California Proposition 38, State Income Tax Increase for Education Funding Initiative (2012)

California Proposition 38
Election date November 6, 2012
Topic Taxes
Status d Defeated
Type State statute	Origin Citizens

2012 propositions
June 5
Proposition 28
Proposition 29
November 6
Proposition 30
Proposition 31
Proposition 32
Proposition 33
Proposition 34
Proposition 35
Proposition 36
Proposition 37
Proposition 38
Proposition 39
Proposition 40
Donations • Vendors
Endorsements • Full text
Ballot titles • Fiscal impact
Local measures

California Proposition 38 was on the ballot as an initiated state statute in California on November 6, 2012. It was defeated.

A "yes" vote supported increasing state income taxes by 0.4% for the lowest earners (those making $7,316 to $17,346) to 2.2% for the highest earners (those making over $2.5 million) for 12 years to fund education and early childhood programs.

A "no" vote opposed increasing state income taxes for 12 years to fund education and early childhood programs.

Election results

California Proposition 38
Result		Votes	Percentage
Yes		3,541,199	28.72%
No		8,789,892	71.28%

Results are officially certified.

Source

Overview

Measure design

If it were approved, Proposition 38 would have increased state income taxes (using a sliding scale) by .4% for lowest individual earners to 2.2% for individuals earning over $2.5 million to fund education and early childhood programs. This income tax increase would have ended after 12 years unless voters had reauthorized it. The increase was expected to result in higher tax liabilities for about 60% of state personal income tax returns. Revenue would have been deposited in the California Education Trust Fund (CETF), which would have been created under the measure. Funds would be distributed through three grant programs: 70% to Educational Program Grants distributed on a per-student basis; 18% to Low-Income Student Grants; and 12% to Training, Technology, and Teaching Materials Grants.

Tax initiatives on the 2012 ballot

Proposition 38 was one of three tax increase measures on the November 6, 2012, ballot. The others were Proposition 30, a sales and income tax increase measure supported by Democratic Governor Jerry Brown, and Proposition 39, an income tax increase for multistate businesses.

Steve Glazer, who supported Proposition 30, said, "When voters are offered choices among competing [tax] measures, it depresses the support for each of them. The likely result will be all of them failing." Darrell Steinberg, the President Pro Tem of the California State Senate said, "The real problem is that if you have multiple measures on the ballot, you dramatically increase the likelihood that they will all fail. That’s not an acceptable outcome." Molly Munger, sponsor of Proposition 38, said, "Under our proposal, virtually all the cuts that the schools have suffered in the last four years would all be restored—and under the governor's initiative, virtually none would be."

Text of measure

Ballot title

The ballot title for Proposition 38 was as follows:

“

Tax to Fund Education and Early Childhood Programs. Initiative Statute.

”

Ballot summary

The ballot summary for this measure was:

“

Increases personal income tax rates on annual earnings over $7,316 using sliding scale from .4% for lowest individual earners to 2.2% for individuals earning over $2.5 million, for twelve years. During first four years, allocates 60% of revenues to K–12 schools, 30% to repaying state debt, and 10% to early childhood programs. Thereafter, allocates 85% of revenues to K–12 schools, 15% to early childhood programs. Provides K–12 funds on school-specific, per-pupil basis, subject to local control, audits, and public input. Prohibits state from directing new funds.

”

Full Text

The full text of this measure is available here.

Fiscal impact

See also: Fiscal impact statements for California's 2012 ballot propositions

The following is a summary of the initiative's estimated fiscal impact on state and local government that was prepared by the California Legislative Analyst's Office and the Director of Finance.

