The Legacy of Serrano: The Impact of Mandated Equal Spending on Private School Enrollment

1. Introduction The California Supreme Court decision in Serrano v. Priest in 1971 was the first state supreme court ruling to declare a state's education finance system unconstitutional.1 The suit, originally filed by a class of Los Angeles County public school children and their parents, argued that the California public school finance system was unconstitutional because of its reliance on a local property tax system. Under this system, large differences in property wealth created enormous variations in educational resources across the state. In its subsequent 1976 Serrano H decision, the California Supreme Court found that the state legislature's response to the first Serrano decision was insufficient. The court ordered the state legislature to follow a trial court's requirement to implement a funding formula that reduces wealth-related per pupil expenditure disparities (i.e., property tax revenue exclusive of categorical aid and special needs) to $100 across school districts. The Serrano II decision resulted in a nearly complete shift of the fiscal responsibility for K-12 education in California from local to state government. In the aftermath of the initial Serrano decision, suits were filed in several other states claiming unconstitutional inequities in the state education system. Many of these suits were successful. Between 1973 and 1983, six state supreme courts (New Jersey [1973], Connecticut [1977], Washington [1978], West Virginia [1979], Wyoming [1980], Arkansas [1983]) found their systems of educational finance unconstitutional. Similar rulings followed in 1989 in Kentucky, Montana, and Texas; in 1993 in Massachusetts and Tennessee; in 1994 in Arizona; and in 1997 in New Hampshire, Ohio, and Vermont. A third of the states' education finance systems now have been ruled unconstitutional. As a result of these rulings and legislative-based education reforms in a number of other states, education expenditure inequality has been reduced.2 This in turn has left local districts with less latitude in determining spending levels. Parents in richer districts are expected to be especially frustrated with the limits on spending that accompany equalization. Changes in state educational finance systems to gain greater equity affected average spending on education in these states. The initial research on this issue focused on the California experience, where raw expenditure figures reveal the dramatic change in per pupil spending in California since the initial Serrano decision in 1971. In academic year (AY) 1969-1970, per pupil spending in California's public elementary and secondary schools was slightly greater than the national average (106.25% of the national average), ranking 14th among all states. However, by AY 1992-1993, education expenditures in California had fallen to 85.6% of the national average and its rank had dropped to 34th. Silva and Sonstelie (1995) concluded that education spending in California in 1989-1990 was significantly lower than they would have otherwise predicted. They attributed about half of the lowered spending to the legislation following Serrano II and the other half to the growth of the student population in California. But the California experience of reduced expenditures appears to be atypical. Manwaring and Sheffrin (1997) found spending to be higher in many states as a result of litigation or legislativebased educational finance reform. Downes and Shah (1995) similarly estimated that school finance reform raised spending in some states and lowered spending in other states. Murray, Evans, and Schwab (1998) found state per pupil spending rose with successful state education finance litigation. The variation across states in the spending effects of education finance reforms may be due to the source (court ordered or legislative) and/or degree (e.g., weak reform, strong reform, etc.) of the reforms. In any case, there should be greater interest in supplementing what the public schools do or opting out of the public system if reforms cause spending in a state to fall. …