After the City of Malibu had its discussion on the tentative revenue sharing agreement between Santa Monica and Malibu schools, it was the Santa Monica-Malibu Unified School District (SMMUSD) Board of Education’s turn to hold a public meeting on the fiscal topic.
On May 22, the board held a presentation of the property tax sharing agreement between SMMUSD, representing the interests of the future Santa Monica Unified School District, and the City of Malibu representing the future Malibu Unified School District. A process years in the making, the revenue sharing agreement is part of a term sheet adopted by the parties to separate SMMUSD into the two districts, which also includes operational and joint powers agreements.
While the two other portions of the agreement are yet to be crystallized, the revenue sharing agreement was previously discussed by Malibu City Council. The Wednesday board meeting was held with the goal of hearing from the community, with several public commenters mainly asking when a final agreement document can be expected for sharing with locals.
The board discussed when a final agreement, outside of a powerpoint presentation available on the district website, could be shared. After sufficient public input, which included the Malibu and SMMUSD meetings, a final document will be presented to both the board and Malibu council for final approval, and the final agreement would be made public through the publishing of council and board agendas.
Board Member Maria Leon-Vasquez made a suggestion based on typical Santa Monica City Council action, saying that the revenue sharing agreement should have a first and second reading, so that the final agreement could be posted in a meeting agenda for when the first reading is ready. Fellow board member Jon Kean noted that the finish line on the agreement is near, and that with children’s educational futures on the line, something as important as fiscal matters shouldn’t be rushed.
“We’re going to get it done right, I am very confident we will get this done and it’ll be a document that both our communities will be proud of,” Kean said.
A presentation on the agreement was provided by SMMUSD legal counsel David Soldani alongside Eastshore Consulting, LLC Principal Shin Green. Soldani said the creation of the revenue sharing formula, broken down into a “base year calculation” to be determined once in the first year separation and an “annual calculation” for each subsequent fiscal year until agreement termination, was made to devise a “steady, predictable amount of revenue growth” for both hypothetical educational entities.
Base year calculation first identifies the amount of revenue per pupil of SMMUSD, then adding $600 to the per pupil revenue to adjust for the additional cost to serve Malibu students. The $600 figure is a recognition that Malibu schools cost more for operations, as Malibu would be a smaller district as a standalone with less efficiency than a district with a higher population density. The adjustment of the per pupil number is to make a “balance” by ensuring adequate revenue for Malibu while not negatively impacting Santa Monica programs.
The adjusted per pupil funding amount is multiplied by the number of students enrolled in only Santa Monica schools, creating a base year “funding target.” This target number is then compared to the unrestricted general fund revenues of a Santa Monica Unified district, and if the revenues are less than the funding target, Malibu would make up the difference through a base year property tax transfer amount. Per the agreement, unrestricted general fund revenues narrowly focus on basic operational funding of the district, not including restricted revenues like supplemental funds for English learners and fundraising revenues from the Santa Monica Education Foundation.
Revenue sharing past the base year starts with the Santa Monica Unified funding target being escalated by 4% each year. The inflated Santa Monica funding target would also be subtracted by the district’s unrestricted revenues, and whatever shortfalls would be made up by a transfer of Malibu property taxes. If Santa Monica revenue growths in funding levels exceed the target number, Malibu would not be required to provide a transfer for that year.
The 4 percent number was determined by historical background finding out what was necessary to “support the normal growth in operational expenditure for the general educational program of the district,” and the number is what is needed to cover normal raises and inflation costs for general education services. The number was also a round one, making it easier to calculate in subsequent year formulas.
“This agreement is the result of mediated negotiations with the City of Malibu and reflects hundreds of hours of work by both sides,” Soldani said. “As is the case with all negotiated agreements, there is some give and take, and that is reflected in this agreement … both sides were guided by the following principle, to ensure that students in both communities have sufficient funds to continue the exceptional educational opportunities and programs that the combined district currently enjoys.”
Annual revenue sharing would continue in this manner until an agreement termination, which could occur if there is no Malibu property tax transfer for three consecutive years, or the 2041-42 fiscal year if a property tax transfer does not occur at that time. If Malibu’s transfer is greater than zero, but less than $5 million in 2041-42, Malibu payments would be tapered off through agreement termination in the 2046-47 fiscal year. If the 2041-42 transfer amount is more than $5 million, payments will taper off until a 2051-52 fiscal year termination.