“

Around $10 Billion of Additional Annual State Revenues. In the initial years—beginning in 2013–14—the annual amount of additional state revenues raised would be around $10 billion. (In 2012–13, the measure would result in additional state revenues of about half this amount.) The total revenues generated would tend to grow over time. Revenues generated in any particular year, however, could be much higher or lower than the prior year. This is mainly because the measure increases tax rates more for upper-income taxpayers. The income of these individuals tends to swing more significantly because it is affected to a much greater extent by changes in the stock market, housing prices, and other investments. Due to the swings in the income of these taxpayers and the uncertainty of their responses to the rate increases, the revenues raised by this measure are difficult to estimate.

”

Support

"Yes on Prop 38" website logo

Supporters

• Molly Munger, Pasadena attorney and Proposition 38's main financial backer who donated over $44 million to the campaign by early November
• The California State PTA
• Carol Kocivar, president of the California State Parent Teacher Association
• Edward James Olmos, an actor who played teacher Jaime Escalante in "Stand and Deliver"
• Arun Ramanathan, executive director of Education Trust-West
• Celia Jaffe, president of the 4th District PTA, Orange County
• Alex Kajitani, 2009 California Teacher of the Year
• Tini Repetti-Renzullo, 2010–2011 Los Angeles County Teacher of the Year

Arguments

• Molly Munger and the Yes on Proposition 38 campaign said the initiative would generate "real money that really goes to schools, money that you can count, that you can trace and enforce, and that you can be sure will get to every school and every child."

Official arguments

The arguments in favor of Proposition 38 in the state's official voter guide were submitted by the following people:

• Carol Kocivar, president of the California State Parent Teacher Association;
• Edward James Olmos, an actor who played teacher Jaime Escalante in "Stand and Deliver";
• Arun Ramanathan, executive director of Education Trust-West;
• Celia Jaffe, president of the 4th District PTA, Orange County;
• Alex Kajitani, 2009 California Teacher of the Year; and
• Tini Repetti-Renzullo, 2010–2011 Los Angeles County Teacher of the Year

The arguments were as follows:

“

Education is our future because children are our future. Without quality schools, our state will lack the skilled workforce needed to grow our economy and create jobs. Instead of investing in our schools, political leaders from both parties have been cutting. Since 2008, they’ve cut school budgets by $20 billion. Over 40,000 educators have been laid off, and California now has the largest class sizes in the nation. RESTORE AND EXPAND SCHOOL FUNDING. Proposition 38 makes schools a priority again. It provides guaranteed funding to restore a well-rounded education and improve educational outcomes. It guarantees billions of dollars to local schools based on enrollment, averaging $10 billion annually over twelve years. School sites can use the money to reduce class sizes or restore classes in art, music, math, science, vocational and technical education and college preparation—based on different needs at different schools. Learn how much new funding Proposition 38 sends directly to schools in your community at: www.moneyforlocalschools.org/restore . PREVENT MORE CUTS. Proposition 38 helps prevent more budget cuts by setting aside $3 billion annually through 2016–17 to reduce the state deficit by repaying state education bond debt. PREPARE CHILDREN TO SUCCEED. 38 provides over $1.1 billion annually to restore budget cuts to early childhood education, improve quality, and expand access to preschool. A FAIR-SHARE WAY TO INVEST IN OUR SCHOOLS. As Californians, we should all contribute something to improve our schools because we will all share in the benefits better schools will bring to our state’s economy and quality of life. Proposition 38 provides $10 billion annually to restore school funding by raising state tax rates on income after all deductions, using a sliding scale based on ability to pay. The wealthiest taxpayers pay the most, with rates rising 2.2% for individuals on incomes over $2.5 million. At the low end, taxpayers with incomes under $25,000 would pay an annual average of $7.00. Learn how Proposition 38 affects taxpayers like you at: www.moneyforlocalschools.org/taxcalculator. FIVE GUARANTEES TO PARENTS AND TAXPAYERS: The Legislature can’t touch the money. 38 PROHIBITS the Legislature from diverting or borrowing the money, and it cannot use the new money to replace money schools currently receive. School funding MUST go per pupil to every school and must be spent at the school. The funds will be audited and any attempted misallocation is a felony punishable by jail time and a ban on holding public office. The money CANNOT be spent to increase salaries or pensions of school personnel, and 38 prohibits spending more than 1% on administration. Spending decisions will be made locally, after public input. Districts MUST hold open meetings at each school site to get input from parents, educators and the community before spending the money. School districts will be accountable for improvement at each school. They MUST set annual educational improvement goals for each school, and publicly report how the money was spent and whether improvement goals were achieved. MAKE SCHOOLS A PRIORITY AGAIN. YES ON 38.

