Santa Monica-Malibu School Board Closer to Deciding Malibu Split

By Niki Cervantes
Staff Writer

March 20, 2018 -- The Santa Monica-Malibu School Board is edging closer to a decision on Malibu’s campaign to split from the District, with a new report detailing the "significantly" high cost to Malibu of equalizing the loss of funding to the Santa Monica-based district.

The report by School Services of California also digs into the financial pros and cons of creating a charter school system for the four schools in Malibu.

The School Board will discuss the report at a special meeting Tuesday night at district headquarters, 1651 16th Street in Santa Monica in the board room.

Discussion is set to start at 6 p.m., although the meeting convenes at 3 p.m. with a workshop on the district’s proposed budget.

Malibu is increasing pressure on the district to make a decision on the split and has embarked on another route -- through the county Department of Education -- to win approval to create its own district.

Malibu officials, however, put that attempt on hold pending the results of the SSC report, which represents a major development in the fight between the district and Malibu ("Malibu Agrees to Pause in Battle to Separate from Santa Monica Public Schools," December 4, 2017).

SSC’s report indicates Santa Monica schools would feel fiscal pain while Malibu’s per pupil funding would increase “dramatically,” absent a revenue-sharing agreement.

A split, effective next fiscal year, would see a Malibu Unified School District with spending of $20,357 per student.

A Santa Monica Unified School District would experience a reduction of per pupil spending to $13,046, from $13,726 which would be spent per pupil by the Santa Monica-Malibu Unified School District, the report finds.

The analysis by consulting firm SSC does not make recommendations to the SMMUSD school board, which continues to wrestle with the financial realities of the split sought by Malibu and approved in concept by the School Board more than two years ago("Santa Monica School Board Members Support Malibu Split, Questions Remain," December 2, 2015).

SSC digs into the proposition of a 50-year agreement on revenue sharing which would keep both districts fairly equal in terms of per-pupil spending.

Its formula requires that Malibu provide Santa Monica with payments “significantly” greater than the revenue Santa Monica schools would receive per student.

By virtue of being so much smaller, Malibu’s per pupil revenue is much higher than Santa Monica’s, the report said.

Without equalization payments, there would be a funding gap of $7,311 per pupil between the two districts in the 2018-2019 year.

The gap continues through the decades and reaches $312,688 per pupil in 2068-2069 in Malibu,compared to $147,803 per pupil for Santa Monica schools.

Using a revenue-sharing formula to equalize the funding would dig into the Malibu District's fiscal pockets every year but both districts would end up with the same per pupil spending -- $14,104 in the 2018-2019 fiscal year -- and in each year of the 50-year agreement, the report said.

A Santa Monica school district could become more dependent on the neutrality payments from Malibu over time, a risk it could mitigate by putting a portion of the supplemental revenues from Malibu into a trust, the report said.

The report found that 25 percent of the revenue neutrality payments would be sufficient (based on investment earnings of six percent annually).

“Under these assumptions, the trust fund would reach $2.6 billion by the fiscal year 2068-69. More conservative rates of return would require a larger set aside and provide lower supplemental payments,” SSC said.

Also on the table is the possibility of creating a Malibu charter school system.

Under that arrangement, the four schools in Malibu would be part of an independent charter school, with about 1,483 students. The current District's remaining 12 schools would stay in a regular public-school district based in Santa Monica.

That would allow SMMUSD to retain all local revenues, including property taxes and to make an in lieu of property tax transfer to the charter school of $12.3 million in 2018-19, the report said.

Cost of living adjustments would increase the amount in subsequent years.

SMMUSD would have higher per-pupil funding with the charter school ($14,482) than without (or $13,726) “because property taxes and other local revenues remain with SMMUSD,” the report said.

Under the state’s funding model, the Malibu charter school would receive $8,580 per pupil in 2018-19 and would increase in subsequent years only by the rate of inflation.