PROP 38 AND PROP 30

COMPARING THE TWO MAJOR STATE SCHOOL FUNDING PROPOSITIONS: PROP 38 AND PROP 30

This Year voters will have to decide between two conflicting tax measures on the November ballot. One is Prop 38, also referred to as the Local Schools and Early Education Investment and Bond Debt Reduction Act, which has been funded almost exclusively by its proponent, wealthy tax attorney Molly Munger. The other is Prop 30, which is backed by Gov. Jerry Brown. Brown took his plan to the people after an earlier attempt to close the budget gap by raising personal income taxes failed in the state legislature. Both ballot measures focus on protecting education funding, but they go about it in different ways.

Prop 38 (M. Munger) would raise the income tax rate on almost all Californians, where   Prop 30 (Gov. Brown) targets only those who make more than $250,000 a year. The amount of the increase would depend on the individual's tax bracket (see "What Your Vote Means" below). The revenues would go into a special fund called the California Education Trust Fund, or CETF. From there, the money would have to be used for three specific purposes, in the following proportions:

pay for schools (60%)

pay for Early Care and Education (ECE) programs (10%)

pay down state debts (30%)

However, beginning in fiscal 2017, the proportions would shift. The amount allotted for schools and ECE would be capped using a formula that takes into account the average growth in Californians' per capita income during the first five years the law is in effect. Any revenues in excess of this cap would go toward debt payments. The rest would be split, with 85% going to schools and 15% going to ECE.

One critical point to consider is that the two November tax measures (Prop 30, Gov. Brown and Prop 38, M. Munger) would negatively affect the other should both pass. The state constitution already provides that when two measures conflict, the one with the most votes prevails. In addition, sections in both Prop 30 and Prop 38 explicitly bar the other from taking effect. Even if you vote for both, only one can win. However, if Prop 30 (Gov. Brown) loses, the much feared "trigger cuts," built into the current state budget, would go into effect.

Prop 38 (M. Munger) has a number of very specific rules about the distribution of funds, and it is well worth your time to read the summary from the Legislative Analyst's Office. And here's the full text of the prop.

Prop 38 (M. Munger) WHAT YOUR VOTE MEANS

Voting YES means that you approve of the new taxes and would like them to be allocated to schools, ECE programs, and state debt repayment. If Prop 38 prevails, then Prop 30 cannot, and a series of trigger cuts built into the state budget will go into effect. Taxes would increase according to the following table:

Single Filer	Joint Filer	Head-of-Household	Tax Rate Increase
<$7,316	<$14,632	<$14,642	--
$7,316-$17,346	$14,632-$34,692	$14,642-$34,692	0.4%
$17,346-$27,377	$34,692-$54,754	$34,692-$44,721	0.7%
$27,377-$38,004	$54,754-$76,008	$44,721-$55,348	1.1%
$38,004-$48,029	$76,008-$96,058	$55,348-$65,376	1.4%
$48,029-$100,000	$96,058-$200,000	$65,376-$136,118	1.6%
$100,000-$250,000	$200,000-$500,000	$136,118-$340,294	1.8%
$250,000-$500,000	$500,000-$1,000,000	$340,294-$680,589	1.9%
$500,000-$1,000,000	$1,000,000-$2,000,000	$680,589-$1,361,178	2.0%
$1,000,000-$2,500,000	$2,000,000-$5,000,000	$1,361,178-$3,402,944	2.1%
Over $2,000,000	Over $5,000,000	Over $3,402,944	2.2%
	Source:	Legislative Analyst's Office

Voting NO means that you reject the tax increase. The school funding and debt repayment plan laid out by Prop 38 will not go into effect.

Prop 38 (M. Munger) WHO/WHAT IT WOULD AFFECT 

Taxpayers: Most Californians would be faced with at least some form of tax increase. See the table in "What Your Vote Means" above.

Public Schools: Public schools could receive as much as $10 billion in the first year. The bulk of that money (70%) would be distributed to schools on a per-student basis, with more money for students in higher grades levels. Additional money (18%) would be allotted to schools based on the number of low-income students enrolled. The final portion (12%), also distributed on a per-student basis, would be dedicated solely to technology -- allowing for the purchase of new equipment and teaching materials and also for teacher training. The money would be tied to a series of restrictions and mandates, including that school districts seek public input before deciding on how to spend the money.

Early Care and Education Programs: ECE programs are those that, like preschool, begin before kindergarten. Current funding levels don't come close to supporting the number of children eligible for subsidized programs in the state (of children ages five and younger, about half are eligible but only 15% are served, according to the legislative analyst's office). Prop 38 would restore some of the funding that was cut in a series of budget reductions since 2008. It would also create a rating system for ECE programs, establish a statewide database to support program management, begin an Early Head Start program modeled after the federal one, and would expand subsidized preschool for children of low-income families, among other things. ECE programs are expected to get about $1 billion a year for the first few years if Prop 38 passes.

State Budget: A share of CETF funds each year will go toward paying down state debts, with the priority on education debt-service costs. That means more General Fund money can go to other public programs and to balancing the budget, according to the legislative analyst.

Prop 38 (M. Munger) WHO'S BEHIND IT
Wealthy tax lawyer Molly Munger is the principal financial backer and proponent of Prop 38. Other than her own contributions, only one minor donation has been reported as of Aug. 14 -- $25,000 from the Atlas Family Trust, compared with $13.8 million from Munger herself.

