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Part 1 of a two-part series. Go herefor Part 2.

prop 30 flowchart

As a parent who volunteers in the schools and has learned the hard way just how complicated school finance is, I want to share my personal analysis of the two education initiatives on this November’s ballot — Prop 30 (a.k.a. Governor Brown’s Initiative) and Prop 38 (a.k.a. Molly Munger’s Initiative). If you need some basic background about each proposition, you can find good links at my “homework” post.

I based my analysis on one simple principle: Children should not be made to pay for the mistakes of grown-ups. With that in mind, this is what I decided.

Since parents are a busy bunch, I’ll give you my answers in three forms: the 15-second answer, the 1-minute answer, and the 3-minute answer (they build off each other, so read all the answers before it if you want the 3-minute answer).

The 15-second Answer

To make sure that schools don’t have to make do with billions less in funding, vote yes on BOTH Prop 30/Brown and Prop 38/Munger.

Prop 30/Brown needs to pass to prevent an additional $5 billion of cuts to education (the “trigger cuts”). Also vote yes on Prop 38/Munger as a safety net for education, because if Prop 30/Brown fails and the trigger cuts occur, Prop 38/Munger monies will still be available to help schools.

The 1-minute Answer

If both Prop 30/Brown and Prop 38/Munger pass, it is likely that only the one with the most votes will prevail, but that depends on how the courts interpret the law.

Prop 30/Brown is tied to the state budget, so in addition to education, your vote will also be helping to prevent millions in cuts to state universities and local governments that need the funds for law enforcement. Prop 30/Brown raises $6 billion in revenue each year from two temporary tax increases:

  • a 1/4 percent increase in the sales tax, which is paid by everybody, and
  • a small increase in the tax rate for incomes above $300,000/year.

In a situation where Prop 30/Brown fails, the trigger cuts will take effect whether or not Prop 38/Munger is passed. Therefore, a YES vote is needed on Prop 38/Munger as a safety net for education. Prop 38/Munger will make a projected $10 billion available for education and early childhood education programs such as Head Start. These funds may be used to replace funds lost by the trigger cuts. Prop 38/Munger also allocates funding to pay down bond debt; by paying down this debt, the State will have more General Funds available for use in the budget (not just restricted to schools).

At the top is a chart showing what many experts think will happen under various voting scenarios.

The 3-minute Answer

A $5 billion cut to schools is scheduled to occur this year unless Prop 30/Brown is passed by voters this fall. This cut will mean even more teachers will be laid off, class sizes will grow larger, and parents will be asked to volunteer and donate even more than we already do.

Schools take the hardest hit in budget cuts because it is the largest part of the budget (41%) and it is one of the few parts of the budget the State can control. At the right is a chart showing the “trigger cuts” that will be averted if Prop 30/Brown passes:According to the Legislative Analyst’s Office (a nonpartisan office of the California Legislature that provides fiscal and policy analysis to legislators of all parties), the vast majority of Prop 30/Brown’s revenues will go primarily to pay the State’s existing obligations to schools since the State has accumulated $9.4 billion in late payments to school districts, a practice of both Democratic and Republican governors.Therefore, if Prop 30 passes, per-pupil funding will essentially stay the same as it is now; but if it does not pass, per-pupil funding will fall by 6% from the 2011-12 level. In other words, if we vote for Prop 30/Brown and it passes, we can expect things to stay as they are, not necessarily get better. But we will prevent things from getting worse and protect our children from mistakes grown-ups have made.

proo 30 spending

Prop 38/Munger’s emphasis is more on boosting funding for schools, but it also includes elements that can help the state budget crisis generally. If passed, it would be in effect for twelve years. In the first four years, 60% of the Prop 38/Munger funds would go towards K-12 public schools, 10% to early childhood education, and 30% will go to pay back school bonds.

Prop 38/Munger is expected to raise $10 billion annually through raising the State’s Personal Income Tax for twelve years. The Legislative Analyst’s Office estimates that 60% of Personal Income Tax payers will be affected.

