To Help Education, We Need State Finance Reforms

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Assemblyman Mike Gatto.

Business cycles are a fact of life. But did you ever wonder why education funding fluctuates so much from year to year? Why a child in our school system just five years ago might have received a vastly different education (and had vastly smaller class sizes) than one attending now?

Unlike other states, our education system suffers fromCalifornia’s heavy reliance on volatile sources of income. Most funding for K-12 education comes from the state’s “General Fund.” Just thirty years ago, income taxes inCaliforniaaccounted for less than a third of the State’s General Fund. By 2010, individual income taxes accounted for 44% ofCalifornia’s tax revenue, which was very high compared to the other fifty states.

Compounding the effect of that dependence is the state’s concomitant reliance on capital-gains-tax revenue. Between 2007 and 2009, the stock market collapse and decreasing home values caused capital-gains taxes, as a percentage of the state’s general fund, to plummet from 12% to just 3%. Billions of anticipated tax dollars disappeared and caused an immediate hole in the state general fund.

Good state education policy should be to rely on relatively stable sources of revenue. I will continue to work on legislation to stabilize our state’s revenues. Overhauling our tax code and implementing an enhanced Rainy Day Fund (a savings account for the state) are two things I believe are sorely needed. Ups and downs are part of life, but they need not be so severe.

Mike Gatto is a father and the Chairman of the Assembly Committee on Appropriations Committee. He represents the cities of Burbank, Glendale, and the Los Angeles neighborhoods of Los Feliz and Silver Lake, among others. E-mail Mike at: assemblymember.gatto@assembly.ca.gov, or call (818) 558-3043.

Website of Assemblyman Mike Gatto: www.asm.ca.gov/gatto.

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