the monthly rents, it reduces the rate of return. To preserve a targeted rate of return, the rent increase must collect more than the parcel tax.
For example, a 1,200 square foot apartment would represent a parcel tax liability of $120 per year, or $10 per month. If the landlord chooses to protect a targeted rate of return of 10%, as well as to offset the parcel tax, then the renter of this apartment would pay $11 per month more, rather than $10 per month more.
As is often asserted, do the quality of Burbank schools and City services significantly boost property values? For each of the 86 Los Angeles County communities surveyed, today’s residential real estate prices were compared to the previous, pre-Great Recession peak prices. (Note: the actual year of the previous peak varies slightly from community to community.) Results: 30 communities are still below their previous peaks; nine have peaks up to 5% greater than their previous peaks; for 12, an increase of 5+% to 10%; and for 16, an increase of 10+% to 20%.
There were 19 communities whose current property values are more than 20% above their previous peaks. With an increase of 26% over its pre-recession peak, Burbank is firmly within this last group. It shares the spotlight with wealthy enclaves like Beverly Hills, San Marino, and South Pasadena; and with beach communities like Santa Monica and Hermosa Beach.
Burbank is prosperous, but with a median income of around $66,000, it’s no Beverly Hills. Nor would Pacific waves crash over Riverside Drive, even if all the ice were to melt. That leaves the quality of schools and City services (with an assist from the housing/employment imbalance) as the likely driver of property values in Burbank. While not necessarily relieving any cash flow challenges presented by property ownership, property appreciation does confer a long-term advantage that must be weighed against tax measures for purposes that tend to preserve that advantage.
Impact on the District.
As mentioned earlier, Measure QS would provide $9.0 million in additional revenue to the District, enabling it to provide a 3% cost-of-living pay increase, eliminate a structural deficit of $2.5 million (and that’s even if there were no pay increase), retain important educational programs, and launch others.
Along with the extra revenue would come requirements to ensure transparency and accountability to the public. Under Measure QS the Board would have to:
- Conduct annual, independent performance audits to assure that parcel tax proceeds are spent only for purposes authorized by the measure.
- Appoint an independent Citizens’ Oversight Committee to further ensure that Measure QS proceeds are spent only as authorized in the measure.
- Deposit parcel tax proceeds in a special account and conduct an annual independent financial audit.
- Receive an annual written report that shows the amount of parcel tax funds collected and expended, as well as the status of projects funded by the parcel tax.
Arguably, Measure QS revenues could also be used to cover the impact of Measure QS spending on required reserve fund levels. For example, if Measure QS leads to $8.0 million in additional expenditures, then at least 3% of this $8.0 million ($240,000) should be added to the reserve fund as a matter of prudence. In this example, $760,000 of the revenues wouldn’t have been spent yet, and so would remain in a special District account.
Impact on the students.
Over 15,120 students are enrolled in the District, with priority given to Burbank residents, then backfilling as necessary with students of parents who work in Burbank, since State funding is based on seats filled.
Preserving and expanding successful education programs (detailed earlier) would certainly benefit these students. And to the degree it succeeds in retaining and attracting quality staff, the $3.6 million pay increase would arguably benefit students, if indirectly.
Evaluating Measure QS against alternative solutions
Measure QS is a response to less-than-adequate State funding especially in relation to the cost burdens it has been imposing on school districts statewide, especially when considering how it has greatly increased the pension funding burden at the school district level. The State, which accounts for about 95% of the District’s revenues, has only recently restored funding to the 2008 level, adjusted for inflation, but not adjusted for upping the District’s share of pension payments from 7% to 20%. And note this: California used to be 5th in the nation in per-student funding; now it’s 41st.
That being said, Measure QS is not the only possible alternative to addressing the District’s understandable budget concerns. From most desirable to least desirable, there are three basic ways the BUSD can address this funding need:
- Reduce costs in a manner that puts the District on a sound financial footing, but without taxes or reductions in the quality of education.
- Increase revenues, such as by passing Measure QS.
- Reduce costs by reducing the scope and quality of education programs, albeit by as little as possible and still remaining within state and federal standards.
These alternatives are discussed in reverse order, beginning with the least desirable alternative.
Cut costs by foregoing the pay increase or by cutting the scope and quality of education programs?
Recall that Measure QS funds are to be used to enable a cost-of-living a pay increase, to preserve and expand education programs, and to eliminate the $2.5 million deficit.
Should the District forego the pay increase? If cost-of-living pay increases are delayed indefinitely, there’s the risk of losing quality teachers and other staff, to the detriment of the students. This is especially true if the pay level is among the lowest in Los Angeles County, one of the highest cost-of-living areas in the country. And the pay level for District’s employees is 45th out of 47 school districts within Los Angeles County.
But perhaps in times of budget crisis, there needs to be additional reasons for supporting a pay increase. For example, teachers in neighboring Glendale have higher salaries, but they also have to handle larger classroom sizes as compared to Burbank. Los Angeles teachers also have higher salaries, but many of them also have larger classroom sizes and face the challenge of teaching students from impoverished neighborhoods.
So aside from market survey data, what might justify a COLA for Burbank teachers?