In conclusion, as a parent who cares about the education of our children, I want to be sure that schools have enough money to do their jobs and do them well. It is important for Prop 30 to pass because if it does not, the trigger cuts will go into effect. However, we also need to vote for Prop 38/Munger as a way to prevent education funding from falling dramatically.

kim tso

Kim Tso
Kim Tso's Blog

Posted: Tuesday, 16 October 2012

FAQs about Prop 30 and Prop 38

Q: Our education system is broken. Why should we continue to pay for something that doesn’t work? If we stop paying for it, maybe the problem will get bad enough, they will eventually fix it.

A: While throwing money at a problem often doesn’t fix it, taking away billions of dollars isn’t any more likely to fix our education system either. In fact, it could make it worse:

  • Children/students will suffer the most from under-funding education. We need to minimize harm and damage to them while we fix the education system.
  • Withholding money to punish the system and correct it may backfire. Daniel Pink’s book Drive: The Surprising Truth About What Motivates Us shows how money is often ineffective as a “carrot” or “stick” to motivate people to solve complex problems and can actually “extinguish intrinsic motivation, diminish performance, crush creativity, and crowd out good behavior.” (p. 205) In other words, money used as an incentive or disincentive is more distracting and harmful than productive especially if the problem isn’t only about money.
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So yes, let’s fix what’s wrong with our education system, including how we fund it, but let’s not do it on the backs of our children. Plus, by taking the fear of losing money off the table, we create better conditions for people to be able to work towards reasonable, rational solutions.

Q: Ballot initiatives are a bad way to legislate. I prefer to vote NO on all of them and put the responsibility back on our elected officials where it belongs.

A: I couldn’t agree more. Unfortunately, budgetary power has shifted from the legislature to the ballot box due to “supermajority” requirements for passing budgets (2/3 vote is needed instead of the usual 51% majority). Supermajority requirements allow minority parties to force concessions or stall budgets indefinitely. To get around these limits, elected officials increasingly have needed to use the ballot initiative instead of the usual legislative process. To learn more about this history, I highly recommend reading California Crack-up: How Reform Broke the Golden State and How We Can Fix It by Joe Mathews and Mark Paul.

So, Governor Brown has brought his budget plan directly to voters through the ballot initiative because he could not get enough Republicans to agree to tax increases. So while I don’t like these issues brought to voters either, the decision is in front of us anyway. And I don’t think our children should have to pay for the mistakes of a dysfunctional system. I believe that it is our responsibility to protect our children from harm while we adults work to fix the problems. So I will vote YES on both Prop 30 and Prop 38. And after November, it will be time to look at who is doing what for longer-term, structural changes in how California governs.

Q: How do these propositions address inequities in the public school system?

A: Prop 30/Brown contains no explicit language to address inequities in public school finance, an issue that California has frequently confronted over the years. It’s silence on this issue leads me to believe that it assumes inequities in school funding are already being addressed through other avenues.

Prop 38/Munger proposes a per-pupil allocation of funds that go to the specific school where the student is located. A portion of the funds will also be distributed as “low income student grants,” also on a per-pupil basis, as additional funds to the schools serving Title I students (Title I refers to the federal Free and Reduced Lunch Program and is often used as a proxy for low-income students).

Personally, I still think that resolving inequities in public school finance should be addressed by broader economic policies aimed at building the middle class and increasing upward mobility from low income families into the middle class, but those kind of policies are not addressed by these two propositions.

Q: Why does Prop 38/Munger use some of the funds to pay for school bonds?

A: The Prop 38/Munger proposal uses 30% of the annual funds raised until 2016-17 to go towards paying back school bonds. Bonds are a form of public borrowing, similar to a mortgage in that the State (with voter permission) borrows a large sum of money for infrastructure (such as a school building) that gets paid back over time.

The State’s General Obligation bonds still outstanding, which includes school bonds and other public infrastructure projects, is now $71 billion according to the State of California Debt Affordability report 2011. Debt servicing on those bonds, which is the amount of money we use from each year’s budget to pay back the borrowing plus interest, was estimated to be more than $7 billion this year. The portion of this debt servicing that comes from school bonds is $2.6 billion.

The faster we can pay back those loans, the less debt servicing has to be paid and the more we can free up general fund money to be available for other public priorities in the budget such as schools. According to the Legislative Analyst’s Office’s analysis of Prop 38, Prop 38/Munger is estimated to save the state $3 billion annually by paying for this debt servicing. These budget savings can then be used for any public priorities determined by the state legislature, including lessening the damage of the threatened trigger cuts.

