PROP 13: Understanding How it Affects San Carlos Schools

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Many people understand the purpose of Proposition 13, but there seems to be a great deal of confusion on how it translates at the local level.  In this instance we will look at how it affects San Carlos real estate and schools.

In 1978, the Proposition 13 Tax Amendment was officially made part of the California Constitution.  In its simplest form, Prop 13 limits property tax rates to no more than 1% of the property’s full cash value.  Any increases in value are capped at 2% or the percentage growth in the Consumer Price Index (CPI).  For example, in 2003, the increase was 1.87%.  It has been less than the 2% cap only five times in the last thirty years.

One of the most frequent concerns that I receive from San Carlos Blog readers centers on their frustration with paying high property taxes in San Carlos, yet our schools are underfunded.  How is this possible?

Answer:   It’s a bit confusing….but here goes….. Just prior to Proposition 13 going into effect, San Carlos was very much a blue-collar town in south San Mateo County.  As a blue-collar town, San Carlos decided that it in order to have its property taxes remain as low as possible, the portion or percentage of property taxes which were to be earmarked for our schools was to be relatively low, compared to other cities and districts.  When Prop 13 became law in 1978, it essentially froze the disbursement rates that cities were using for determining the share of property taxes to be used for its schools.  San Carlos was frozen at a relatively low portion or percentage of its property taxes going to the San Carlos School District.  This rate has never changed, thus it has been incredibly difficult for our schools to keep up, financially.   Further, it is legally impossible for San Carlos and cities similar to San Carlos to change their disbursement percentage from pre-1978.  However unfair this may seem, it’s a reality that our district has had to deal with for the past 30 years.

At the same time as the implementation of Prop 13, a very famous California Supreme Court case was decided.  The final ruling in Serrano v. Priest, stated that the State of California had an obligation to equalize the disparities in the funding of California School districts.  The result was a political compromise.  Essentially, the all school districts in California were given a choice:  (1) districts with very high property taxes could opt to be self-funding from their property taxes, with very little help from Sacramento (as long as they could prove viability); or (2) districts could agree to essentially forego the heavy dependency on their local property taxes and join the revenue stream from the state budget.  Almost all of the districts opted to be a part of the state budget to secure a minimum level of funding each and every year.  In fact, out of the 1,000 plus school districts in California, only 65 went with choice #1, and became what is referred to as Basic Aid Districts .  One such district which decided to become a Basic Aid District is the Palo Alto Unified School District.  Obviously, this proved to be a very good move for Palo Alto.

Given this information it now becomes clear that an increase in property tax revenue does not translate to more money for our San Carlos schools.  While in Basic Aid Districts the increase in property taxes would most likely translate to more money for schools.  It is also easy to see why so many are asking to either repeal Proposition 13 or build in an amendment which would give cities and districts some more flexibility in positioning themselves to maximize the property tax revenue percentages going to their local schools.

The current funds allotted to San Carlos schools have not been enough to cover all of their needs.  This is the reason the San Carlos Educational Foundation was created and the reason for our current parcel tax was passed in 2003.  It is also the reason that Measure S will appear on the ballot in November.  Essentially, Measure S will increase the current parcel tax by $75 a year.  To read more about Measure S on the San Carlos Blog click here.  To be taken to the Measure S site, click here.  I want to thank San Carlos School Board Members Mark Olbert and Seth Rosenblatt who have taken time out of their busy schedules to answer my questions regarding this topic.

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