Prop 38 (M. Munger) WHO'S AGAINST IT                                              Those interests that have lined up behind Jerry Brown's tax measure, Prop 30, are naturally opposed to the Munger plan. In addition, the California Democratic Party has come out against the measure. However, no major donations to the opposition campaign have been registered with the Secretary of State's office

ARGUMENTS BEING MADE FOR                                                       restores education money that was cut from the budget in recent years, guaranteeing billions of dollars to local schools based on enrollment -- an average of $10 billion annually over 12 years.

It will prevent more cuts by setting aside $3 billion a year through 2017 to help repay state education bond debt.

It prohibits the legislature from diverting or borrowing the money, and the money cannot be used to replace current education funding.

Money is distributed on a per-pupil basis and must be spent at the school.

The money cannot be spent to increase salaries or pensions of school personnel.

Spending decisions will be made locally and will require public input.

School districts will be accountable for improvement at each school and must report how they money was spent.

ARGUMENTS BEING MADE AGAINST
Prop 38 is a massive tax hike for middle-class taxpayers and small businesses. It would damage small businesses that pay income taxes as individuals rather than as corporations.

It would kill jobs in small and family businesses where most job growth is taking place.

It can't be changed once it's passed, so it will continue for 12 years even if there is evidence of fraud or waste.

It gives Sacramento $3 billion a year for four years to spend without restriction.

It creates a costly new bureaucracy by forcing schools to go through complex red tape just to receive basic funding, and it creates new programs even while necessary school functions have been cut back.

It will do almost nothing to improve student performance.

Prop 30 (Gov. Brown) WHAT YOUR VOTE MEANS

Voting YES means that the personal income tax would go up for those earning more than $250,000 as well as a quarter-cent sales tax increase would go into effect. Also, the state would continue to fund certain public safety programs it handed over to counties in 2011.

Single Taxable Income	Joint Taxable Income	Head of Household Taxable Income	Tax Rate Increase
Under $250,000	Under $500,000	Under $340,000	--
$250,000-$300,000	$500,000-$600,000	$340,000-$408,000	1%
$300,000-$500,000	$600,000-$1,000,000	$408,000-$680,000	2%
Over $500,000	Over $1,000,000	Over $680,000	3%
Source:	Legislative Analyst's Office

Voting NO means that no new taxes will be introduced. The following trigger cuts would go into effect. Schools and other programs would face billions in reduced funding as follows:

Schools and community colleges	$5.35 billion
University of California	$250 million
California State University	$250 million
Department of Developmental Services	$50 million
City police department grants	$20 million
CalFire	$10 million
DWR flood control programs	$7 million
Local water safety patrol grants	$5 million
Department of Fish and Game	$4 million
Department of Parks and Recreation	$2 million
DOJ law enforcement programs	$1 million
Source:	Legislative Analyst's Office

Prop 30 (Gov. Brown) Who/What It Would Affect

Taxpayers: The first chart above shows how the personal income tax increase would affect those in each bracket.

Consumers: Everyone would pay an extra quarter cent sales tax at the point of sale.

Public Schools: If the measure passes, schools could see up to $6.6 billion in increased funding. If it fails, funding could go down by as much as $5.4 billion.

State Government: If it passes, the state would see an increase of billions of dollars to help cover education and balance the budget. If not, it would face a serious shortfall and begin making a series of trigger cuts to government programs to reduce overall spending.

Local Governments: Local governments, mainly counties, have already been required to take on new responsibilities in public safety, including supervising parolees and handling incarceration for some adults. The state helped by providing funds for these programs last year, but Prop 30 would ensure that these payments continue annually.

Prop 30 (Gov. Brown) Who's Behind It
This is the tax increase Gov. Jerry Brown has been trying to get approved for more than a year, part of his strategy to close the budget gap. It has the support most notably of the League of Women Voters and the two major teachers unions. The teachers unions have together donated millions to the campaign. Key financial backers include:

California Teachers Association

California Federation of Teachers

Service Employees International Union's Local 1000

Democratic State Central Committee

Prop 30 (Gov. Brown) Who's Against It
So far only a small amount has been donated to the opposition campaign, with the largest contribution so far from the Small Business Action Committee. Joel Fox, the president of that group and editor of the political blog Fox&Hounds, is actively involved in the campaign to defeat Prop 30 and has put his name to the official arguments against that will appear on the ballot. So far the key financial contributors are:

Small Business Action Committee

Howard Jarvis Taxpayers Association

  

Arguments Being Made For

§  Prevents an additional $6 billion in school cuts and provides new funding for education this year.

§  Establishes a guarantee for public safety funding in the state's constitution, where it can't be changed without voter approval. "It keeps cops on the street."

§  Balances the budget and pays down California's debt.

§  Only the highest income earners pay more income tax. Couples earning below $500,000 a year will pay no additional income taxes.

§  It's temporary. PIT goes up for 7 years and quarter-cent sales tax for 4 Years.

§  The money goes into a special account the legislature can't touch.

§  Mandatory, independent audits will ensure funds are spent only for schools and public safety.

Arguments Being Made Against

§  Legislature can take existing money for schools and use it for other purposes, replacing it with money from Prop 30, effectively resulting in no new money for education.

§  There are no requirements or assurances that any more money actually goes to classrooms. 

§  Prop 30 rewards the dangerous behavior of spending more than the state has by giving politicians billions of dollars more with no real reforms.

§  The governor, politicians and special interests are threatening voters by saying, "vote for our massive tax increase or we'll take it out on schools," but they refuse to reform the education or pension systems to save money.

Source: Legislative Analyst's Office