Prop. 223 Could Put a Cap on School Overhead

California school districts come in a thousand shapes and sizes, from behemoth Los Angeles Unified, the largest with 680,000 students, to wee Panoche Elementary in San Benito County, the smallest with just five.

But an initiative on the June 2 ballot would impose a single budget recipe on every district statewide: 95 cents of every dollar to be spent on direct classroom or campus expenses and no more than a nickel on district administration.

Proposition 223, known in education circles as “95-5,” is believed to be the first voter initiative in the country to mandate such a formula for school spending. Ahead in statewide polls, it would be one of the latest in a growing number of precedent-setting California ballot measures.

Arguing that California school districts are less efficient than others, backers say the initiative would cut bureaucratic waste and put the savings into classrooms. “Who’s for kids?” their slogan asks, and “Who’s just kidding?”

Foes contend that the initiative would siphon millions of dollars from rural and suburban districts through a system of fines rigged in favor of big city schools such as Los Angeles’. Some Northern California critics, invoking the state’s water wars, call Proposition 223 the educational equivalent of the Peripheral Canal.

All sides agree that Proposition 223 would force widespread changes in local school budgeting. In theory, that could free up more money for some schools--for teachers, principals, campus maintenance and so on--without raising taxes.

But the bottom line for student services is not clear. New education regulations, analysts say, are often easy to conceive but hard to carry out.

“My experience as a legislator was that when we established other kinds of formulas, people figured out a way to go about their business and not much changed,” said former state Sen. Gary K. Hart, co-director of the Institute for Education Reform of California State University. “Oftentimes it becomes a big distraction--a game for the auditors, lawyers and bureaucrats.”

But district administrators and trustees throughout the state consider Proposition 223 another serious threat to their independence, in an era when state officials wield growing power over the schooling of 5.6 million students.

The nonpartisan state legislative analyst calculates the average school district administrative expense at 7.3%. That is about $700 million more than Proposition 223’s 5% cap would allow. The analyst notes that more than 900 of California’s 994 school districts now exceed the proposed threshold, putting them in jeopardy of fines of about $175 per student each year.

Among the initiative’s prominent supporters are Sen. Dianne Feinstein, former Rep. Michael Huffington, Los Angeles Mayor Richard Riordan and the Los Angeles teachers union. Riordan spokesman Deane Leavenworth said the mayor, who has given the pro-223 campaign $100,000, “believes we should put the money where the kids are, and that’s what 95-5 does.”

Opponents include state Supt. of Public Instruction Delaine Eastin, the state PTA, the California Business Roundtable, the Assn. of California School Administrators, the Los Angeles Unified school board and dozens of others. Nonetheless, many critics charge that Los Angeles Unified will hold an unfair advantage in the Proposition 223 formula because its size guarantees economies of scale.

“I don’t think they thought of us,” said Tom Bishop, superintendent of the 1,200-student Jamul-Dulzura Union School District in rural San Diego County and president-elect of the state Small School Districts’ Assn. “I think many people in Los Angeles think the world is like Los Angeles, and forgot about the kids who go to school in small towns.”

Although initiative proponents roundly deny such charges, they acknowledge that Proposition 223 had its roots in the often-fractious school politics of Los Angeles. United Teachers-Los Angeles, the state’s largest local teachers union affiliate, spent more than $100,000 on a petition drive launched in 1996 to put the 95-5 measure on the ballot after a similar bill failed in the Legislature.

So far, the initiative has drawn little public notice, but that may change. Both sides are saving for an advertising blitz in May. By March 17, the pro-223 campaign committee had $378,000 in the bank, compared to $26,500 for its top opponent. The No on 223 campaign, though, promises a substantial fund-raising effort.

A Times poll this month found that Proposition 223 held a 49% to 30% edge among registered voters and 55% to 26% edge among likely voters, once the initiative was summarized for them.

But interpretation of the initiative’s details is a matter of intense dispute, mired in the arcana of education finance and accounting.

Named the Educational Efficiency Initiative, Proposition 223 would earmark at least 95% of all budgets for “direct services to pupils, school site employees and school facilities,” beginning in the 1999-2000 school year.

Included are the salaries of teachers, nurses, counselors, principals and others who give pupils “immediate and unbrokered services.”

On the administrative side of the ledger--expenses the initiative would limit to 5%--is a long list of items including district management, payroll, purchasing, public information, fiscal services, staff development, curriculum planning and the like.

But some expenses may not fall neatly into one category or the other. As the legislative analyst asked, are printing and duplication limited by the cap? Or are they direct services, exempt from it? The answer, the analyst said, depends on whether photocopy machines are in district headquarters or a school campus.

The initiative also would require districts to file new administrative expense reports annually and conduct audits and “fiscal efficiency reviews” every five years.

