Prop 98 in a Budget Tug-of-War

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

Predictions from the Legislative Analyst that the state will have more revenue than the governor projects in his May budget revision — with most of the money going to the schools under the provisions of Prop 98 — could set up a spending tug-of-war with Prop 98 in the middle.

Passed in 1988, Prop 98 set a guaranteed percentage of the state’s general fund budget for K-12 and community college education. The measure also established a complicated formula to not only send money to the schools each year, but to make up for what the schools did not receive during particularly dismal budget years.

The makeup money would come to the schools through something called the restoration of the Maintenance Factor. As described by the Legislative Analyst in a primer on Prop 98, “the state has provided less growth in K-14 funding than the growth in the economy. This funding gap is called the maintenance factor. Proposition 98 contains a mechanism to accelerate Proposition 98 spending in future years. This is called restoration of maintenance factor.”

The Legislative Analyst points out in an analysis of the governor’s revised budget that the governor’s choice for calculating the maintenance factor payments ratchets up the minimum guarantee for schools and squeezes other areas of the budget.

The Analyst’s office in its report questions “the reasonableness of an approach that results in the rest of the budget under certain situations not benefiting at all from revenue growth.”

The Analyst proposes an alternative approach to the Maintenance Factor payments used in the past that would essentially split the revenue growth between the schools and other General Fund programs.

How will the legislature, with the majority on the hunt for more spending revenue, react to the governor’s Prop 98 Maintenance Factor restoration plan?

The legislature could opt for following the Legislative Analyst’s advice to change the repayment formula and thus free up money for other programs. But legislators likely would not want to deal with the touchy subject of reducing additional money the governor has earmarked for schools.

Then what? An argument that the school maintenance factor must follow the LAO recommendation to help other budget programs so then taxes should be raised to send additional money to schools? How about a discussion to consider amendments to the way Prop 98 operates squeezing the overall budget?

It would be an important debate. More likely with this legislature we would see the former approach on taxes rather than the latter discussion on amending Prop 98.

Share this article: Share on FacebookTweet about this on TwitterShare on LinkedInPin on PinterestEmail this to someone

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.