Proposition 98, which was approved by the voters in 1988 to ensure that California's schools were adequately funded, has not served the state or public education well. By requiring a set percentage of state revenue to go to public schools, it has inhibited the Legislature's ability to make sound budgeting decisions, and it has not saved schools during the worst budget years, when there are exemptions to the funding guarantee.
The result has been that when the state is flush, schools embark on expensive and permanent new programs — higher teacher wages and retirement benefits, for example, or after-school activities — that become unaffordable during downturns. That leads to cuts, often across-the board cuts that directly affect the classroom. A proposal by Gov.
Brown's idea isn't to change the Proposition 98 guarantee, which is unfortunate. The law remains wildly popular with voters who don't fully understand its unwieldy ramifications; undoing it would be nearly impossible.
Instead, he plans to include wording in ACA 4, his budget reform proposal on the November ballot, that would require the state to deposit some Proposition 98 money into a financial crisis fund set aside for schools. Those deposits would come from capital gains taxes, considered the most volatile source of state revenue, when they exceed 6.5% of the general fund tax revenue.
For the last couple of years, capital gains have been in the 9% to 10% range, according to the governor's budget summary. But during the recession, they dipped to 3.5% to 5%.