Where does California stand when it comes to educational funding?

California is in the worst financial situation of its history. What does that mean? We are $26 billion dollars in debt and our payments are $4 billion for the next two years and thereafter $2 billion for the remainder of the term of fifteen years. Education funding is about 45% of the State Budget’s General Fund. The actual percentage varies depending on fluctuations in the economy as will be discussed later under the Proposition 98 explanation.

Our state ranks 43rd when it comes to how much we are spending in the classroom for our children in K-12. We also have fewer teachers, fewer support staff, and one of the most diverse multiethnic school populations in the country. Due to the various education programs mandated by the state and federal government, every school in California is funded differently and at different amount. Almost everyone can agree that school children in California are under funded, which was why Proposition 98 was created.

Proposition 98 provides K-14 with a guarantees funding source that grows each year with the economy and number of students. It allows funding for schools to continue to increase and not decline over the long term. Prop. 98 is complicated and allows for wide variation in school funding based on how much money the state coffers take in each year. An explanation of how Prop 98 works is essential to understand, so that the Governor’s proposed changes to the proposition will make more sense.

Here is how it works: Based on the financial revenues of the state in any given year, the legislature will fund California school based on one of these four formulas or “tests.”

• Test 1- Provides 39% of General Fund (not used since 1988-89).

• Test 2- Provides increase in prior years funding by growth in attendance and per capita income.

• Test 3- Provides increase in prior years funding by growth in attendance and per capita General Fund revenues.

• Suspension of Prop. 98, requires 2/3 vote of legislature for one year only, can fund schools at any level.

We are currently in a suspension year because of our fiscal problems. When schools are funded with a Test 3, or a suspension of Prop 98, an inequity is created between what should be the funding amount under prop 98, and what was actually funded. The funding gap is called the Maintenance Factor. The maintenance factor is to be repaid during the next few years when the economy improves and to restore the automatic increases in educational funding to the same level that it would have been, had reduced funding never occurred. Basically, the funding levels will increase even when the state can’t pay, but all the money will be repaid in the future.

What is the Governor’s proposed changes to Proposition 98? The changes are in two forms at this point, one is a legislative bill (ACA 4) and the other is an initiative measure, which is called “California Live Within Our Means Act.” There would be several very profound changes to Prop. 98. The foremost is that Test 3 and Suspension Provisions will be eliminated and Education spending would become subject to across-the-board cuts. The first impact is the elimination of the “Ratchet Effect.” The Ratchet Effect means when the state provides additional funds to education above the minimum guarantee, the additional increase becomes part of the base level of funding. The Ratchet Effect has managed to provide a level of funding that secured our 43rd position in relation to all other states. The second impact the state would not created any future maintenance factor. Also to settle up the current obligations of the Maintenance Factor to school funding is extended to 15 years. The broken promise which PTA is talking about is the $3.7 billion in maintenance factor due to schools created when Prop 98 was suspended the last fiscal year. The third impact is education funding will essentially be frozen at the current level with only the cost of living increases. The final impact is that the Governor would have extra ordinary power over the budget and Prop 98 funding, in the advent of a fiscal emergency. The Governor would be able to reduce items budget spending appropriations at his discretion.

The bottom line is that although the changes to Proposition 98 would allow for a more steady level of funding for education, the changes will not move spending for education in the right direction. It was the opinion of many legislative observers and educational advocates that the Governor’s proposals will either maintain our 43 position in per pupil funding or California’s per pupil funding in will slip even lower in the coming years. Although Proposition 98 contains flaws and attempts to provide adequate funding for our children now, the Governor’s proposed changes would only worsen our below par funding structure.

For more detailed information on this subject, visit the Legislative Analyst Office online: http://www.lao.ca.gov/  then from the top menu select under subject area: Education k-12, then from the left hand column, select k-12 reports and the page that displays will have a document titled Proposition 98 Primer.  To access the Prop. 98 Primer directly, click here.

Norman Faller, PTA Legislative Analyst

Courreges Elementary School

Fountain Valley CA