Proposition 1B
Education Funding. Payment Plan.
Legislative Constitutional Amendment
Background
Proposition 98 Education Funding. Proposition 98, passed in 1988 and modified by Proposition 111 in 1990, amended the California Constitution to require a minimum level of state funding for elementary and secondary ("K-12") schools and community colleges. Together these schools and colleges are commonly referred to as K-14 education. The state budget enacted in September 2008 included almost $51 billion in Proposition 98 funding, but never went into effect due to the state's budgetary problems, and was superseded by the February 2009 budget agreement.
Proposition 98 established two methods or "tests" for determining the amount of state funding to be provided, and required the state to use the one that resulted in the larger amount.
- Under Test 1, the funding amount would be the same percentage of the General Fund as the schools received in the previous fiscal year (approximately 40 percent). This test has been used only once, in 1988-89.
- Under Test 2, funding would be the same dollar amount as the schools received in the preceding year, adjusted for increases in enrollment and per capita personal income. This test has been operative in 13 of the last 20 years.
Proposition 111 added a third test, which adjusted the Test 2 funding formula for changes in attendance and per capita General Fund revenues, thereby limiting the funding amount in years of low revenue growth and allowing the state to provide less Proposition 98 funding than required under Test 2. This test has been operative in six of the last 20 years.
Maintenance Factor. Any reduced funding under Test 3 must be made up in future years. The amount to be made up is known as the "maintenance factor." Additionally, the Legislature may suspend the minimum funding amount in any year by an urgency statute requiring a two-thirds vote; this has happened once, in 2004-2005. In both cases, the state keeps track of the difference between the higher Proposition 98 amount that otherwise would have been required and the amount of funding actually provided to the schools in that year. The minimum amount of maintenance factor that must be paid in one year depends on how quickly state revenues grow. When state revenues grow quickly, larger payments are made, and the obligation is paid off in a shorter period of time. These maintenance factor payments become part of the base for calculating the next year's Proposition 98 minimum guarantee. As of the end of 2007-08, the state had an outstanding maintenance factor obligation of $1.4 billion.
The Legislative Analyst has estimated that the minimum guarantee under Proposition 98 in 2008-09 and 2009-10 would be determined by Test 1. Since Test 1 has only been used once, issues have arisen over how the maintenance factor is supposed to work in Test 1 years. For example, is a maintenance factor created in Test 1 years? If so, would the maintenance amount be calculated in relation to the Test 1 level or the Test 2 level? There is much disagreement over these issues, with different interpretations potentially resulting in very different Proposition 98 funding requirements. These issues are summarized in the text box below, prepared by the Legislative Analyst for the official Voter Information Guide.
Unclear How The Constitution Would Be Interpreted |
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Two issues have arisen over how the maintenance factor is supposed to work in Test 1 years—how it is created and how it is paid back. Maintenance Factor Obligation in 2008-09 Is Unknown. The first issue relates to whether the state creates a maintenance factor or obligation in a year when Test 1 is applied. Historically, a maintenance factor obligation generally has been created when Test 3 applies. It is unclear whether a maintenance factor is created when Test 1 applies and is lower than Test 2. Some believe a maintenance factor is created in this situation. If so, this could result in an additional maintenance factor obligation of $7.9 billion being created in 2008-09 (for a total outstanding maintenance factor obligation of $9.3 billion). Others believe that no maintenance factor is generated under this situation. Method of Paying Maintenance Factor Also Unclear. The second issue relates to how the maintenance factor (from previous years) is paid in a Test 1 year. One interpretation is that maintenance factor payments are to be made on top of the Test 1 level. A second interpretation is that maintenance factor payments are to be made on top of the Test 2 level. Because the Test 1 level is expected to be significantly higher than the Test 2 level in 2009-10, the first interpretation could result in a significantly higher minimum guarantee in 2009-10. |
K-12 Revenue Limits. Approximately two-thirds of Proposition 98 funding for school districts is provided under what is known as "K-12 revenue limits." Districts receive a funding amount per student based on average daily attendance, and each school district may use this funding as it sees fit for general education purposes. The Legislature has provided additional revenue limit funding to districts with the lowest per-pupil revenue limit amounts in order to equalize funding among the districts.
The remaining one-third of Proposition 98 funding is categorical aid, which is earmarked for particular purposes, such as Special Education, and must be spent according to state and federal guidelines.
Reduction in Proposition 98 spending in the 2008-09 Budget Agreement. The final budget agreement reached by the Legislature in February 2009 significantly lowered the Proposition 98 funding level through a mixture of program reductions, deferrals, and re-designation of funds. The budget package provides $50.7 billion for the schools in 2008-09, a reduction of $7.4 billion below the 2008-09 enacted spending level.
