Some of the spending in California’s record-breaking $308 billion budget seems to be an attempt to slow down the number of people fleeing the state. During the height of the COVID-19 pandemic, California saw the highest net outflow of residents in the country, losing 300,000 residents between April 1, 2020, and July 1, 2021.Florida and Texas, together, gained over 625,000 residents during that period, according to Census data. Meanwhile, the latest Census metrics show that Los Angeles, San Francisco, and San Jose lost more than 120,000 residents combined in 2021, joining New York City and Chicago as the top five cities that lost residents.
“In the face of new challenges and uncertainties, we’re providing over $17 billion in relief to help families make ends meet and doubling down on our investments to keep building the California Dream on a strong fiscal foundation,” said Gov. Gavin Newsom of the state spending plan he signed in June.
Stimulus checks marketed as ‘inflation relief’ are the largest item in that $17 billion portion of the budget. The payments will go to single adults making up to $250,000 a year and couples making up to $500,000, costing taxpayers $9.5 billion. Another spending item getting far less attention, but with nearly an identical price tag, is a $9 billion increase in the base student funding for California’s public school funding formula, which determines how much money school districts receive each year.
For a variety of reasons during the pandemic, statewide public school student enrollment dropped by 2.6% in the 2020-21 school year and 1.8% in the 2021-22 school year. The declines in major metro school districts were more acute, according to data from Burbio, a school data site. In Southern California, Los Angeles Unified School District wasn’t the only one losing large numbers of students. San Diego Unified School District and Long Beach Unified each lost more than 3% of their student populations last year. Orange Unified School District and Capistrano Unified fared better, losing less than 1% of their students. Overall, school districts located in cities and suburbs lost 2.5% and 1.6% of their students, respectively, last year.
Even though there are fewer kids in public schools, the state’s education spending continues to go up. But higher education spending isn’t leading to higher student test scores. Despite increasing education spending by 36% since 2002, California students produced only small increases in math and reading test scores as of 2019.
CalMatters reports: “Since California students began taking the new standardized exam — known as ‘Smarter Balanced’ — statewide reading and math scores have inched up an average of about 1 percentage point each year for the past five years.”
However, many education researchers fear school closures and other learning disruptions during the pandemic are likely to have erased any progress student outcomes made in the last decade. California’s current combination of a declining population and increased education spending is a recipe for fiscal challenges in the coming years. As a potential recession looms and inflation continues to rise, state leaders and school districts should be preparing their budgets accordingly, not continuing a spending spree.
The state budget is heavily reliant on personal income taxes, which, although more stable than many other revenue sources, can make state revenues volatile and contribute to large surpluses and deficits. During the 2008-09 recession, for example, a drop in revenue from income and corporate taxes coupled with years of runaway spending helped cause the state education budget to be cut by nearly 14%.
Right-sizing California’s education budget now, while the state has a surplus, certainly goes against the political pressures to perpetually increase spending. But California can’t keep increasing education spending while losing students and failing to produce significant achievement gains. To avoid sudden and drastic cuts when the next financial crisis inevitably hits the state and public schools, students and taxpayers would be better served by strategically rightsizing schools and the education system right now.
Jordan Campbell is an education policy and quantitative analyst at Reason Foundation.