Proposition 98

Proposition 98, an amendment to the state Constitution requiring significant spending on K-14 education, altered the California budget through a process called earmarking. The initiative passed by a thin margin in 1988, with 50.7 percent of voters (4,689,737 voting for compared to 4,500,503 voting against) approving at least 40 percent of the budget be spent on elementary schools, middle schools, high schools and the state’s 23 community colleges. According to the Legislative Analyst’s Office, a nonpartisan advisor to the state legislature, initial education funding is derived on the prior year and with a year-by-year change based on average, daily K-12 attendance. The Legislature may increase funding to K-14 education; however, any raise resets the minimum funding level in subsequent years. The Legislature also has the power to suspend automatic funding for one year based on the nearly insurmountable two-thirds vote. The affect of earmarking has placed education as the top budget priority in California.

Proposition 13 of 1978 forever changed the landscape of local funding in California. Local school districts have had to rely more on state funding, including approximately 67 percent of local school costs (Ross, 26). The slow growth of property tax money spurred a call for more education funding. “California schools are the fastest growing in the nation,” according to the text of Prop. 98. “Our schools must make room for an additional 130,000 students every year.” Voters worried California schools were insufficiently funded and feared the state would rank among the lowest in the nation. The LAO says state spending is approximately the national average (Ross, 26). However, the Democratic Party and the California Teachers Association contend the state ranks among the bottom 10 states in elementary-secondary education spending (Ross, 26).

According to some figures, approximately 42 percent of the state budget is spent on K-14 education compared to 13 percent spent on four-year colleges in the California State University and University of California systems (Ross, 24). Some have argued the fiscal requirements of Prop. 98 are as inefficient as they are effective at ensuring adequate funding to education. The spending requirements protect “education when revenue lags but also can be perceived as a spending maximum when more than 40 percent is needed” (Lawrence 230). Others contend Prop. 98 hasn’t spent enough on education. “Despite the assurances of Proposition 98, California’s spending for elementary and secondary education is well below the national average” (Ross, 26).

The LAO says Prop. 98 is responsible for about 75 percent of total funding for K-14 education funding. K-12 education received less than $37 billion of the General Fund and more than $12 billion from local property tax revenues for a total of less than $49 billion in the 2006-07 revised budget. Less than $18 billion not budgeted through Prop. 98 funds teacher retirements, bond payments, state lottery allocations, federal fund allocations and other programs. Prop. 98 money and other funds total less than $67 billion to K-12 education. Community colleges received more $4 billion from the General Fund and less than $2 billion from local property taxes for a total of less than $6 billion in 2006-07. Other agencies, which include special and adult education, received $114 million. The combined General Fund total accounts for less than $41 billion compared to more than $14 billion in local property taxes, illustrating the move from local to state funding. Prop. 98 accounts for a total of just less than $55 billion for 2006-07.

Opponents, including then Gov. Deukmejian, business groups and some employee unions criticized Prop. 98 before its passage because budget development would begin