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Doom Loops

Yet Another Casualty of San Francisco’s Disastrous Housing Policy

As non-wealthy residents flee the unaffordable city, the public school system is facing a funding collapse.

victorian home relocation
Carlos Avila Gonzalez/The San Francisco Chronicle/Getty Images
Welcome to San Francisco, where residents spend ungodly sums to relocate historic single-family Victorian homes, but there’s insufficient political capital to approve enough new housing.

The most childless city in the United States is only becoming more so. Less than 14 percent of the city’s population is under the age of 18, and that percentage has been steadily declining for years. Unsurprisingly, enrollment at San Francisco public schools has also fallen in recent years, exacerbating a perennial budget problem for the district and raising the likelihood it may be forced to close down some of its schools.

And yet, private education in San Francisco seems to be doing better than ever. No fewer than nine of the city’s tony private schools are upgrading their facilities, with some of them expanding enrollment and others financing new amenities like yoga studios. The shrinking of San Francisco’s child-age population doesn’t seem to have caused any problems for these schools; far from it. So what’s going on here?

As with most macro trends in San Francisco’s politics and public life, the answer comes back to the city’s chronic lack of housing. And it should serve as a warning to other expensive American cities: Housing shortages have a way of eroding public education systems. In fact, they chip away at the very social and financial logic that keeps all kinds of high-quality public services afloat. Any city that replicates San Francisco’s poor choices is likely to wind up with fewer young families and less capacity to serve the families who stick around.

I’ve seen San Francisco’s twin housing and public education crises from a couple of different angles over the past several years. Currently, I’m the policy director at California YIMBY (for “Yes in My Backyard”), where I spend my days studying the impact of housing scarcity on cities like San Francisco and thinking up ways the state can intervene. But in 2019 I was a policy analyst at the Legislative Analyst’s Office in Sacramento—essentially California’s version of the Congressional Budget Office—where I tracked K-12 education funding.

California has an unusual system for funding local school districts, called the Local Control Funding Formula. Signed into law a decade ago by Governor Jerry Brown, LCFF overhauled how California pays to educate its kids. No longer would districts cobble together their annual budgets from any number of bespoke funding pots; instead, each school district would receive a standardized sum based on total pupil attendance, with additional funding for students who were low-income, English learners, or foster children.

That’s the simple version. The reality of LCFF is a bit messier, burdened as it is by the usual mix of legacy programs and political compromises. But the result was still just barely shy of revolutionary: Per-pupil funding was no longer just a function of one’s ZIP code. In fact, the poorest areas were getting more per-pupil funds, because they had more students who necessitated the additional funding mentioned above.

So far so good. But there was a big problem with LCFF: Because per-student funding was largely tied to average daily attendance, a drop in attendance would eventually lead to a sustained reduction in the average district’s budget. In theory, this should have provided a financial incentive for districts to discourage unexcused absences. In practice, it turned out to be a fiscal time bomb for San Francisco—and for the state’s many other overpriced, anti-growth jurisdictions.

Everything worked as intended so long as districts continued to add more kids. But statewide birth rates have dropped by nearly 50 percent since 1990. And for the first time in its history, California’s population is now steadily shrinking as residents flee to states with lower housing costs. That means there are fewer students to go around.

In the abstract, that may not seem like much of an issue. After all, if a district’s student population falls by 10 percent, why can’t the district make do with a little less? Answer: Using 90 percent of a school building doesn’t cost 10 percent less than using 100 percent of it. Some costs, like maintenance, are more or less fixed. It’s the funding that’s variable.

Similarly, a decline in attendance doesn’t automatically lead to a commensurate drop in labor costs. Any district looking to lay off educators or reduce their pay must contend with California’s strong public sector unions. Here too, the housing crisis plays a role: As a city’s housing costs inflate, so do the minimum salary requirements of professional staff. (Housing costs were a major factor in this year’s Los Angeles teacher’s strike.)

To be sure, not all of San Francisco’s public school problems can be blamed on the housing market. District governance has been so spectacularly poor that aggravated parents recalled three members of the school board last year in a bruising, ugly special election. Covid-19 school closures didn’t help matters; many parents who had the means to send their kids to in-person private schools did so, and it now looks like many of those kids aren’t coming back.

While Covid-19 probably accelerated the drop in public school enrollment, though, it didn’t precipitate it. And incompetent management of the district can’t explain why public school enrollment has been falling statewide for nearly 20 years. The housing crisis is a critical factor, and it is amplifying the severity of the district’s other problems.

Of course, aggregate statistics about birth rates and population declines only tell part of the story. We also need to consider who is leaving San Francisco. While the Bay Area’s median income has declined slightly over the past three years, the share of households earning six figures or more has only grown. People across the income spectrum are moving out of the area, but low- and middle-income earners are leaving at higher rates. Many of those who stay behind are those who can afford to stay—and who can afford to opt out of public education while the public school system struggles to pay its bills. Meanwhile, the people who suffer the most are the very households that the Local Control Funding Formula was supposed to help: impoverished families that can’t afford to move out of the Bay Area, can’t afford to send their kids to private school, and can’t afford adequate housing.

It gets worse. While California’s public education system is not especially dependent on local tax revenue, plenty of municipal services are. And as middle-class and upper-middle-class residents leave the Bay Area, they take their tax contributions with them. Over time, this will cause the quality of public services to decline, which will in turn encourage more people to leave.

San Francisco can reverse this dynamic, but only if its elected leaders remove the city’s myriad obstacles to building more homes. (Under pressure from the state, they took an important step in the right direction this week, but more remains to be done.) Only by making the city affordable for middle-class people will public officials be able to grow the population and ensure sustainable funding for necessities like public education and a high-quality transportation system. If they don’t do this, an already deeply unequal city will become apocalyptically so. There will be the very poor, who are disproportionately reliant on the programs that face chronic funding shortfalls, and the very rich, who can secede from the commons entirely and fund their own private alternatives to what we used to call the public good.