How does Los Gatos compare to California and the nation?

It’s hard to believe that Los Gatos falls BELOW the national average AND California average in per student expenditures.

• State funding is based on equity and Los Gatos is low funded.
• Local revenue contributes 26% of our total revenue. Without local revenue our ranking would slip considerably further.

Why is Los Gatos Union School District considered a Low Funded school district? How is it possible that we can be funded so much below neighboring communities such as Los Altos, Palo Alto and Woodside?

Disclaimer: First off, to answer these questions here is not to trivialize nor attempt to accurately depict all of the details of school finance. How districts are funded - according to very complex formulas and decisions - is far too detailed to answer in a short article. However, a few basics and generalizations on school finance will get you about 90% there.

Categories of School Funding

To begin, school districts fall into one of two categories for funding: Revenue Limit or Basic Aid.

• Revenue Limit - A revenue limit school district's property tax is limited, and thus, not capable of funding the district's school budget. These districts receive their funding from the state whose revenue is generated through sales tax, business tax, income tax and yes, excess property tax of basic aid school districts. Most school districts in California are revenue limit districts.
• Basic Aid - A basic aid school district resides within a community that is capable of generating enough revenue through their property taxes to cover their school budget. The term basic aid means that the state then provides a small (<1% of the per student allocation) amount per student. This basic aid, however, is no longer funded due to the passing of the Budget Act of 03-04. About 60 school districts in California are basic aid districts.

Determining District's Category of Funding

The state determines whether a school district is revenue limit or basic aid based upon the district's allocated budget. The district's allocated budget is calculated as the per student allocated funding multiplied by the number of students in daily attendance within the district. If a community cannot fully fund the district's allocated budget through property tax, then that district will be revenue limit. Otherwise, the district is basic aid.

The per student allocation, or funding, is based on a formula that provides an equitable amount per student within a specific range. Districts with larger numbers of students in low socio economic areas generate many categorical funds provided by the state and federal government due to the needs of those students. These students will be at the high end of the funding range, while students in some districts (Los Gatos) are at the bottom of the range.

Now, in most cases, once the per student allocation is multiplied by the number of students, the district's revenue generating capability through property taxes falls short of the district's allocated budget. These districts are revenue limit. The shortfall in revenue becomes increasingly evident in low socio economic areas where property tax revenue is low, per student allocated funding is at the top of the range, and enrollment in the district is particularly high. How per student funding (equity) increases as a function of the community's wealth decreasing is represented in the figure below in orange.

In a basic aid school district, the district's property tax exceeds the per student allocation multiplied by the number of students. In addition, a basic aid budget - once determined is adequate for the number of students in the district - is more determined by the community's capability to generate funds then on number of students or student equity. To the extent that the property tax revenue exceeds the district's allocated budget, the district's revenue will increase proportionally. Thus, a basic aid district will most likely end up with a per student funding that is much higher in the range than is determined by the state based upon equity. Basic aid district funding per child increases with respect to the community's property tax revenue (or wealth) increasing. This is represented in the figure in green.

Where does Los Gatos fit in?

The determination of per student funding is very important in understanding why Los Gatos ranks as a Low Funded school district. As determined by the state of California, Los Gatos is at the low end of the range. Where in some districts students will require $5-8K per student for a proper education, Los Gatos is allocated around $4.5K. (This dropped to $4.2K for this school year due to the budget cuts.)

We all feel we pay excessively high property tax, so it is a surprise to realize that last year our property taxes were so close to being adequate to fund our district that, although we were classified as basic aid, there was very little per student dollar difference from revenue limit. For a district whose per student funding is determined at the low end of the range, a revenue limit funding category would yield the smallest per student budget for a California school.

When the enrollment in the district declined in this school year, we shifted further toward a basic aid budget. As a result, the district's allocated budget remained constant (assuming property tax revenue was constant) and by being spread across fewer students, the per student funding increased over 2002-3. If property tax revenue remains constant and student enrollment drops further, our per student funding will increase (minimally) as the district's budget is no longer dependent on number of students. This oscillating position between revenue limit and basic aid classifies Los Gatos as the richest of the poor school districts, and the poorest of the rich school districts. This is how Los Gatos finds itself a Low Funded school district.

When we compare Los Gatos to our neighbors that have a higher revenue generation capability, we see that their per student funding numbers are greater. If these communities have fewer children (Woodside has 400 K-8, compared to our 2400), then their per student funding increases further. This is how different communities that are all basic aid school districts have very different per student budgets - before local revenue is added.

In most cases:

The effect of local revenue on basic aid districts

In most cases, basic aid school districts also have additional local funding sources. Between $2-5K per child is generated annually through local funds. The purpose is to fund programs that enrich the students' experience and provide for programs that cannot be afforded by funding under basic aid. These funds are primarily parcel tax funds and annual fundraising dollars, usually raised through the Education Foundation serving the school district. Many districts have high parcel taxes - Palo Alto and Los Altos are over $600 per parcel - compared to $290 per parcel in Los Gatos.

Since Proposition 13, nearly all of our neighboring districts have had a Foundation that raises funds annually to subsidize the school district's budget. Los Gatos has had its own Foundation (LGEF) since 1982, yet the fundraising had never hit levels comparable to neighboring communities' Foundation's efforts until this past Spring with SOS. Los Gatos does, however, benefit from a parcel tax that contributes nearly 20% of the district's budget. When the Foundation raises $1M in this current campaign, this will make up 5% of the district's (approximately $19M) budget.

When our district's budget can count on property tax, parcel tax and annual giving through the Foundation (at the $1M level), we can begin to compare ourselves with our neighbors. However, it will not be until local fund generation significantly increases, that we will be on par with our neighboring school districts in per student funding and programs offered to students.