The future of education in Santa Monica and Malibu is becoming clear, as a years-long process to create two independent school districts finally has fiscal details to share with the respective communities.
Santa Monica schools will receive an annual payment from Malibu that guarantees current funding levels plus an annual growth rate of 4% a year for about the next 18 years.
Details were presented at a special meeting of Malibu City Council YouTube video (below) on Wednesday, highlighting one of the largest hurdles to the potential split of the Santa Monica-Malibu Unified School District (SMMUSD) into separate Santa Monica and Malibu Unified districts. The agreement is part of a term sheet adopted by Santa Monica and Malibu parties in November 2022, which also includes pending operational and joint powers agreements.
In the presentation by Malibu school separation finance consulting team consultant Cathy Dominico, the revenue sharing agreement memorializes the allocation of existing and projected SMMUSD revenues between the pending Santa Monica and Malibu educational entities. The agreement’s guiding principle is that each of these entities is "allocated a sufficient share of funding to provide similar level of service at each school site as prior to separation."
Malibu Mayor Steve Uhring noted that the agreement has been provided to SMMUSD officials and that the terms "will work for both parties" while still staying true to Malibu’s goals of local control of education.
"The program here is to make sure that both parties are able to continue doing the education process that they have to do, and at the same time, give the Malibu school district a chance to get built up so that we can deliver the educational alternatives we want for Malibu children back here in the city," Uhring said.
The revenue sharing is broken down into two components, a "base year calculation" to be determined once in the first year of separation, and an "annual calculation" for each subsequent fiscal year until termination. The annual calculation is used to determine the amount of property taxes to be transferred so that the Santa Monica Unified School District achieves 4% annual growth in total unrestricted revenues, one of the main goals of the Santa Monica side of negotiations.
To determine the base year calculation, the formula first identifies the amount of revenue per pupil of SMMUSD, adjusting for the additional cost to serve Malibu students. Then, the adjusted per pupil funding amount is multiplied by the number of students enrolled in just Santa Monica schools, creating a base year "funding target."
In a sample calculation an adjusted per pupil revenue of $18,131 was multiplied by 8,019 enrolled in Santa Monica campuses, creating a base year funding target of $145,397,289. The numbers were purely samples because the base year calculations will be based on the fiscal year prior to separation.
This funding target number is compared to the unrestricted general fund revenues of a Santa Monica Unified, and if the revenues are less than the funding target, Malibu would make up the difference through a base year property tax transfer amount. In the example calculation, the Santa Monica Unified unrestricted general fund revenues of $128,928,378 is $16,468,911 under the funding target, meaning that number would be the base year amount transferred by Malibu.
Subsequent fiscal year revenue sharing starts with the Santa Monica Unified funding target being escalated by 4% each year. The inflated Santa Monica funding target, similar to the base year calculation, would be subtracted by Santa Monica’s unrestricted revenues, and whatever shortfall there is in the difference between revenues and funding target would be made up by a transfer of Malibu property taxes. If Santa Monica revenue growth results in funding levels which exceed the funding target, Malibu will not be required to provide a transfer for that year.
Dominico made clear that the 4% increase in the Santa Monica funding target "is not an increase [of] 4% on [Malibu’s] payment" and that the escalation is "based on the target revenues" of Santa Monica Unified. She added that the 4% number was based on negotiations, stating that in negotiations "there’s pain on both sides."
"I think we would have rather had a lower number," Dominico said. "But as we’re going through and trying to get concessions on one side to provide protections to Malibu to make sure that this revenue sharing is affordable … one of the things we did have to agree to was that 4% growth rate, it is based on [SMMUSD’s] historical growth rate … they felt like in order for them to say to their community that they would not be harmed due to the separation, that’s the level of funding they would need to achieve."
Malibu City Councilmember Bruce Silverstein admitted that "all things being equal" Malibu "wouldn’t be giving" up concessions to the Santa Monica side, but the city had to follow the negotiation process.
"This is a contractual way to [ensure] that it gets divided fairly to set up Malibu at least no less unfairly than it currently is going forward, with opportunity for it to become more and more fair to Malibu to the point, eventually, where there’s a complete separation," Silverstein said. "Would we like more? Absolutely. Would they want more? Absolutely. They don’t even want to separate. So this was the cost to being able to do it … if we [didn’t] get the same education, I wouldn’t be supporting this … but it’s the same. It’s the same dollars, the same education, and it’s an opportunity for a better education incrementally."
The annual revenue sharing would continue until an agreement termination, which could be triggered in several ways. First, an early termination would occur if there is no Malibu property tax transfer for three consecutive years. If that does not occur, the next chance for termination would be in the 2041-42 fiscal year if there is no property tax transfer at that time. That 2041-42 year is the beginning of the end regardless, as if Malibu’s transfer is greater than zero, but less than $5 million in 2041-42, Malibu payments are tapered off through termination in the 2046-47 fiscal year. If in 2041-42 the transfer amount is greater than $5 million, payments will taper off until termination in 2051-52.
Language in the agreement has protections for both the Malibu and Santa Monica sides of the equation, including considerations of adjustment to the formula or payment amount from the Malibu side if the transfers result in "undue fiscal pressure" on Malibu Unified. For Santa Monica, the agreement guarantees the unrestricted general fund revenue annual growth of 4%, with the property tax transfer payments to be paid in alignment with normal county property tax distributions each year, in order to assist with cash flow.
The City of Malibu initially identified school district separation as a priority in 2015, with the city formally submitting a petition two years later to the Los Angeles County Office of Education Committee on School District Organization. The petition approval process is currently on hold pending negotiations regarding the term sheet, with the subsequent operational agreement called "in process" and a joint powers agreement still to be agreed upon.
Next up is another Malibu workshop on the separation topic to be held on April 20, followed by similar meetings to be held in Santa Monica. Once sufficient public input is received on the agreement it will formally come back to Malibu City Council and the SMMUSD Board of Education for ratification.
