EDUCATION BUDGET Proposition 98
The governor has proposed a ballot initiative for the November Presidential Election that provides $6.9 billion in temporary tax increases. The tax increases include an increase on the personal income tax of the state’s wealthiest taxpayers and a one-half percent increase on sales tax. The governor’s proposal assumes the passage of the initiative and adjusts the Proposition 98 minimum guarantee accordingly. The minimum guarantee is funded at $52.5 billion which is approximately $5 billion higher than the current year funded level of $47.6 billion.
The budget also provides several Proposition 98 adjustments or rebenching. These include a reduction of $375 million due to (1) the elimination of the policy to rebench the guarantee due to the elimination of the gas tax from the Proposition 98 calculation; (2) the inclusion of AB 3632 mental health services; and (3) the exclusion of child care from Proposition 98.
The proposal once again includes budget “triggers” in case the initiative fails. The trigger includes a reduction of $4.8 billion to Proposition 98 which becomes effective on January 1, 2013. The Proposition 98 guarantee will drop by $2.4 billion in 2012-13 due to the natural decline of the guarantee without the additional revenues. In addition, Proposition 98 will be rebenched to shift K-14 General Obligation Bond debt service costs into Proposition 98, resulting in an additional cut of $2.4 billion. (It is unclear at this time whether this is a legal manipulation of the minimum guarantee). The administration notes that this reduction equates to cutting the school year by three weeks. Further, the budget restores $2.2 billion deferral, which was initially eliminated with the additional revenues. It should be noted that the administration has voiced the willingness to work with school leaders to determine the best method to implement this reduction in an effort to minimize the impact on education programs.
Weighted Student Formula The governor proposes to eliminate all categorical program funding with the exception of special education, school nutrition and Proposition 49 after school programs. These funds would then be distributed to school districts through a weighted student methodology. The funds would be targeted or weighted based on specific student populations. The student populations include English language learners and students that receive free and reduced priced meals. The formula will be phased in over a period of five years with districts receiving 20 percent of their funds through this weighted method until all funds are received in this manner. The administration acknowledges that there will be some "winners" and "losers" as this new funding model is implemented. Meaning that some districts will receive more than they did the previous year and some districts will receive less than they did the previous year.
This proposal also includes a system of accountability measures that will be the basis for evaluating and rewarding school performance under this finance model. These measures will include the current quantitative, test-based accountability measures, along with locally developed assessments and qualitative measures of schools.