Two Perspectives on Prop. 76

We’re presently spending more than we take in, and in the past few years we’ve been raiding various special funds to balance the budget. We don’t want to do this anymore.

What it comes down to is that we’ve been operating along the lines of an economic formula that was out in place by Prop 98. The formula is the difference between the percentage rate of growth of revenue and the percentage rate of growth of personal income. You take that difference and multiply it by a half, and then multiply it again by the State’s general fund.

This formula was conceived during the dot com boom in 1999/2000 when we had a lot of money, but unfortunately it wasn’t sustainable. The intent of this formula for education was that each year, school funding was to grow based on student attendance and the state economy. Unfortunately, Proposition 98 also had a flip-side—it’s an alternative called “Test 3” or the maintenance factor.

When Test 3 kicks in—this is when the state experiences slow growth, funding can be reduced through a two thirds vote of the legislature. It’s a suspension of the guarantee.

This has gone into place five times since Prop 98 was implemented. This is why we currently owe $3.8 billion to various special funds that we raided. We don’t want this to happen again and what Prop 76 does is that it eliminates Test 3—or the clause that would allow us to raid special funds. We really don’t want to do this in the future.

Yes—they’re basically rounding the number. We owe this money as a result of the flip-side of proposition 98. We don’t want to keep doing this. We want to be able to pay it back and Proposition 98 doesn’t include a guarantee that this money has to be paid back.

Proposition 76 would have the State Government pay back these funds over the course of fifteen years. With Proposition 76, we can’t operate in the same way anymore. While Proposition 98 was conceived to establish minimum funding for education, in periods during slow growth it becomes a maximum.

And, by the way, this slow growth is an anomaly—it happens about once every seven years. Proposition 76 allows for us to pay the $3.8 billion on a reliable basis over the course of fifteen years.

Basically what this bill allows is a mid-year budget correction and 36 states already have the authority to implement a mid-year budget correction. California is currently one of 14 states that doesn’t have this. Six states also allow their Governor to balance the budget without the approval of the legislature. These six states are Minnesota, Missouri, Indiana, Nebraska, North Carolina, and Ohio. Being able to implement a mid-year correction to the budget is key. The fact that we didn’t have this in place is the reason why we went from a small budget problem to a huge problem. We need to be able to catch any sort of problem while it’s still small, and correct it, and Prop 76 allows us to do that.

Well a fiscal emergency can’t just be declared on a whim. It’s all set in formula. It has to be declared under two circumstances: when the revenue in a budget falls short annually by more than one and a half percentage points, and when the budget stabilization account (which was put forth by Prop 58) is depleted by 50 percent. The budget stabilization account is our “rainy day” fund.

We’re adding 1% of our General fund to it every year till it reaches about eight billion—this will take about 10 years, and at that point we’ll use the interest on that fund for various things like education, police, health care, etc.

That’s simply not true—our last budget called the “Big Five” went into discussion in mid June and was approved by July 5th.

Well this Proposition should be discussed calmly. Unfortunately this has become a battle between the CTA Union and the Governor, and it’s been reduced to two bumperstickers—“Don’t spend more than you have” and “Don’t let the Governor cut school funding,” but neither of those are fair assessments.

Proposition 76 proposes some really good things:

• You can’t spend more than the three year average growth of revenue
• You can’t raid special funds
• You can implement a mid-year budget.
• It’s really driven by reality.

There are various reasons why Prop 76 is bad for the State of California. First of all, it undermines Prop 98 and overturns the minimum funding requirements for education proposed in that bill. As a result of this schools in California end up getting $4 billion less than they’re used to.

This elimination of funding guarantee to schools essentially means that we’re cutting $600 per student in California. Now, depending on various classroom sizes across the state, I’m sure this gives you a sense of how much we’d be cutting per classroom. It’s quite a bit.

It’s not the fiscally responsible thing to do. It gives the governor the ability to make cuts at any point without the approval of the legislature.

At any point he could declare a fiscal emergency which would allow him to make budgetary cuts without anyone keeping a check on these cuts. Prop 76 would eliminate all checks on the governor altogether. The Governor has already borrowed two billion dollars from education during his time as Governor and he hasn’t paid it back.

Prop 76 would basically mean that he would never have to pay back that two billion. It essentially eliminates all accountability, and any checks on budgetary cuts.

There’s this constant argument that if we vote against Prop 76 taxes will be raised. That’s absolutely not true.

The Republican Assembly of California has even said that Prop 76 would encourage a tax increase. There’s no guarantee that Prop 76 would allow the governor to cut taxes. In fact, it destabilizes finding sources to such a degree that city and county budgets are extremely vulnerable to the governor’s new expanded powers.

The Governor can break contracts mid-year, for example, by making mid-year budget cuts. Prop 76 allows the governor to pull the rug out on any sort of county expenditure and the counties are left footing the bill instead of the state. It’s incredibly destabilizing and that’s why it only has a 19% approval rating.

According to a field poll as well as the PPIC poll. It destabilizes funding to such a degree and essentially it’s services such as firefighters and police that take a blow as a result of this. They have outstanding obligations that the state had guaranteed, and Prop 76 could potentially allow the governor to pull funding for these areas.

So it’s a systemic cut. It’s not just going to affect education.

Exactly. It destabilizes the entire system, not just education. It’s really a general funding issue. It hurts local funds in all areas, not just education.