”

Opposition

"No on Prop 38" website logo

Opponents

• Allan Zaremberg, president of the California Chamber of Commerce
• Ken Williams, member of the Orange County Board of Education
• Thomas Hudson, executive director of the California Taxpayer Protection Committee
• Andrew Wong, member of the Board of Education of the Pomona Unified School District
• Keith Royal, president of the California State Sheriffs’ Association
• Richard Rider, chairman of San Diego Tax Fighters
• The California Republican Party
• The California Democratic Party
• Gov. Jerry Brown
• The California Business Roundtable

Arguments

• David Kieffer of the SEIU said in late February 2012 that although he was sympathetic to the aims of Proposition 38, its supporters should withdraw it in favor of competing initiative Proposition 30, a competing initiative on the 2012 ballot that was supported by then-Governor Jerry Brown (D). Keiffer said, "From a public policy point of view, we're going to end up with a big mess, where three competing tax initiatives will collide at the ballot box and we won't get any of them passed."

• Gov. Jerry Brown argued that because Proposition 38 earmarks the revenue it was designed to raise for education, it would do nothing to alleviate California's budget deficit.

• Jerry Carnahan of the California Business Roundtable said, "We are aggressively moving forward to raise money and oppose these initiatives. We will ensure by the November election that the voters of California will understand their real impacts on our economy and jobs."

Official arguments

The arguments in opposition to Proposition 38 in the state's official voter guide were submitted by the following people:

• Allan Zaremberg, president of the California Chamber of Commerce;
• Ken Williams, member of the Orange County Board of Education;
• Thomas Hudson, executive director of the California Taxpayer Protection Committee;
• Andrew Wong, member of the Board of Education of the Pomona Unified School District;
• Keith Royal, president of the California State Sheriffs’ Association; and
• Richard Rider, chairman of San Diego Tax Fighters.

The arguments were as follows:

“

No on Prop. 38: $120 Billion Income Tax Hike on Most Californians If you earn $17,346 or more per year in taxable income, Prop. 38 raises your California personal income tax rate by as much as 21%, on top of what you pay the Federal government. The Prop. 38 tax increase continues until 2024. If you have a child entering first grade, you’ll be paying higher income taxes until that child graduates from high school. Even as the economy improves and more people get back to work, the tax increases continue. Even without necessary reforms to our education system, like the ability to fire bad teachers, the tax increases still continue. Prop. 38 locks us into higher income tax rates for the next twelve years—no matter what! The politicians and bureaucrats get billions of dollars in new taxes, with virtually no accountability on how the money is spent and how much actually gets into the classroom. Targets Small Business and Kills Jobs Approximately 3.8 million California small businesses pay individual taxes on their earnings, rather than corporate taxes. Consequently, small businesses will be devastated by these higher taxes—even businesses making as little as $30,000 or $40,000 a year. Instead of creating jobs and improving the economy, Prop. 38 will force family businesses to cut jobs, move out of state, or even close. If they can stay in business, they’ll raise prices to pay the higher taxes, which will ultimately be passed on to consumers. No Requirements to Improve School Performance Under 38, there are no requirements to improve school performance or get rid of bad teachers. Too much money will continue to be spent on administration, consultants, pensions, benefits and overhead and too little will be spent in the classroom. Currently, 24% of California students don’t graduate from high school. Prop. 38 pours more money into a system that is failing our kids without requiring improvements in outcomes for students. No Changes, Even for Fraud or Waste, for Twelve Years Prop. 38 contains a special provision hidden in its twentyseven pages of fine print that prohibits any changes in the measure through 2024 (without another vote of the people), even in the case of waste, fraud or abuse. $120 Billion in New Taxes, but Nothing to Reduce Our Deficit Prop. 38 allows the politicians in Sacramento to keep spending. There is nothing in Prop. 38 that requires any of the funds to be used specifically for deficit reduction and nothing that stops the politicians from getting us back into the same mess we’re in now, even with $120 billion in new taxes. No on Prop. 38: 27 pages of fine print and flaws $120 billion in higher taxes Increases income taxes for taxable incomes above $17,346 Damages small business and kills jobs No Requirements to Improve School Performance Can’t be changed for twelve years—even for fraud or waste—without another vote No on Prop. 38—Another flawed, costly and misleading initiative.

