Does School Finance Litigation Cause Taxpayer Revolt? Serrano and Proposition 13

Law & Society Review, Sep 2006 by Martin, Isaac

An influential theory argues that court-ordered school finance equalization undermines support for public schools. Residents of wealthy school districts who cannot keep their tax revenues for their own school districts may vote to limit school funding altogether. Proponents of this theory point to Serrano v. Priest, a 1977 decision of the California Supreme Court that mandated equalization of school financing and was followed almost immediately by Proposition 13, a ballot initiative to limit the local property tax. I test the theory that these two events were causally related by using hierarchical models to analyze voters within school districts. I find no evidence that opposition to school finance equalization contributed to the tax revolt. Claims about the perverse consequences of school finance litigation should be greeted with skepticism.

Since the late 1960s, civil rights attorneys have challenged the unequal financing of public schools, arguing that the reliance on local property taxes to fund education violates the constitutional rights of children to equal educational opportunity. In response, several state courts have overturned established systems of school finance. These decisions have typically mandated remedies that redistribute tax revenues from wealthy districts to poor ones.

Most scholarship on the impact of school finance litigation investigates whether it has the effects intended by reformers. The question is important because it bears on the long-standing controversy over whether the judiciary can create social change. Critics argue that courts are relatively powerless to promote equality, because they depend on other institutions to implement their decrees (Horowitz 1977; Rosenberg 1991). Students of school finance litigation have generally taken a more optimistic view of the courts. Where judges have decided in favor of school finance equalization, their decisions have been implemented, if sometimes "grudgingly" (Canon & Johnson 1999:127; see Rebell & Block 1982; McUsic 1999), and the result in at least some states has been a substantial redistribution of resources among school districts (Bosworth 2001; Paris 2001; Reed 1998, 2001; Rebell & Block 1982; but see Horowitz 1977: Ch. 3).

This article addresses a different question: whether such litigation has effects unintended by reformers. It is a commonplace that judicial policies-and social policies in general-can have effects that their promoters did not foresee or intend (Bogart 2002; Canon & Johnson 1999; Horowitz 1977). This criticism is commonly leveled against courts when they attempt to equalize resources that the market has distributed unequally. According to the critics, egalitarian judicial policies may have a variety of perverse consequences that range from reducing the aggregate well-being of the public (see, e.g., Posner 1998) to undermining respect for the judiciary (Horowitz 1977) to provoking a political backlash by the privileged (Rosenberg 1991).

The last of these arguments has gained widespread currency among students of education finance. Proponents argue that courtordered school finance equalization undermined popular support for schools and ultimately triggered a backlash that crippled public education. Voters who had happily paid heavy taxes to support their local schools were unwilling to pay the same taxes for schools outside of their own communities. When courts mandated equalization, voters responded by demanding laws to limit the property tax levy. An unnamed legislator interviewed by Kozol (1991) summarized the theory succinctly: "This [property tax limitation] is the revenge of wealth against the poor. 'If the schools must actually be equal,' they are saying, 'then we'll undercut them all.'" (1991:220).

This theory originated in California, which was home to both the most widely cited school finance equalization decision (Serrano v. Priest ["Serrano I"J, 5 CaI. 3d 584, 96 CaI. Rptr. 601, 487 P. 2d 1241 [1971]) and the most dramatic and well-known antitax backlash initiative, Proposition 13 (CaI. Const. Art. XIIIA, sec. 1-6 [1978]). Some observers at the time suspected that these two events were related (Oakland 1979:388; Kuttner 1980:23). The economist William Fischel (1989) developed the underlying theory in an article entitled "Did Serrano Cause Proposition 13?" and a series of subsequent publications (Fischel 1992, 1996, 2001, 2002, 2004). Largely because of Fischel's efforts, the hypothesis that court-ordered school finance equalization caused the tax revolt has become, in his words, "part of the conventional wisdom among local publicfinance scholars and students of Proposition 13" (2002:103). Stark and Zasloff (2003), who are critical of the Fischel hypothesis, acknowledge it as "a leading, perhaps the leading, explanation for the root cause of Proposition 13" (2003:815). They count more than 20 recent articles that make reference to the hypothesis in law journals alone (2003:805, note 19). Several economists have endorsed the hypothesis (see, e.g., O'Sullivan et al. 1995; Wassmer 1997; Downes & Schoeman 1998; Reschovsky 1999; Sonstelie et al. 2000). Kozol popularized a version of the hypothesis in his best-selling book, Savage Inequalities (Kozol 1991), and other writers have popularized it in mass-market books that describe tax revolts in California and New Jersey (Schrag 1998; Cohen 2003). It is no exaggeration to say that the Fischel hypothesis is among the most influential interpretations of the property tax revolt.