But there is little consensus on what fiscal efficiency means for California’s public schools, which are heavily regulated by the state and federal governments and which serve one of the most diverse student populations in the world.

Pro-223 spokesman Tyrone Vahedi cites studies by the Educational Research Service, a nonpartisan organization in Arlington, Va., that show average school district administrative costs nationwide are just under 5%--far less, he said, than the California average.

However, the research service has not studied such costs by state. Bob Wells, assistant executive director of the school administrators’ group, said the national data are not comparable with California statistics. He pointed to other research showing that the state has fewer district administrators per student than the national average.

Beneath the debate over statistics is the reality that school districts these days have little freedom on many issues.

They must run poverty and special education programs. They must teach hundreds of thousands of children who aren’t fluent in English. They must give students new state (and soon, perhaps, national) tests and overhaul textbooks and curriculum to satisfy a public that craves higher student achievement. They must keep count of primary grade class sizes and seek out credentialed teachers, who are in increasingly scarce supply.

Theodore Mitchell, dean of the Graduate School of Education and Information Studies at UCLA, said some California school districts could be run well with 8% administrative overhead and others run poorly with 4%. He said there is “no body of research” that indicates an optimal percentage.

“It’s a very difficult line to draw,” Mitchell said.

Proposition 223, nonetheless, draws a hard line. Districts that break the 5% administrative spending cap, even by a small amount, would be subject to fines by the State Board of Education.

The initiative is silent on what would happen to those fines. But a law passed by voter initiative 10 years ago, Proposition 98, requires a certain level of education spending each year. In effect, the Proposition 223 fines could benefit districts that meet the Proposition 223 requirement, initiative opponents say, as the fines are redistributed through the school system.

Los Angeles Unified is a focus of the debate. It now spends 7% of its budget on administration, exceeding the 5% limit by more than $90 million a year. Officials say they could be forced to shift many operations from headquarters to school campuses, to improve their accounting and to consider budget cuts.

Yet Los Angeles Unified’s administrative-expense ratio is better than that of many districts, especially those with smaller enrollment. Strange as it may sound to voters accustomed to tales of bloated bureaucracy, with schools, bigger is sometimes cheaper.

Critics of the initiative assume that Los Angeles Unified would find a way to meet the requirement. The first line of their ballot argument, signed by state PTA President Rosaline Turnbull, asks why the district should “get all the money.”

Los Angeles school officials question that argument. They point out that their school board voted to oppose the proposition.

“If we were going to get all of that [money], why would we oppose it?” said Ronald Prescott, a Los Angeles Unified deputy superintendent. “Obviously, the downside is bigger than the upside for us, as we see it.”

Most smaller school districts see only downsides.

In San Benito County, Panoche Elementary School District spends about $80,000 a year for a one-room schoolhouse serving the children of cattle ranchers. Lawrence Elrod, an assistant superintendent for the county’s office of education, said the district spends about twice what the initiative would allow on administration, largely for auditing and other state-ordered paperwork.

In Huntington Beach, the 9,700-student Ocean View School District spends 8.6% of its annual budget on central administration. To meet the proposed cap under Proposition 223, Supt. James R. Tarwater said he would have to cut or retool the management of personnel, purchasing, curriculum development, staff training and a host of other services.

School principals or assistants would have to take over many tasks, Tarwater said, a shift that might hinder central oversight without saving any money. “It just wreaks havoc,” he said.

Yet Tarwater asserted that Ocean View already is “streamlined,” noting that it quickly succeeded in reducing class sizes from kindergarten through third grade under a popular, but logistically demanding, state program begun in 1996.

Replied Vahedi, the pro-223 spokesman: “I think you’re being simply lied to when they can’t tell you they can’t do any better than 8%. That money would be better spent directly in the classroom, on books, computers or a nurse. Schools are about educating our kids, getting them the resources they need.”

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Prop. 223 at a Glance

* Would prohibit school districts from spending more than 5% of their annual funds on “general administration,” “instructional resources supervision” and “supervision of instruction.” Examples include school board expense, data processing, executive salaries, purchasing and warehousing--but not salaries of school principals or teachers.

* Would require the State Board of Education to fine districts that don’t comply about $175 per student.

* Would require performance audits and “fiscal efficiency” reviews every five years.

* Could, in theory, reduce administrative costs statewide by up to $700 million a year. But districts might rely on more precise accounting and budgeting to avoid fines, in addition to shifting some tasks to school campuses. Unknown how much new money would be spent on classrooms.

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Key Proponents

* Los Angeles Mayor Richard Riordan

* U.S. Sen. Dianne Feinstein

* U.S. Rep. Howard Berman.

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Key Opponents

* State PTA

* California School Employees Assn.

* California Assn. of Suburban School Districts

Source: California Voter Information Guide .