”

Media editorials

See also: Endorsements of California ballot measures, 2012

Support

2012 propositions
June 5
Proposition 28
Proposition 29
November 6
Proposition 30
Proposition 31
Proposition 32
Proposition 33
Proposition 34
Proposition 35
Proposition 36
Proposition 37
Proposition 38
Proposition 39
Proposition 40
Donations • Vendors
Endorsements • Full text
Ballot titles • Fiscal impact
Local measures

• The Bakersfield Californian: "Proposition 38 is one of the most promising education proposals we've seen in a long time. Where Proposition 30 would stop the bleeding in schools, Proposition 38 provides enough money to transform the state's education system, which now ranks 47th in per-pupil funding. Proposition 38 is the clear choice for voters who want their tax dollars to make a difference."

• The San Francisco Bay Guardian: "...the question facing the voters isn't whether Munger is a self-serving brat who went her own way on this, or whether there are flaws in the measure. It's whether the state ought to raise taxes to pay for education. With all the duly noted reservations, the answer to that question has to be yes."

Opposition

• The Bay Area Reporter: "Prop 38 did not result from a collaborative process but was the plan put forward by one wealthy individual."

• The Contra Costa Times: "The existing school funding system is a mess and it must be dramatically reformed, but we fear Proposition 38 will only complicate matters. The need is urgent, but not so urgent that voters should approve a funding scheme that could end up wasting precious taxpayer dollars."

• The Daily Democrat (Woodland, California): "This tax initiative by civil rights attorney Molly Munger would increase spending for public schools, but could derail Gov. Jerry Brown's Prop. 30, thus adding to the state's budget problems."

• The Fresno Bee: "The prospects for passage of Gov. Jerry Brown's Prop. 30 has been damaged by the supporters of Proposition 38, which is pushed by wealthy civil rights attorney Molly Munger. That measure would raise income taxes by $10 billion primarily to fund schools. Unfortunately, the competing measures could cause Californians to vote against both measures. That would be disastrous. Vote "yes" on Prop. 30 and vote "no" on Prop. 38. Munger's initiative does nothing to help public safety, a component of Prop. 30."

• The Lompoc Record: "Prop. 38 may help schools, but it ignores other budgetary deficiencies California is facing."

• The Long Beach Press-Telegram: "It would send money directly to schools, not districts -- even money for technology. That would be crazy."

• The Los Angeles Daily News: "This kind of ballot-box budgeting is bad policy."

• The Los Angeles Times: "Proposition 38 is a well-intentioned attempt to aid California's beleaguered schools, but a vote for the measure is a potential vote against Proposition 30. In addition, the singular focus of Proposition 38 on education is misplaced, particularly in light of the deep and damaging cuts the state has been making in programs that aren't already guaranteed half the state's general fund. As much as the schools need help, they aren't the only ones in need of rescue."

• The Marin Independent Journal: "Proposition 38 is competing with Proposition 30 for votes and its backers say Proposition 38 keeps Sacramento politicians' hands off its funds. But Proposition 38 doesn't stop deep funding cuts that would take place if Proposition 30 fails."

