Are California voters signaling tax fatigue toward school bonds and parcel taxes?

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The final results of last month’s school parcel taxes and construction bonds may not bode well for districts weighing their own tax proposals on the Nov. 3 ballot. The passage rate for both parcel taxes and school bonds on the June 2 ballot fell below the historic average. So the question facing districts as the Aug. 7 deadline for placing measures on the ballot approaches is: As goes Palo Alto, so goes the rest of California?   

The defeat of Palo Alto Unified’s four-year parcel tax — the district’s first parcel tax defeat in 22 years — was the biggest surprise of the June 2 election. Passage would have lowered and replaced the existing $905-per-parcel tax, which will expire in June 2027, to $800 per parcel. It fell 4 percentage points short of the required two-thirds majority needed to pass a parcel tax. 

Palo Alto is an unusual case, however. As a basic aid district, its assessed property value per student is so high that its public schools are locally funded, above what it would receive from the state’s Local Control Funding Formula. And, with property values continuing to rise and student enrollment declining by about 20% to 10,400 students over the past seven years, per-student funding has risen to about $35,000 per student, according to former school board member Todd Collins. That’s about two-thirds higher than the state average.

Collins and Ken Dauber, another former Palo Alto school board member, advised voters to reject the extension. With about $100 million in reserves (about 30% of the budget, as opposed to the state-advised minimum of 3%), the district shouldn’t need the $14 million that the parcel tax would raise, they wrote in a letter.

“As a friend mused, ‘I didn’t know that school districts had endowments,’ ” Collins said.

Voters in Novato Unified in Marin County also narrowly defeated a second parcel tax by 0.7 percentage points shy of the 66.7% required. The eight-year, $249 per parcel tax would have supplemented an existing $251 parcel tax. With Novato now facing $6 million in cuts in 2027-28 on top of $4 million in place for this year, the district is considering asking voters to reconsider. 

“There is simply too much at stake as far as resources and services to our students,” Superintendent Tracy Smith told the Marin Independent Journal.

Palo Alto and Novato were among the seven of 15 parcel taxes statewide on the ballot, rejected by voters. Palo Alto’s Measure B got 62.4% of the vote. The statewide parcel tax pass rate of 53% was 12 percentage points lower than average since 2002, according to Michael Coleman, who produces the California Local Government Finance Almanac.

Parcel taxes are one of the few allowable ways that school districts can enact a general tax to supplement their operating budgets. Because Proposition 13, the anti-tax initiative passed in 1978, bans creating new property taxes based on assessed value, districts are forced to use a uniform tax per property, regardless of whether a home or commercial building is a Silicon Valley mansion or converted granny unit.

Because of that built-in inequity, only about 10% of California’s nearly 1,000 school districts have passed a parcel tax. They’re concentrated along the coast, mainly high-income districts in the Bay Area. An exception this year was Hayward Unified, a middle-income community in the East Bay, which defeated a $98 per-parcel tax with only 62.3% support, while Piedmont Unified, a high-income enclave abutting Oakland, passed a $3,174 per-year parcel tax with an 82.4% majority.

Construction bonds fare better

School construction bonds, which require a 55% majority for passage, also raise money through local property taxes but are tied to each property’s taxable value. Twenty-six districts placed bonds on the June ballot, and 16 won. The largest to pass was the $360 million bond in Compton Unified, which is riding a wave of positive press for its post-pandemic surge in test scores. Two bigger bonds failed, however: a $512 million bond in Castro Valley Unified, with 51.9% support, and a $920 million bond for the Contra Costa Community College District with only 50.1% support.

The overall 62% bond passage rate for June was well below the historic average of 78%. But Rebekah Kalleen, who represents the Coalition for Adequate School Housing, a statewide organization that promotes school construction projects, pointed to 2024, when the passage rate of 60% in the March primary election rebounded to 78% in the November election.

Historically, between 100 and 113 school districts place school bonds on the November ballot in an off-presidential-year election, she said. That would quadruple the number from June. 

In Palo Alto, where there has been a wave of tech layoffs, Collins said: “Tax fatigue played a role in our election.” If voters in other less-wealthy regions feel the same, tax proposals could face trouble in November.

Kalleen remains optimistic. “While there is a lot of general sensitivity to affordability concerns in California, we also find time after time that voters recognize the importance of education and supporting schools, and they vote accordingly,” she wrote in an email.

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