California Special Election - Proposition 76.
State Spending and School Funding Limits.
[ Official Initiative Information ]
- Limits state spending to prior year's level plus three previous years' average revenue growth
- Changes state minimum school funding requirements; eliminates repayment requirement when minimum funding suspended.
- Grants the Governor substantial new authority to unilaterally reduce state spending during certain fiscal situations.
- Changes several key provisions in the State Constitution relating to the minimum funding guarantee for K-12 schools and community colleges.
- Makes a number of other changes relating to transportation funding; loans between state funds; and payments to schools, local governments, and special funds.
- Continues prior year's budget appropriations if state budget delayed.
This proposition is both the most complicated and most important measure on the ballot. This measure makes major changes to the state Constitution relating to the state budget and some previously passed initiatives that apply to guaranteed K-14 school funding.
California has faced large annual shortfalls in it General Fund state budget since 2001-02. These shortfalls developed out of a downturn in the economy which caused state revenues to fall sharply below the level needed to fund all of the state's spending commitments. Revenues are growing again but changes will be necessary to address a likely budget shortfall in 2006-07.
A projected shortfall can be predicted because there are state laws that govern guaranteed spending levels for specific programs. The proposition adds a second limit on state spending that is better tied to the actual economic and tax revenue patterns in the state. California's tax revenues are highly sensitive to economic changes. That is, they tend to grow fast during the upside of business cycles (more tax money is available), and grow slow-or fall-when the economy is on the downside of business cycles (making less tax revenue available).
The new limit on spending would grow more slowly than actual revenues when the economy is accelerating, and grow faster than actual revenues when the economy slows or is in recession. In years when the economy is accelerating, more tax revenues would be collected relative to the funding commitments made in the state's budget. This extra money collected would be allocated as follows: 25% to a state reserve fund; 50% to pay down prior year funding shortages; and 25% for road, highway and school construction projects. In years when revenues collected fall below that projected by the budget, the state could use the reserve funds collected in healthy years to offset the funding shortages instead of borrowing money at interest.
As previously mentioned, the state has funding guarantees for schools, Proposition 98, passed by voters in 1988. The current formula used to determine what the funding level should be each year would be modified by the proposal. The current formula does not allow for much flexibility in years when the economy grows slowly or recedes. In these years, funding shortfalls happen.
For example, consider that the budget formula demands that 50 billion is to be spent on schools for a certain year. However, when revenues collected that year only amount to 47 billion, not enough money is collected to pay for lawfully mandated, previously agreed-on amount. Where is the extra money to come from? Usually, this shortfall is paid back the next year. In addition, the amount used to figure in Prop 98's formula for next year's budget for schools would be the whole 50 billion, instead of the real amount that was (collected and) spent, 47 billion. Prop 98's current formula insulates the school budget from the reality of current economic factors and holds the rest of the budget hostage to its guaranteed funding.
The proposal alters the guaranteed funding formula for schools to better account for changes in the economy, and by direct extension, the revenues available to the state for schools. Additionally, it allows the state to pay back funding shortfalls to the school budget over the next 15 years. This shortfall money is excluded from the formula that is used to generate sucessive year's funding limits. Additionally, if the Legislature allocated more money to schools than is required by funding guarntees, this additional money is exempted from the guaranteed funding formulas for subsequent years. This provision removes the fear the legislature might have in allocating more money to schools than is guaranteed. Their generosity to allocate more than required levels in years of plenty will not adversely effect them with artificially higher guarantee levels in years of want; their generosity will not be penalized later on.
The state budget serves two purposes: it estimates the total amount from taxes that will be collected in the in upcoming year; then it divides that anticipated amount among the departments and local governments that provide services to state residents. However, in years when the state collects less money then it anticipated, the state has a budget shortfall. When this happens, the proposal permits the Governor to declare a fiscal emergency. In such a situation, the legislature would be called into session and then have 45 days to enact legislation which alters the state budget to account for the dimishment in actual tax revenue being collected. If the Legislature cannot agree how to act and no legislation is passed to deal with the shortfall, the proposed measure grants the Governor new powers to unilaterally reduce state spending-at his or her discretion. The Legislature could not override these reductions.
My Conclusion: Vote Yes on Prop 76.
This is a non-partisan, fiscally responsible governmental plan to control state budget spending. Opponents of this measure are primarily attacking it, not on its merits, but in personally attacking the politically vulnerable Governor Arnold Schwarzenegger. They employ scare tactics that characterize Schwarzenegger as a mad dictator just waiting to take draconian control of the entire state. The proposal does grant the governor additional authority in making changes to the state budget, but only in years with a budget shortfall, and then only if the Legislature fails to come up with acceptable spending modifications. Someone has to make budget changes in shortfall years, either the Legislature can do it or the Governor will.
Info Supporting Prop 76 |
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Info Opposing Prop 76 |
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