California Proposition 98, Mandatory Education Spending (1988)
California Proposition 98, or the Classroom Instructional Improvement and Accountability Act, was on the November 8, 1988 ballot in California as an combined initiated constitutional amendment and state statute, where it was approved.
Proposition 98 was placed on the ballot as a reaction to Proposition 4, the so-called "Gann Limit Initiative".
Proposition 98 requires a minimum percentage of the state budget to be spent on K-14 education, guaranteeing an annual increase in education in the California budget. As a result of Proposition 98, a minimum of 40% of California's general fund spending is mandated to be spent on education and the actual percentage of the general fund spent on education is over 50%.
Proposition 98 amended the California Constitution to mandate a minimum level of education spending based on three tests:
- Test one, applicable only from 1988 to 1989, required spending on education to make up 39% of the state budget.
- Test 2, applicable to years of strong economic growth, requires spending on education to equal the previous years spending plus per capita growth and student enrollment adjustment.
- Test 3, used in years of weak economic growth, guarantees prior years spending plus adjustment for enrollment growth, increases for any changes in per capital general fund revenues, and an increase by 0.5 percent in state general funds.
This is accomplished by shifting specified amounts of property tax revenues from cities, counties and special districts to "educational revenue augmentation funds" (ERAF) to support schools statewide. 
Prop 98 can be suspended with a 2/3 vote of the California State Legislature.
|California Proposition 98 (1988)|
According to Dan Walters, Proposition 98 grew out of "the infighting among education groups in the uncertain days following passage of Proposition 13 in 1978...That's why the California Teachers Association and other school interests created an Education Coalition that wages constant war in political and legal arenas to protect its share of the state budget."
John Mockler drafted the language for Proposition 98.
The initiative was a result of 1978's Proposition 13, which limited assessed property taxes to one percent of a home's value in California and thus limited the amount of local funds that could be spent on school districts. It was amended two years later by Proposition 111.
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The parts of the California Constitution affected by Proposition 98 are:
- Section 5.5 was added to Article XIII B.
- Section 2 of Article XIII B was amended.
- Section 8 of Article XIII B was amended.
- Section 8.5 was added to Article XIII B.
Text of measure
The ballot title was:
The official summary said:
- "Amends State Constitution by establishing a minimum level of state funding for school and community college districts; transferring to such districts, within limits, state revenues in excess of state's appropriations limit; and exempting excess funds from appropriations limit. Adds provisions to Education Code requiring excess funds to be used solely for instructional improvement and accountability and requiring schools to report student achievement, dropout rates, expenditures per student, progress toward reducing class size and teaching loads, classroom discipline, curriculum, quality of teaching and other matters. Contains other provisions."
- See also: Fiscal impact statement
The fiscal estimate provided by the California Legislative Analyst's Office said:
- "Meeting the required minimum funding level for schools and community college districts will result in state General Fund costs of $215 million in 1988-89. No excess state revenues are expected in 1988-89 for transfer to schools and community colleges. Local administrative costs are estimated to be $2 million to $7 million a year for preparation and distribution of School Accountability Report Cards. No fiscal effect can be identified for the required prudent reserve fund."
Proposition 98 has been criticized by some groups because it mandates "auto-pilot spending" and reduces the legislatures' budgetary flexibility.
A November 2009 state budget analysis prepared by the California Legislative Analyst's Office said that because of the way Proposition 98 is worded, California's declining revenues translate into an extra $1 billion for the state's public schools, even as revenues available for other programs shrink. According to John Myers, the Sacramento Bureau Chief for KQED's "The California Report", the LAO report says that "In a nutshell: Prop 98 ties school funding, in part, to year-to-year changes in state revenue. But the year-to-year changes projected by this year's budget deal ended up being wrong, making it seem as though revenues are growing faster than projected, thus guaranteeing schools more money. Remember, this is contrary to reality, where revenues are actually declining. Nonetheless, you can expect education advocates to demand that $1 billion ASAP, given the budget reductions to schools over the past two years."
A February 2010 article in TIME, the national newsweekly, said, "Proposition 98 requires California to spend 40% of the state budget on public schools, which places enormous pressure on other state programs, such as higher education and the courts."