• The Merced Sun-Star: "Some entities, notably the California School Boards Association, recommends a 'yes' vote on both measures. We think it's more likely voters will support only one, and we think that Proposition 30 is preferable of the two."

• The North County Times: "Prop. 38 is a bad way of trying to do some good work."

• The Orange County Register: "The tax-and-spend culture in Sacramento needs a complete overhaul. Voters might be agreeable to paying more if they saw true reform, such as freeing families from underperforming public schools with tuition vouchers or enough charter schools to meet demand. Maybe if there were genuine reform to public-sector pensions. Or, if meaningful reform in providing public services could be achieved, rather than merely promised, or, if new spending meant equal reductions in old spending, perhaps voters would have reason to give more. We don't see these reforms ahead. As always, instead, we hear pleas to increase taxes for a broken system those in charge refuse to fix."

• The Press-Enterprise: "California would be foolish to raise taxes without providing real and enduring solutions to the state’s chronic budget shortfalls. Yet Props. 30 and 38 would increase taxes on Californians without putting state finances on a sustainable course. Voters should demand a comprehensive fix to the state’s yearly budget turmoil, and reject the flawed half-measures offered by Props. 30 and 38."

• The Redding Record Searchlight: "Both 30 and 38 are written so that only one can take effect. We think the governor's asking for plenty already, and we'll go with his plan."

• The Sacramento Bee: "Munger's initiative does nothing to help public safety."

• The San Diego Union-Tribune: "California voters have a crucial choice this November. On Propositions 30 and 38, they can vote for higher taxes and accept the premise that this won’t hurt the struggling economy and that the main problem with our already-high-tax state is that its government doesn’t get enough money from its residents. Or they can vote no and force change in our broken status quo, starting with the public schools that eat up by far the biggest chunk of the state budget."

• The San Francisco Chronicle: "Prop. 38 would further complicate and disrupt locked-in budget formulas. An analysis by the left-leaning California Budget Project concluded that the measure 'may not increase total school spending by as much as some estimate because the Legislature could reduce other state education spending.' One point for voters to consider: Public colleges and universities do not get anything from Prop. 38 - and could bear the brunt of resulting budget cuts."

• The San Gabriel Valley Tribune: "The measure layers a new funding and budgeting system on top of one that's already too complex."

• The San Jose Mercury News: "Proposition 38 would raise more money for schools overall but would pile on bureaucracy and restrict flexibility."

• The Santa Cruz Sentinel: "Prop. 38 funds would go to schools, bypassing the oversight of state education officials and legislators. None of the money can go to teachers' salaries. This provision and a series of other restrictions seem problematic; so does the stipulation that any amendments to the measure would have to be made by voters."

• The Vallejo Times-Herald: "Proposition 38 would raise more money for schools overall but would pile on bureaucracy and restrict flexibility."

• The Ventura County Star: "Proposition 38 is an example of 'ballot-box budgeting,' asking voters to approve higher income taxes while imposing unreasonable restrictions on how the funds are used in the future."

• The Victorville Daily Press: "We have the same recommendation for Prop. 38, another ballot measure which effectively does the same thing as Prop. 30. Naturally, our argument opposing 38 is the same as our argument against 30. Both benefit teachers’ retirement funds at the expense of taxpayers and students, and our arguments can actually be reduced to a sentence: Why help those who refuse to help themselves (in the form of a longer work career and higher personal contributions to pensions?"