The Proposal
Proposition 1B would amend the California Constitution as follows.
"Supplemental Education" Obligation. The state would be required to make a total of $9.3 billion in supplemental payments to K-14 education in annual payments beginning in 2011-12. The payments would be made from a "Supplemental Education Payment Account" that would be established as part of the passage of Proposition 1A on this ballot. If Proposition 1A is not approved by the voters, Proposition 1B will not go into effect.
Supplemental Payments in Place of Maintenance Factor Payments. Under Proposition 1A, the state would deposit 1.5 percent of General Fund revenues (currently about $1.5 billion) into the Supplemental Education Payment Account in annual installments, beginning in 2011-12, and continuing until the entire $9.3 billion was provided. These supplemental payments would become part of the base budget when calculating the following year's Proposition 98 minimum guarantee. They would replace any payments that the state would otherwise be required to make under current law for maintenance factor obligations created in 2007-08 and 2008-09. The measure does not clarify the uncertainty regarding how the maintenance factor would work in Test 1 years, as discussed above.
Distribution of Funds. The amount deposited in the Supplemental Education Payment account would be appropriated annually by the Legislature to K-12 and community college districts. Under the measure, payments to K-12 education would be used only for revenue limits (general purposes with few restrictions), and, out of the 2011-12 payment, up to $200 million would be used to equalize revenue limit payments among school districts. All other K-12 payments would be distributed based on the districts' per-pupil revenue limit rates. (Funding for the categorical programs would come from another source.) The measure makes no specific requirements as to how payments to community colleges are to be used.
Fiscal Effect
According to the Legislative Analyst, the fiscal effect would depend on key factors that are uncertain. These include how Proposition 98 funding would work in the future under current law, and shifts in the economy that could change the Proposition 98 minimum guarantee by billions of dollars. If Proposition 1A is not approved by the state's voters, this measure would have no fiscal effect, and Proposition 98 education funding would be determined by interpreting the Constitution in its current form.
If Proposition 1A passes, the Legislative Analyst describes the likely effects of this measure as follows:
Savings in Near Term. Under some interpretations of current law, the measure could result in annual savings to the state in 2009-10 and 2010-11. This is because the measure could postpone maintenance factor payments that otherwise would have been made in these years. Any such savings could be up to several billion dollars each year. Under other interpretations of current law, however, the measure would result in no savings to the state in 2009-10 and/or 2010-11.
Costs in Long Term. In 2011-12, the state would begin making supplemental payments. The $9.3 billion in payments likely would be paid over a five-to-six year period. As noted above, the long-term effect of these payments is subject to considerable uncertainty. Under most situations, however, costs to the state for K-14 education likely would be higher than under current law—potentially by billions of dollars each year.
What A Yes Or No Vote Means
A YES vote means that the state Constitution would be amended to set aside $9.3 billion in Supplemental Education Funds to replace the Proposition 98 maintenance funding requirements for 2007-08 and 2008-09.
A NO vote means that the Legislature would continue to apply current law to Proposition 98 funding for K-14 education.
Supporters Say
- Proposition 1B starts the process of paying back some of the severe cuts to education resulting from the current budget crisis.
- Proposition 1B is part of a package of reforms that will provide short-term solutions to get us through these difficult economic times and long-term solutions to ensure that we never again face the type of deficits we faced this year.
- Proposition 1B ensures that education funds will be paid back as economic conditions improve, thus preventing the permanent loss of education funds.
Opponents Say
- Proposition 1B depends on passage of Proposition 1A, a complex, hastily-drafted measure which will freeze state spending at a level that is already too low to guarantee adequate service and prohibit the state from using increased revenue when the economy recovers.
- Proposition 1B was designed and put on the ballot to prevent teachers' unions from opposing Proposition 1A.
- This measure is unnecessary—the Legislature has the power to restore state funding of education without Proposition 1B.
Support And Opposition
Ballot arguments in support are signed by David A. Sanchez, President, California Teachers Association.
No ballot arguments in opposition to this measure were submitted.
PRO
Budget Reform Now
Andrea Landis, Kaufman Campaign Consultants: 916-443-7817
California Teachers Association
California Federation of Teachers
CON
California Nurses Association
American Federation of State, County and Municipal Employees
For More Information
California Secretary of State
Legislative Analyst's Office
Campaign Finance Information
Ballotpedia
California Budget Project
Education and Education Funding:
California Department of Education
Ed-Data
EdSource
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