The New York Times wrote in March 2010 that Proposition 98 "earmark[s] so many state tax dollars for education that it is now extremely difficult to balance the state budget."
Complexity of Prop 98
Education consultant John Mockler, who drafted Proposition 98, is said to have "often joked – perhaps truthfully – that he deliberately made it obtuse so that stakeholders would hire him to interpret it, thereby allowing his children to attend expensive universities."
Proposed 2009 changes
Reform proposition rejected:
The California state budget problems in 2009 led to the possibility that Proposition 98 from 1998, Proposition 10 from 1998 and Proposition 63 from 2004 would be altered in a special 2009 election so that dedicated funds approved by the voters when these propositions were passed can be used for the state's general fund.
Schwarzenegger proposes suspending:
In late June 2009, Gov. Schwarzenegger proposed that Proposition 98 be temporarily suspended as a way to help close the state's $26.3 billion budget shortfall. Schwarzenegger wants to cut $3 billion from the state's contribution to public schools, which would be difficult to do under Prop 98's provisions. The governor is said to feel that since the state's voters on May 19 rejected a package of ballot propositions, including a tax hike, that he and the state legislature unsuccessfully urged them adopt, spending cuts are now the only route available to close the state's budget gap.
The idea of suspending Prop 98 is regarded by some Democrats as a "nuclear option" in the ongoing 2009 budget deliberations. The well-heeled California Teachers Association, which worked hard against Schwarzenegger's 2005 ballot propositions, is said to be preparing a series of television ads to attack Schwarzenegger.
Ron Nehring, chair of the state's Republican Party, says, "The labor folks are on the defense to a much greater degree than I've seen, pushing for tax increases when the people oppose them ... and their ad campaign is about pressuring Democrats to go along. We're united behind the governor 100 percent."
Two-thirds of the members of the California State Legislature would have to vote to suspend Proposition 98. Proposition 98 has been suspended by the state legislature twice since it passed in 1988, once in the early 1990s when tax revenues plummeted as the result of the decline of the aerospace industry and again in 2004 when tax revenues in the state declined following the decline of Silicon Valley dot-com businesses.
- PDF of the November 8, 1988 ballot proposition voter guide
- Proposition 98 Primer
- Proposition 98 Primer
- Proposition 98: Too complex, even for the experts
- The Basics of Proposition 98: A Tutorial for State Lawmakers. A 20-minute webcast tutorial released in May 2009 by the California Legislative Analyst's Office
- ↑ Education Week, "Fiscal Deadline, Thorny Deficits Bedevil States", July 10, 2009
- ↑ Scripps News, "What goes around, comes around", February 21, 2011
- ↑ Proposition 98 Primer
- ↑ 4.0 4.1 Fresno Bee, "A Wonderland formula funds California schools", January 17, 2010
- ↑ Fact Sheet: The ERAF Property Tax Shift
- ↑ Fresno Bee, "Dan Walters: Judges quarrel as California fiscal crisis worsens", November 16, 2009
- ↑ North County Times, "Big problems for the Brown tax proposal", February 16, 2012
- ↑ Cure Proposition 13 'Sickness' by Reassessing Commercial Property, Boosting the Homeowners' Exemption and Cutting the Sales Tax
- ↑ California Family Council
- ↑ KQED Capital Notes, "$21 billion deficit now, worse later", November 18, 2009
- ↑ Legislative Analyst's Office, "The 2010-11 Budget: California's Fiscal Outlook", November 18, 2009
- ↑ TIME, "How the Initiative Culture Broke California", February 26, 2010
- ↑ New York Times, "Californians Compete for a Shot at Redistricting", March 3, 2010
- ↑ Inside Bay Area, "Editorial: Budget deal a step forward, but voters must pass five ballot measures", February 15, 2009
- ↑ San Francisco Chronicle, "Governor backs off plan to suspend Proposition 98", July 4, 2009
- ↑ 16.0 16.1 San Francisco Chronicle, "Schwarzenegger holds his ground on budget", July 8, 2009
- ↑ Mercury News, "State education leaders decry governor's proposal to suspend Proposition 98", July 8, 2009
- ↑ Los Angeles Times, "Proposition 98, which guards funding for state's schools, is tested again", July 17, 2009