July 16, 2025

The Price of Failure in Education

This is an excerpt from the forthcoming book from one of the speakers at our July 25^th meeting. Gus Mattammal, a full-time educator for 22 years, owns Advantage Testing of Silicon Valley, where he works with both paying and pro bono students across the Bay Area and in several states. His new book is entitled "A is For Average: Why Our Public Schools Underperform, And How You Can Help."

As a California taxpayer, you pay a lot of money to finance our school system, so it’s worth having a good idea of what you’re getting for your money.

Let’s start with some big-picture numbers showing California’s ranking relative to other states. We’ll examine the funding for the 2019-2020 schoolyear and our performance on the 2019 NAEP exam, which is considered “the nation’s report card” and is the gold standard of judging school system performance. I chose 2019 because it’s the most recent year for which both per-pupil funding data from the National Center for Education Statistics and NAEP scores both exist, and because it gives us a picture just before Covid hit:

Per-pupil funding: 20^th

8^th grade reading: 37^th

8^th grade math: 38^th

4^th grade reading: 40^th

4^th grade math: 44^th

As you can see, with the 20^th-best resource base to work with, California delivers performance at around 40^th in the nation. In the case of 8^th grade reading, for example, California punches 17 points below where you would expect it to be: 20^th place in funding versus 37^th place in reading. If funding were the only driver of performance – that is, if money were the only thing that mattered – then we’d expect to see California at approximately 20^th in the rankings. In fact, we can look at how well each state punches relative to its funding weight – here are the 10 best performers and the 10 worst performers for 8^th grade reading:

The best performers:

State	Funding Ranking	8th Grade Reading Ranking	Difference	Ranking of Difference
Utah	50	6	44	1
Idaho	51	10	41	2
Indiana	37	10	27	3
North Carolina	49	22	27	3
Colorado	28	6	22	5
Montana	33	13	20	6
Florida	41	22	19	7
South Dakota	40	22	18	8
Kentucky	39	22	17	9
Wisconsin	23	6	17	9

The worst performers:

State	Funding Ranking	8th Grade Reading Ranking	Difference	Ranking of Difference
Louisiana	36	44	-8	41
Pennsylvania	9	17	-8	41
West Virginia	29	45	-16	43
California	20	37	-17	44
Rhode Island	12	30	-18	45
New Mexico	27	49	-22	46
Delaware	13	36	-23	47
Hawaii	14	41	-27	48
New York	2	30	-28	49
Alaska	8	49	-41	50
Dist. of Columbia	1	51	-50	51

As you can see, not many states manage to achieve less with the money they have than California does. To check in on more current results, while we do not have per-pupil figures from the NCES yet for 2024, we do have NAEP scores. Here is California’s performance on this most recent of test cycles:

8^th grade reading: 38^th

8^th grade math: 34^th

4^th grade reading: 37^th

4^th grade math: 40^th

With the exception of 8^th grade reading, which slipped a point, California did improve a few points. For the record, it took 5 years and well over $13 billion extra inflation-adjusted dollars to produce that modest gain.

Upcoming Meetings

Gus Mattammal will take the stage after we hear from Acalanes Union High School District Superintendent, John Nickerson at the Chicken Pie Shop in Walnut Creek next Friday, July 25^th at 11:45am.  Register here: https://cocotax.org/event-6199011

September 26 - Local Government Fiscal Health Dashboard with Boomer Shannon from California Policy Center (also: possible presentation from Lafayette School District)

October 25 - Steven Greenhut on “The War on Suburbia”

Proposition 13, a Vital Safeguard

Many thanks to CoCoTax Executive Committee member Mark Fernwood for contributing this article.

Many in CA today may not remember the terrible situation that led to the taxpayer revolt culminating in the passage of Proposition 13.  That was an era of rapid increases in home prices allowing property taxes to skyrocket.  Many owners, on fixed incomes, such as the retired, were being forced out of their homes.  The State’s response was, “if you can’t afford your house, you may need to sell to someone who can afford it.”

The Assessor would tell us, “ I am only reflecting the current market value of your property.”  The Tax Collector would declare,” The tax rates have not changed, I am only collecting the lawful amount based on your property value.”  While each casts the blame to the other, a vast windfall of taxes was being collected each year.  This allowed a rapid expansion of government.

In 1978, 63% of CA voters passed Proposition 13 as a Constitutional Amendment. This limited assessments to 1% of valuation based on the purchase price, plus up to 2% annual tax increases.  It also required a 2/3 majority of voters to pass new tax or bond measures. Finally, CA property owners were given a predictable & affordable future. 

