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

Law & Society Review, Sep 2006 by Martin, Isaac

Until Serrano II, Fischel argues, the market for public schools was at equilibrium. California residents generally received the levels of public education they wanted from their local school districts at levels of taxation that they were willing to pay. The mandate to equalize school finances destroyed this equilibrium. Voters in highdemand districts-those who paid premium prices to live in districts with good public schools-were suddenly slated to receive less public schooling even as their taxes remained high. They were no longer getting what they paid for.

Had these voters been able to undo school finance equalization, they could have restored the former equilibrium without cutting taxes. But Serrano made this impossible. The legislature was constrained by the judiciary, and the California Supreme Court was immune to voter sanction. Unable to restore spending, voters instead chose to cut taxes. In short, Fischel argues, "Proposition 13 succeeded because voters in high-demand school districts no longer regarded the property tax as a benefit tax" (Fischel 1992:176).

There are two ways to test this hypothesis. One is to compare California after Serrano to the counterfactual scenario of California without Serrano. Empirically, one could approximate this comparison by identifying similar states with and without Serrano-like decisions (King et al. 1994). In his early work, Fischel argued against this comparative strategy on the grounds that no other state court had imposed a remedy quite comparable to Serrano in the extremity of its egalitarianism (Fischel 1989:471). Although school finance equalization measures in other states since 1989 have obviated this objection (see Reed 1998), Fischel now offers a second argument against comparative tests, which is that the "penumbra" of school finance litigation may have caused even states without Serrano-like decisions of their own to change their tax policies (Fischel 2002:104-6).

In the interest of providing a generous test of the Fischel hypothesis, I pursue a second strategy: to compare individuals in California whose interests were affected differently by Serrano. I thus accept the decision of Fischel and at least some of his critics to eschew cross-state comparisons and to treat the California primary election of June 1978 as the principal test case of the argument. Note, however, that nothing in the logic of the argument is otherwise peculiar to California, and that Fischel believes the policy implications of California's experience apply quite generally to other states that may be considering legislation to equalize school finances (Fischel 2002). Like much of Fischel's work, then, this article treats California as merely a case study to test a more general hypothesis: to wit, that court-ordered school finance equalization causes property tax revolts.2

All previous attempts to test the Fischel hypothesis to date have relied on community-level voting returns from California to test whether people in school districts with higher property valuation per pupil were more likely to vote for Proposition 13. Districts with above-average property valuations per pupil were losers under the Serrano redistribution formula, and the Fischel hypothesis implies that voters in such districts should have been particularly inclined to favor tax limitation. Fischel (2001) tested this hypothesis by calculating the bivariate correlation between valuation per pupil and the aggregate vote. He controlled for other, non-Serrano influences on the vote by transforming the dependent variable: namely, by subtracting the percentage who had voted for a tax limitation in 1972 (the last property tax limitation initiative prior to Serrano II) from the percentage who voted for Proposition 13 (the first property tax limitation initiative after Serrano If), and then dividing the result by the former quantity. Subsequent analyses have followed the same procedure, although they have also introduced additional controls by means of multivariate OLS regression (Stark & Zasloff 2003; Fischel 2004).