Two words: quality schools. Every Burbank public school has received State recognition as a distinguished, Gold Ribbon school. An estimated 6-to-11% of school aged Burbank children go to private schools; the low percentage is consistent with the excellent reputation, and performance, of Burbank’s public schools. Achieving and maintaining high public regard not only requires a teacher with talent, but also a teacher with a willingness to devote many extra, uncompensated hours of going the extra mile in lesson preparation and professional development. This level of dedication is needed from much of the support staff as well.
Arguably, then, COLAs at reasonable intervals make it easier for the District to retain the quality, dedicated employees it needs for continuing to have quality schools.
Should the District forego expanding education programs? At first blush, it appears that a significant percentage of Measure QS revenues would be used to increase the scope and quality of education programs. However, it’s been a truism in education that today’s enhancements often become tomorrow’s benchmarks for what constitutes a strong public school district. The enviable reputation of the District today has come from embracing past education initiatives.
A wider range of quality educational programs, besides benefitting students, is another factor besides pay that promotes retention of high-quality teachers who wish to grow professionally.
Should the District cut education programs to eliminate the $2.5 million deficit? Even if the District did not increase pay or expand programs, there would still loom the deficit, one that would require cutting programs in the absence of a revenue source. But a survey in March of this year confirmed what has been common knowledge: Burbank citizens want its public schools to remain strong. Education initiatives help the District to avoid a one-size-fits-all education experience, a failing that characterizes mediocre-and-worse school districts.
But for some, the issue is not putting the brakes on education initiatives. Rather it is whether the District has done a good enough job of fleshing out its education initiatives. Do the initiatives require increased staffing? How much spending would be on supplies and equipment? Some Measure QS proponents maintain that further fleshing out could take the initiative away from the citizens, which are intended by Measure QS to have an active role in program development.
Increase revenues by passing Measure QS and imposing a parcel tax?
Even in Burbank, there are a lot of people living paycheck-to-paycheck, with household budgets in worse shape than the District’s budget. And a parcel tax is an arguably less desirable method of taxation than a bed tax or sales tax. For example, one-third of the increased sales tax revenue from the City’s proposed Measure P would come from non-residents. In contrast, over 1,300 students do not have parents living in Burbank, and these non-resident parents would not be subject to the parcel tax.
But by law, the District cannot raise the sales tax. A parcel tax is one of the few legal options available, though one requiring a higher level of voter approval (two-thirds) than a simple majority. Proponents argue that the parcel tax, unlike revenue bonds, can be used to increase staffing or boost salaries, and that this is the best strategy for maintaining and improving the quality of education.
A survey last March revealed that 58% of Burbank voters would “definitely” or “probably” vote for the parcel tax, as compared with the need for 67% of the voters to pass Measure QS. The survey also revealed that 29% would “definitely” not support the tax. That leaves 13% undecided, and most of those voters would need to be won over to provide the two-thirds majority for passage.
One argument in favor of the parcel tax is the assertion that it’s a local source of school funding that the State of California could not take away. But others disagree, citing Sate actions (albeit decades ago) that took away local funding in an attempt to equalize per-pupil funding across economically unequal school districts. They urge instead that the State be politically pressured into increasing school funding. However, even after 10 years of investment, California is still ranked in the bottom 10 states in school funding. It’s doubtful that the State would rescue California’s school districts any time soon.
There are also concerns whether or not the District budget as a whole is healthy enough for what may lie ahead: Even more State shifting of retirement funding responsibility to school districts? Boosting emergency reserves? Meeting future COLA increases? In this view, a measure that commits the District to implement additional educational programs may be premature, until the District’s budget is less vulnerable to various contingencies. Proponents argue that Measure QS would address the most pressing budget problems, and there is no superior funding alternative on the horizon.
Can enough costs be cut in a manner that avoids imposing a parcel tax or cutting education programs?
Bear in mind that about 88% of the District’s budget is labor; only 12% is non-labor. Given that the District’s teachers are already among the least well-paid in Los Angeles County, and that the District wants to maintain smaller teacher-student ratios, cuts in compensation or staffing would be self-defeating, given that the public supports strong schools.
How about trimming administrative and other non-teaching staff positions? Some administrative positions had recently been cut in a recent reorganization of senior management. Some fat may still be marbling the muscle, but $9.0 million worth? Doubtful.
Several proven cost saving practices will continue. The District and the City will continue working together for their mutual benefit; City parks that use District school property is one notable example. The City provides some $1.9 million in annual support that would otherwise have to be covered by the District:
- School Resource Officers: $363,000
- Joint-Use Agreement: $435,000
- After-school Programs: $360,000
- School-based counseling: $245,000
- Crossing Guards: $466,000
- Disabled student transportation to schools: $11,000
- Public Works free recycle bins and pick-up service: $20,000
Additionally, the District takes advantage of a statewide contract and buys in bulk, with substantial annual savings over earlier purchasing practices.
Concluding remarks
The State of California has shifted the pension funding burden to local school districts, including Burbank’s. It would be nice if long-overdue fat trimming could solve the problem. But the District has been putting its money into muscle; that’s one reason why Burbank schools are highly-regarded. Moreover, there are good reasons to believe that Measure QS, aside from eliminating the deficit, would live up to its acronym and support Quality Schools.
So next Tuesday, Burbank voters will have to decide if the pain of a parcel tax is worth the real education benefits that it would confer on Burbank’s public schools.