Consider an example of someone that, years ago, had purchased a house for $100,000 and was paying about $1400 a year in taxes.  Now the house is worth $500,000.  Under the pre-Prop. 13 model, of assessing at current value, times a rate of 3% to 4%, the owner would be faced with a bill of up to $20,000 per year!  How could anyone plan for that?  Such increases would force many thousands to try to sell in unison.  The combination of a tsunami of homes for sale and even fewer that could qualify to buy, would destroy home values.  Many would be forced into foreclosure. 

“Divide and conquer” is a tactic, of pitting residential owners against commercial.  A “split roll,” would first remove commercial property from Prop. 13 protection. The same problem applies to commercial:  Most owners could not afford such massive tax increases.  Of those owners with leases allowing a ‘pass-through’ of taxes, could the businesses and apartment tenants really afford to pay such increases?  This would result in massive business failures, unemployment and commercial property foreclosures.

All benefit from Prop 13.  It guarantees owners a reasonable and predictable tax. It also protects commercial & residential renters from unaffordable increases. Further, it provides government with 2% growth in tax revenue on properties that don’t change hands. Combined with increased assessments from re-sales and new construction, Prop. 13 generally provides local government with revenue growth at or above the rate of inflation.

CoCoTax is a nonpartisan organization that has a motto of “Good government at an affordable price.” To find out more about us go to: CoCoTax.org.

With less federal support, California will have to find Medi-Cal savings

This opinion piece from CoCoTax President Marc Joffe appeared earlier this week in the Orange County Register.

In the unfolding war between the California and federal governments, the state has a major vulnerability: its reliance on federal healthcare funds. This year’s enacted budget includes over $120 billion of federal funds for the State Department of Healthcare Services, primarily for Medi-Cal. With the passage of the One Big Beautiful Bill, the Trump administration is beginning to chip away at this funding.

As I’ve discussed on these pages previously, California uses a special tax on managed care providers to increase its federal take. By using the provider tax revenue to pay for Medi-Cal services, the state can attract extra matching funds since the federal government matches state Medi-Cal spending on a one-for-one basis for traditional beneficiaries and a nine-for-one basis for those who became eligible for Medi-Cal as part of the Obamacare Medicaid expansion. LAO recently estimated that the managed care provider tax attracted $7.6 billion of federal funds in 2024 alone.

California’s tax runs against the spirit of a 1991 federal law which required that, to attract federal matches, state provider taxes had to be broad-based and uniform. But state officials took advantage of a loophole in the regulations implementing that law to qualify its tax.

Currently, California’s tax on managed care providers is $187.50 per Medi-Cal beneficiary and only $2.00 for other covered individuals. But it still passes a flawed regulatory test to determine whether the tax qualifies for federal matching funds.

When the Biden administration’s Center for Medicare and Medicaid Services (CMS) approved the California provider tax for federal matching funds, it warned the state that a subsequent regulatory review might invalidate the state’s levy.

Nonetheless, California’s healthcare industry placed Proposition 35 on the November 2024 ballot, which made the provider tax permanent and dictated how its proceeds would be distributed.

Now the OBBB has closed the loophole the state used to obtain CMS approval for the tax. Further, under Trump, CMS was already planning to change the 1990s-era regulations to close the loophole on its own. So, it now seems inevitable that California will lose the federal funds no later than December 31, 2026, when the current approval from the Biden era expires.

The provider tax regulation is likely to be just one of multiple changes that will reduce federal support for Medi-Cal during the Trump era. An earlier version of the OBBB would have penalized California for covering undocumented immigrants. Although that provision was removed at the behest of the Senate parliamentarian, it is likely that Congress and the Trump administration will try something similar in the future.

While California policymakers may be tempted to fight federal Medi-Cal cuts in the courts, a better option would be to rein in the program’s costs. This should be possible given the fact that per beneficiary Medi-Cal costs are higher than per capita healthcare spending in Japan, France, and Canada.

One step would be to deter unnecessary emergency room visits. The California Department of Health Care Access and Information found that Medi-Cal beneficiaries were about three times more likely to make avoidable ER visits than individuals with private insurance. While most privately insured patients are responsible for a sizable copayment when they visit the ER, Medi-Cal patients face no such disincentive. Federal regulations allow states to charge Medicaid patients an $8 copayment for non-emergency ER visits, and this ceiling may well rise during the Trump administration. California should start levying these copayments.

The state should also review its use of managed care providers. Connecticut found that these middlemen were not saving the state enough money to cover their administrative costs and profits. The Nutmeg State actually lowered its Medicaid costs by reverting to a traditional fee-for-service model. Perhaps California could follow this precedent.

Finally, California needs to reconsider its aggressive rollout of Medi-Cal to the undocumented. As of March, 1.657 million individuals with “unsatisfactory immigration status” were on the program, not only driving up costs but also competing with legal beneficiaries for scarce provider resources.

While it would be wonderful to provide unlimited medical care to everyone in California, the state cannot afford to do so without massive federal assistance, and policymakers should expect that assistance to shrink during this administration.