Though the state is facing a budget crunch, the picture for local schools appears brighter, with the Mountain View Los Altos Union High School District (MVLA) expecting healthy property tax growth this coming year.

MVLA's 2023-24 budget projects a 7% increase in secured property tax revenue, the district's main source of funding. The school board approved the budget on a 4-0 vote, with trustee Sanjay Dave absent, at its June 9 meeting, according to Associate Superintendent of Business Services Mike Mathiesen.

The projected jump in property taxes is based on data from the Santa Clara County Assessor's Office, which the district compared to historical trends, Mathiesen said. The district's 2022-23 budget projected an 8.5% increase in secured property taxes and the district ultimately saw a 9.1% increase, Mathiesen said.

While the 2023-24 budget assumes a 7% rise this year, the district's overall revenue is only expected to increase by 0.5%. That's largely because MVLA received one-time funds from the state last year that it won't be receiving this coming school year, Mathiesen said. California distributed extra money to school districts over the past several years to help them respond to the pandemic and its impact on students' education.

Secured property taxes make up about 77% of the district's total revenue. The district projects that its other income sources will generally stay flat, Mathiesen said. That includes "unsecured" property taxes, which are for property that can be moved, like boats, airplanes and business equipment. Secured property taxes are assessed on real estate. The district's budget doesn't assume any increase in unsecured tax revenue, because it is more volatile and harder to predict, Mathiesen said, adding that it makes up a small portion of the district's budget.

In total, the district's revenue is expected to be $134.4 million this coming year, with expenses of $135.4 million. That roughly $1 million deficit is because the district plans to spend some of the remaining one-time money that it received, which doesn't show up as revenue in this year's budget, because the district is carrying it over from prior years, Mathiesen said.

On the expense side, the 2023-24 budget includes a 5% raise for teachers and other school staff. In the 2021-22 school year, the district and its unions reached an agreement to give employees a 5% raise in each of the 2021-22, 2022-23 and 2023-24 school years.

As is typical for school districts, employee salaries and benefits are MVLA's biggest expense, making up 83% of its budget. Teachers in the high school district earn an average salary of roughly $174,000, Mathiesen said. With benefits, it's about $240,000 per teacher.

The district projects it will have 4,473 students this coming school year, an increase of 26, which Mathiesen said is based on the number of students who have signed up for classes. In the following two years, the district projects a decrease of 44 and then 68 students. That's based on a demographic study from 2016, which Mathiesen said the district plans to redo this year to get more current projections.

The 2023-24 budget also anticipates a $1.9 million reduction in state funding. Despite the potential cuts, the district doesn't plan to reduce any programs for students, with plans to cover any losses with general fund dollars, Mathiesen said. He added that the state budget hasn't been finalized and, based on recent updates, it looks like the cuts may not be as deep as the $1.9 million that was originally anticipated.

Projecting property tax revenues

Recent tech layoffs have sparked fears of a downturn in the Bay Area real estate market, but even if home sale prices dip, it doesn't necessarily mean MVLA will see a drop in funding.

Because of the way property taxes are calculated in California, the bulk of the increase in revenue that local school districts see comes when properties are sold or new developments are constructed, Mathiesen said.

Unless a home is sold or new construction occurs, its assessed value – on which property taxes are based – can't increase by more than 2% each year. That's due to Proposition 13, which California voters passed in 1978.

Because of this cap, longtime homeowners are often paying property taxes on an assessed value that is far below the current market value of their home. This means that even if real estate prices drop, homes that are sold will often see an increase in assessed value, which means more revenue for the school district.

Mountain View is also continuing to see both commercial and residential growth, with new developments being constructed, Mathiesen said. That too is expected to bring more money into the district.

Mathiesen also noted that even if there is a regional dip in property values, the local picture may look different. During the 2008 recession, Mathiesen said that property values weren't as sharply affected in Mountain View, Los Altos and Los Altos Hills relative to other areas of the county.

Looking beyond next year

The 2023-24 budget document also includes projections for the 2024-25 and 2025-26 school years. MVLA is estimating 5% secured property tax growth in each of those two school years. According to Mathiesen, the district is typically more conservative when projecting further out.

On the expense side, the district shows a surplus in both 2024-25 and 2025-26, but Mathiesen said that's partly because the budget doesn't include any employee raises. It's the district's practice not to assume a salary increase in the budget until it's decided, because pay is negotiated with the employee unions, Mathiesen said.