Education as Scapegoat In State Fiscal Woes : Proposition 98 Funding Measure Is No Excuse To Beggar Health and Welfare Programs

California schools are once again caught in the midst of the state budget battle and they are being blamed unfairly for the state’s fiscal woes.

Voters showed their support for our schools and the future of our children when they passed Proposition 98 last November. Proposition 98 does three things: It provides schools with a minimum guarantee of state funds so that eventually kindergarten through 12th grade schools and community colleges can receive enough money to stay even with inflation and enrollment growth; it calls for any “surplus” funds, that is revenue above the state spending limit, to be invested in schools to improve education; and it requires stricter accountability by requiring each school to issue a report card describing its own performance.

Unfortunately, some of the state’s leaders are using Proposition 98 as a scapegoat for California’s fiscal problems. They are claiming that Proposition 98 gives “extra” money to schools, forcing cuts in other programs. These allegations are inaccurate. Projections by the nonpartisan Legislative Analyst indicate that per pupil expenditures, when adjusted for inflation, will actually decline next year.

While the state is facing a very real fiscal problem, it is not because of Proposition 98. The real culprit is an unintentional $1 billion tax cut that forced the entire reserve to be used up this year. The Deukmejian Administration does not seem prepared to correct this tax windfall, and so it has proposed substantial program cuts next year. To make matters worse, the Administration is dodging its responsibility for this problem by attempting to shift the blame to Proposition 98 and pit education against health, welfare, and other vital programs.

Each year the governor and the Legislature must decide how to spend added revenues resulting from economic growth. The new monies are used to meet needs caused by increased population, to maintain purchasing power and to provide new or expanded services. In 1989-90 this new revenue amounts to $2.9 billion.

Proposition 98 assures that schools and community colleges receive a high enough share of the $2.9 billion in new state revenues to keep their overall portion of the state budget from dropping.

The governor has stated that, because of Proposition 98, schools will receive an additional $400 million in the 1989-90 budget, forcing other programs, such as health and welfare, to be cut by approximately that amount. But that is not correct. Out of a $2.9 billion total in new revenues, Proposition 98 provided schools with just $920 million this year, compared to $977 million from the same total last year. Thus, out of an equal amount of new revenues, schools are receiving less new money after the passage of Proposition 98 than before.

Proposition 98 has stabilized education’s share of the budget at a low level compared to previous years, even though our enrollment this year is growing by more than 140,000 children, or 3%. The educational community asked the public to pass Proposition 98 to prevent substantial cuts below the level needed for schools to keep even with inflation and to pay for enrollment growth. That is exactly what the measure is doing, but it does not provide any additional funding above maintenance levels for 1989-90.

Since schools did not receive an “extra” $400 million, why does the governor’s budget propose almost $400 million in health and welfare cuts?

The major reason is that nearly one-third of $2.9 billion in next year’s new revenues is being proposed to be used to rebuild this year’s reserve fund. This year’s entire reserve is being used to forestall cuts in programs due to a revenue shortage of $1 billion last year.

How did that happen? The state, in an attempt to conform its tax laws with federal tax reform legislation, miscalculated and ended up reducing state revenues by $1 billion. Moreover, the largest beneficiaries were the state’s wealthiest taxpayers, who received a $1 billion tax windfall by mistake.

Instead of blaming Proposition 98, the governor and Legislature have several options to provide full inflation and growth adjustments to those health and welfare programs singled out for cuts. They can do just what was done last year--when the reserve was rebuilt to only $600 million instead of $900 million. They also can take the following steps:

--Rescind the unintended tax reduction for the wealthy for one year, which would make $1 billion available for programs.

--Close tax loopholes to conform to more recently passed federal legislation, which would provide $250 million to $400 million.

--Stop giving away sources of revenue. The 1986 unitary tax cut could potentially give foreign corporations a windfall of more than $100 million. It should be repealed.

What our leaders cannot do is make schools pay the price for poor fiscal planning by substantially reducing the schools’ share of new money. Schools paid the price in 1987, when the governor and Legislature balanced the budget by reducing the schools’ share by $400 million below what it took to keep even with inflation.

Education is the not the enemy of health and welfare. We all have a stake in correcting California’s fiscal problems. We all should demand that our leaders do so. With the passage of Proposition 98, schools can no longer be used to help balance the state budget. And that is exactly what the voters wanted.