This provision is one of the strongest points for me in supporting Prop 38/Munger. Unfortunately, Prop 38/Munger’s win may not be a good long-term solution for school funding in the way it hopes to be (see next question).

Q: There’s a lot in Prop 38/Munger for me to like as a parent: a bigger role for parent oversight, input and accountability and measurable student outcomes, and money going directly to schools instead of to Sacramento. In contrast, Prop 30/Brown feels like we are being threatened with cuts to give our support. Why are you advocating Prop 30/Brown as the one that is important to pass?

In all honesty, I find a lot to like in Prop 38/Munger, too. Here are my two concerns with it:

Prop 38/Munger is untested. Various education policy expert bloggers point to the difficulty of implementing Prop 38 if it should become law, because there is not enough language in the initiative to provide guidance in the execution. This could: a) make us lose precious time to get resources to schools, and/or b) become another Prop 98 quagmire. Prop 98 was a voter proposition passed in 1988 to guarantee a minimum funding level for schools, but it has morphed into a de facto maximum level of funding for schools as the State never provides more than it is required to by law. Also, Prop 98 has become a complex set of formulas and fixes to those formulas over the years. Without a solid, tested process, Prop 38 could become an additional layer of difficulty in education funding.

Prop 38/Munger follows a dangerous trend of separating education funding from the rest of the budget through a dedicated tax. Advocates of Prop 38 point to the separate fund that is created and overseen by a Fiscal Oversight Board made up of the State Controller, State Auditor, State Treasurer, Attorney General and Director of Finance — “untouched” by legislators. That’s another way of saying that it will not be subject to the democratic process.

While it may sound good to have a “protected” fund for schools, what happens in practice is if education has a separate fund to support it, our legislature will be tempted to continue to underfund education in the general budget and let Prop 98 and Prop 38/Munger take care of paying for education. When Prop 38/Munger expires in 12 years, it may be more difficult to pull those costs back into the state budget than it was to take them out. (Prop 63, the Mental Health Services Act, was an interesting example of this trend, and while it hasn’t yet become the sole source of mental health funding in California, it is moving in that direction. There is a good scholarly article about the dangers of dedicated taxes and Prop 63 here.)

So while I also like aspects of Prop 38/Munger’s proposal, I’m inclined to keep education funding in the hands of a democratically-run legislature where it belongs and not subject our children to being guinea pigs in a policy experiment that could lead to drastic cuts to schools down the road.

Q: Isn’t it okay if just Prop 38/Munger passes? Sure, the trigger cuts will go into effect, but won’t the schools have money from Prop 38/Munger to cover that $5 billion loss?

A: Schools will continue to receive funds, but it would not just be a matter of exchanging $5 billion in cuts with $5 billion in Prop 38/Munger revenues. For one thing, Prop 38/Munger’s 30% to bond repayment could generate some savings that can help make some of the trigger cuts unnecessary (LAO estimates $3 billion). Second, it is hard to predict how the legislature will act to fulfill its Prop 98 minimum funding guarantee to schools.

My primary concern is how Prop 38/Munger follows that trend of separating education funding from the rest of the budget through a dedicated tax (see answer to question just above this one).

Q: Are there any other unintended consequences we can foresee?

A: If Prop 30/Brown fails, the cuts to schools could be even worse than most people predict because the budget includes an option called “rebenching.”

If Prop 30/Brown doesn’t pass, the State budget says that it can push the costs of the $2.6 billion in debt servicing for school bonds into the complicated calculations for Prop 98, which was passed by the voters in 1988 to set a minimum level of funding for schools. In practice, Prop 98 has become a maximum funding level instead of a minimum.

Prop 98 has become a complex formula to determine school funding (see EdSource guide to Prop 98), but if the $2.6 billion in debt servicing for school bonds were added into it, the debt servicing is so large that it would effectively further reduce the amount available to give to schools.

Rebenching has serious enough consequences that the California School Boards Association has already suedthe State over it. A judge ruled in June that rebenching was okay, so now CSBA is waiting for the election results before it appeals the decision.

For more information on rebenching, please read these blog posts by John Fensterwald that are wonky, but helpful:

You can submit other questions to me through the comments section below. My post that takes a closer look at the two propositions’ tax proposals can be found here.