Palo Alto 101 Schools and Youth

How Does School Funding Work in Palo Alto?

Palo Alto High School

State funding, local taxes, school bonds…how does it all add up to fund Palo Alto schools? Palo Alto is unique in so many ways, including how our public schools are funded. Read on to find out where the money comes from and where it goes in Palo Alto schools.

How much does Palo Alto spend per student per year?

Palo Alto Unified School District (PAUSD) has an annual budget of about $185 million, which translates into $14,700 per pupil. Across California, the average per pupil spending is about $8,500 and nationally, it is about $12,000. California ranks near the bottom (47th out of 50 states) in terms of state rankings for per pupil spending. Despite having a strong tax base, PAUSD remains just slightly above the national average for per-student funding and behind many other high-performing districts, which spend about $20,000 per student.

Where does the money come from?

Almost 90% of the revenue for Palo Alto Unified School District (PAUSD) is generated through local sources, including property taxes and the parcel tax because it is a ‘basic aid’ district. Palo Alto is one of the most locally funded districts in the state.

PAUSD revenue chart

What does ‘basic aid’ mean for Palo Alto?

Palo Alto funds our schools largely through local revenue because PAUSD is one of only about 10% of districts across the state that are what’s called “basic aid.” This means that Palo Alto brings in more money from our local property taxes than we would get from Sacramento. Other local basic aid districts include Mill Valley, Woodside and Los Altos.

As a basic aid district, Palo Alto’s revenue is not tied to the number of students in our schools. As a result, if PAUSD adds students but our property taxes do not grow, the amount available per pupil declines. Of course the opposite is true too- if property taxes increase and enrollment is flat or declining, there is more funding to spend per student.

PAUSD has added an additional 2,000 students in the past 10 years, and due to our basic aid structure, these new children do not automatically mean an increase in funding.

Why does the parcel tax matter?

The parcel tax in Palo Alto for the current year 2014-15 is $637 per assessed property, regardless of property value. Seniors can apply for an exemption from the parcel tax.

The Palo Alto parcel tax generates 7% of PAUSD’s operating budget, which is almost the same as state funding. Revenues from the parcel tax are essential for PAUSD because they are not dynamic to the economy (unlike property taxes) and form a locally controlled stream of reliable funding dedicated only to educating the children of Palo Alto.

Funds from the 2010 parcel tax are used primarily to keep class size below 25 students per classroom in PAUSD and thus are allocated almost entirely to pay for teacher salaries.

The current parcel tax is up for renewal in 2015. Unlike bond measures, which require a simple majority to pass, 67% percent of Palo Alto voters must vote to renew the parcel tax in May 2015 to ensure this essential source of local funding will continue. As a sign of the community’s commitment to public education, the last parcel tax renewal in 2010 was approved by almost 80% of Palo Alto voters.

What is Partners in Education (PiE)?

Partners in Education (PiE) is the only nonprofit organization dedicated to raising funds to support all of PAUSD schools and students. PiE relies on a team of over 200 parent volunteers to raise funds at each school site, which are then distributed back to Palo Alto schools on a per pupil basis to ensure equitable distribution of resources across the district.

Since PiE was founded in 2005, the organization has donated over $30 million to PAUSD schools. In 2014, PiE donated a total of $5.1 million dollars to PAUSD.

PiE asks Palo Alto families to give $800 per child enrolled in PAUSD, which is lower than many surrounding communities such as Woodside, where parents are asked to give $4,800 per child.

School principals control how PiE funds are spent, using guidance from district leadership and in response to their specific student needs. PiE funds can only be used to pay for salaries, not for materials or supplies. In 2013-14 school year, PiE funded salaries for 250 full and part time instructors, teachers and counselors in PAUSD schools.

In PAUSD elementary schools, PiE funds classroom aides, along with art, science and music programs. In middle schools, PiE pays for elective teachers, counselors and classroom specialists, and in high school, PiE supports college counseling, STEM-based electives and other school-based programs to engage students and support their academic growth.

Why is the Cubberley lease such a hot button issue?

As seen in the chart above, lease revenue generates 6% of PAUSD’s operating budget. Of this, $7 million has been coming from the fee the City of Palo Alto pays PAUSD to lease Cubberley for recreation facilities and space for numerous city programs and nonprofits. With the new Cubberly agreement that was framed in November 2014, PAUSD will lose almost $2 million a year in these fees. There is no immediate new income stream to replace this revenue loss.

Why aren’t bond funds included in the chart?

Bond funding is a separate income stream for facilities only. In 2008, 77% of voters passed the Strong Schools Bond, a $378 million bond to upgrade and build facilities for Palo Alto’s aging schools and growing student population. The Strong Schools Bond has funded many major facility projects at our Palo Alto schools, including the new buildings at Gunn and Paly high schools.

Bond measures require a simple majority (55%) to pass and are repaid through property taxes. Bond funds are not included in the revenue chart because they cannot be used for operational costs, except for purchasing technology.

If PAUSD were to open additional schools, a new bond could be necessary to pay for the construction and rebuilding costs.

Where does the money go?

Like most organizations, PAUSD’s biggest expense is its people. The majority of the district’s budget is spent on salaries and benefits for teachers, administrators and support staff.

expenditures PAUSD

PAUSD has won the Meritorious Budget Award from the Association of School Business Officials International (ASBO) and has a conservative approach to spending its revenue.

Palo Alto maintains $43 million in reserve, $19 million of which is required by the basic aid reserve policy. Another $17 million is set aside for expenses including professional development, business upgrades, technology replacement, and other needs. Of the $185 million annual budget, only $7 million is currently ‘unrestricted,’ which means it has flexibility to address the changing needs of PAUSD students.

What’s the bottom line?

Palo Alto’s excellent public schools rely almost entirely on local funds. Funding from the state is minimal for Palo Alto and federal funding is even lower. While Palo Alto’s property taxes revenues have been on the rise in recent years, so are expenses for PAUSD, particularly salaries and benefits. Governor Brown is also shifting responsibilities for unfunded pensions to local districts and Palo Alto will be required to foot a lion’s share of this bill.

Several members of the PAUSD school board have suggested that they want to open new schools in the district. It’s important to understand that there are no new funding sources to pay for the construction, staff and administration costs that would be required for these new facilities.

We are extremely fortunate in Palo Alto to have a strong property tax base, supportive families and a community that values public schools. However local funding, including the parcel tax, PiE and bond funds are more important then ever for ensuring a strong future for Palo Alto public schools.

Resources:

Nancy Krop presentation to CA PTA: School Funding Update

PAUSD budget proposal, June 2014 (plus additional information from Cathy Mak, Chief Business Officer, PAUSD)

For more information on how money works, check out the Palo Alto Pulse overview of city finances: Where does the money come from and where does it go in Palo Alto?

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About the author

Victoria Thorp

Victoria Thorp

Victoria is the founder and editor of Palo Alto Pulse and has lived in Palo Alto since 2007. Victoria's diverse professional background includes working as the editor of GreatSchools.org , as a senior writer for KIPP and Teach for America, and as a radio producer for City Visions on KALW (91.7FM San Francisco). She is a graduate of Leadership Palo Alto and a member of the Palo Alto Partners in Education Advisory Board.

She has a BA in English from Tufts University and Masters in Education and Secondary Teaching Credential in English from UCLA.

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