Jerry Brown and Molly Munger both want to raise taxes to help schools - - but differ on approach

kyamamura@sacbee.comSeptember 18, 2012 

If Gov. Jerry Brown and civil rights attorney Molly Munger agree on one thing, it's that California needs to raise taxes to give schools more money.

Voters who share that view now have to consider two distinctly different paths devised to accomplish the goal.

On the November ballot, the tax hike with the most votes should prevail if both succeed, though courts would likely have to sort out which parts of each initiative survive.

Munger's initiative, Proposition 38, would radically upend a school-financing approach that state officials and local districts have long practiced. The measure would generate $10 billion annually by raising income taxes on all but the poorest income earners for education and budget relief, but send money directly to school districts rather than through the state.

The governor's proposal, Proposition 30, raises an average of $6 billion annually once it takes full effect, according to the state Legislative Analyst's Office, all of which counts as state revenue for budget purposes. Its defeat would trigger more than $5 billion in cuts to schools and community colleges.

After failing earlier this year to persuade Munger to drop her measure ("Even God can't stop somebody from sinning," he said), the Democratic governor has since tried to explain why his is a better option for voters.

He argues that his measure better protects higher education and public safety and generates money more quickly. His campaign has emphasized that the rival initiative does not start sending money to districts until the 2013-14 school year.

"It will take several years for her tax to equal mine," Brown told The Bee's editorial board this month.

To solve recent deficits, California leaders have engaged in a delicate dance with the state's education funding mandate under Proposition 98, stretching and reworking accounts the way a pizza maker kneads dough.

Because the mandate, which guarantees minimum funding for schools, largely bases its calculations on revenues that come through Sacramento, state leaders have significant control over how to balance education dollars against the rest of California's spending demands.

Proposition 38 would alter that dynamic, setting up three grant programs – including one based on student need and another aimed at training and technology – to distribute money to individual schools. It provides money for early childhood development and some initial funds for state budget relief in addition to K-12 schools.

Supporters, most notably the California State PTA, say it would give local teachers and parents direct control over how money is spent.

But within the budgeting world, Proposition 38 has become something of a forgotten stepchild, lacking the institutional backing that Brown has attracted for his measure from unions, some businesses and Democratic leaders.

Brown and lawmakers built their current budget as if only the outcome of Proposition 30 matters. Many school districts did the same. They have contingency plans to shut down the school year early should voters reject Brown's initiative, which would hike the sales tax by a quarter-cent on the dollar and raise top rates on high-income earners.

John Mockler, who helped write the state's landmark Proposition 98 that guides school finance to this day, suggests that routing money outside that system could hurt schools in the long run. Under Proposition 98, schools currently have first claim on most incoming dollars whenever state revenues spike after a period of cuts.

"There's a huge restoration effect when you have big growth," said Mockler, who started the year advising Munger's campaign but switched to Brown's side this summer.

The Legislative Analyst's Office hasn't made such a prediction. The analyst's Edgar Cabral said the constitutional formula does require school funding growth when tax revenues spike, but many factors that remain unknown would determine how that plays out.

Brown acknowledges that by 2017, Proposition 38 raises more for schools because it devotes a higher share to K-12 education that year. Proposition 38 also lasts for 12 years, while Brown's sales tax hike ends after four years and his income tax hike ends after seven years.

Because Proposition 38 would send money to schools outside of the normal funding avenues, its effects are open to interpretation. Brown and his campaign team have emphasized that $6 billion in trigger cuts would still occur this school year, mostly in education, if Proposition 38 takes precedence over Proposition 30.

"Because of that $5.5 billion in (education) trigger cuts, they won't be caught up, they'll go into that hole if she wins," Brown said of Munger's initiative.

Others say that is misleading.

Proposition 38 initially devotes about $3 billion annually for the state general fund, at least half of which could be available this school year to avoid trigger cuts at the University of California and California State University, said Brad Williams, a former state fiscal analyst who advises Munger.

"On the budget relief side, it frees up money for the governor and Legislature," Williams said. "I think they would use some of that to restore money for CSU and UC. There's certainly enough there."

Other education experts said districts and teachers unions could find ways to avoid the trigger cuts even if Munger's initiative prevails.

The analyst's office said that while Proposition 38 would not begin funding schools until 2013-14, it would provide extra money that year, equal to about $7 billion total. Schools could work with their districts to tap those funds early by relying on borrowing or accounting shifts rather than closing classrooms.

State Superintendent of Public Instruction Tom Torlakson said he believes the Legislature and districts would revisit their trigger cut arrangements if Proposition 38 prevails.

"If there is a pot of money generated outside of the budget deal, it still addresses priorities the governor and Legislature said they care about," Torlakson said. "So I think the Legislature would find a way to bridge the budget gap knowing the money is coming in."

While the campaigns have tried to emphasize differences between the initiatives, Torlakson, the Los Angeles Unified School District Board of Education and the California School Boards Association are among those who have endorsed both measures.

"Both measures are bold and timely and needed to deal with the crisis in our schools," Torlakson said. "I believe splitting the 'yes' vote could have negative consequences. … You could get two measures that end up with 48 percent, and neither passing."

PROPOSITION 38

What it would do:

• Raise income taxes on most Californians for 12 years.

• Allocate increased revenue to public schools, child care and preschool programs, and state debt payments.

• According to the Legislative Analyst's Office, schools would receive about $6 billion annually, or $1,000 per student, from the measure.

What it would cost:

• According to the Legislative Analyst's Office, the measure would increase income taxes on all but the lowest income bracket for 12 years, raising roughly $10 billion annually in initial years and likely growing over time.

• Allocates roughly 60 percent of revenue to schools, 30 percent to state debt payments and 10 percent to early child care and education programs, with the share for schools increasing to roughly 85 percent in later years.

PROPOSITION 30

What it would do:

• Raise the statewide sales tax rate by a quarter percentage point for four years and impose income tax increases for seven years on Californians earning more than $250,000 a year.

• Prevent about $5.4 billion in cuts to schools and community colleges included in the state budget should the initiative fail.

• Guarantee tax revenue to local governments to fund public safety responsibilities shifted to them from the state last year.

What it would cost:

• According to the Legislative Analyst's Office, the measure would increase state tax revenues by about $6 billion annually over the next few years.

• Revenue from increased taxes would be available to increase school funding and to help balance the state budget.

WHAT IF PROPOSITION 30 FAILS

Here are the more than $5 billion in budget cuts scheduled to occur if Proposition 30 is not approved:

• K-14 education: $5.4 billion

• University of California: $250 million

• California State University: $250 million

• Developmental Services: $50 million

• City police grants: $10 million

• Department of Forestry and Fire Protection: $10 million

• Flood control: $6.6 million

• Local water safety control: $5 million

• Fish and Game (non-wardens): $2.5 million

• Park lifeguards: $1.4 million

• Fish and Game (wardens): $1 million

• Department of Justice: $1 million

• Park rangers: $100,000

Source: state Department of Finance

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