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Proposition 98 (1988) (March 2004)

Provisions
 
A constitutional amendment approved by voters in November 1988 and amended by Proposition 111 in 1990. The four provisions are:
  • a guarantee of minimum funding for K-12 schools and community colleges based on a specific calculation (see below)
  • an allocation to K-14 education of 50% of the difference when state tax revenues exceed the Gann spending limit, with the remaining 50% rebated to taxpayers,
  • annual School Accountability Report Cards (SARCs) with at least 13 specific items for each school, and
  • a "prudent" state budget reserve.
With a two-thirds vote of the Legislature and signature of the governor, Proposition 98 may be suspended for one year.

The Tests
 
Determining the Proposition 98 allocation is a complex calculation. In years of normal or strong state revenue growth, the K-14 guarantee is the larger of:
Test 1—the same share of the General Fund for K-14 education as the base year, 1986-87 (adjusted for changes in the share of property taxes), or

Test 2—the prior year’s funding from state and property taxes adjusted for inflation (growth in per capita personal income) and increases in the student population (average daily attendance, or ADA).
The guarantee when General Fund tax revenues grow more slowly than per capita personal income is:
Test 3—the same criteria as Test 2 except inflation is defined as the growth in per capita General Fund revenues plus one-half percent.

Test 3b —same as Test 3 except education may suffer cuts no deeper than other portions of the state budget.
The difference between the amount under Test 3 and what would have been the amount under Tests 1 or 2 must be restored to education in years of stronger revenue growth.

Impact
 
The Proposition 98 guarantee involves a complicated calculation that is affected by the condition of the state's economy. For many years the economy was fairly stable or even growing. Therefore, the Proposition 98 guarantee has usually fallen into Test 2, which means that education received the previous year's funding plus increases for growth in attendance and per capita personal income. In the 1998-99 state budget, when the economy was booming, the Legislature even approved more money for K-12 education than the Proposition 98 guarantee.

Beginning in 2001-02, however, the state’s General Fund experienced more volatility, first decreasing dramatically and then gradually moving upward. The framers of Proposition 98 had not envisioned multi-year dynamic change. Instead, the guarantee only looks at growth from one year to the next. Therefore, during the 2001-02 and 2002-03 budget cycles—when the state began facing record-breaking deficits—policymakers decided to hold education spending at the allowable minimum. Although the Legislature has the power to suspend Proposition 98 with a two-thirds vote, it has historically chosen not to do so.


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All rights reserved. Revised February 09, 2010.
URL: http://www.ed-data.k12.ca.us