Polling information

See also: Polls, 2012 ballot measures

Poll results for the measure are detailed below:

Date of Poll	Pollster	In favor	Opposed	Undecided	Number polled
February 14-18, 2012	Field	45%	48%	7%	344
March 14-19, 2012	By GQR & AV for USC Dornsife/LAT	32%	64%	4%	1,500
May 21-29, 2012	Field Poll	42%	43%	15%	710
June 21-July 2, 2012	Field Poll	46%	46%	8%	997
August 3-7, 2012	PACE/USC Rossier School of Education	40%	49%	11%	1,041
September 9-16, 2012	PPIC	45%	45%	11%	2,003
September 6-18, 2012	Field Poll	41%	44%	15%	902
September 17-23, 2012	USC Dornsife/Los Angeles Times	34%	52%	14%	1,504
October 7-10, 2012	California Business Roundtable	41.9%	45.9%	12.2%	830
October 11-15, 2012	Reason-Rupe	42%	52%	6%	696
October 14-21, 2012	PPIC	39%	53%	8%	2,006
October 21-28, 2012	California Business Roundtable	33.0%	54.1%	12.8%	2,115
October 17-30, 2012	Field Poll	34%	49%	17%	1,912

Path to the ballot

See also: California signature requirements and California ballot initiative petition signature costs

• Roberta B. Johansen, James C. Harrison and Molly Munger submitted a letter requesting a ballot title for Version #11-0088 on November 30, 2011, and for Version #11-0100 on December 12.
• The ballot title and ballot summary for Version #11-0088 was issued by California's attorney general's office on February 13, 2012.
• The ballot title and ballot summary for Version #11-0100 was issued by California's attorney general's office on February 17, 2012.
• 504,760 valid signatures were required to qualify the initiative for the ballot.
• The 150-day circulation deadline for #11-0088 was July 12, 2012.
• The 150-day circulation deadline for #11-0100 was July 16, 2012.
• About 848,000 signatures to qualify Version #11-0100 for the ballot were submitted to county election offices throughout the state in the first days of May 2012.
• On June 20, the California Secretary of State announced that the initiative had qualified for the November 6, 2012, ballot.

Cost of signature collection:

The cost of collecting the signatures to qualify Proposition 38 for the ballot came to $4,952,513. This amounts to a cost-per-required-signature of $9.81/signature. The cost-per-required-signature of rival measure Proposition 30 was $10.86/signature.

The primary signature vendor was Arno Political Consultants. They collected $2,501,196 for their work on the Proposition 38 petition drive. However, 12 other vendors also worked on the petition drive. These vendors included Groundworks Campaigns ($486,663), Discovery Petition ($335,873), Harwig & Harwig ($333,437), JSM ($319,667), Victory Consultants ($283,682), Goldstein/Ostic ($241,192), Bay Area Petition ($197,716), Carl Schmitt ($131,091), the Monaco Group ($53,276), Pride Staff ($43,494) and Linda Roosna ($19,066).

One petition drive management company hired to collect signatures to qualify Proposition 38 for the ballot said in early April that in order to provide an incentive for those who were collecting the signatures on a paid basis to collect more signatures, it would give away a $15,000 automobile each week in a random drawing among those signature-gatherers who collected the most signatures the preceding week. Signature-gatherers for Proposition 38 were at that time being paid $1.50 per signature, while those collecting signatures for competing initiative Proposition 30 were being paid $3.00 per signature.

Order of ballot propositions

Initiated ballot propositions traditionally are given numbers (ballot positions) and placed on the ballot in the order in which signatures are submitted and they qualify for the ballot. Sponsors of Proposition 38 submitted signatures before sponsors of competing initiative Proposition 30.

In June 2012, Proposition 30 sponsor Governor Jerry Brown signed Senate Bill 1039, which changed the way that ballot propositions are numbered and ordered on the ballot. The change required all proposed constitutional amendments to appear on the ballot before initiated state statutes. Proposition 30 was a constitutional amendment and Proposition 38 was an initiated state statute.

Munger, sponsor of Proposition 38, filed a lawsuit seeking relief from Senate Bill 1039. On June 29, 2012, judge Timothy Frawley issued a temporary restraining order (TRO) forbidding Debra Bowen from assigning ballot numbers based on the new ballot-numbering system until he had a chance to fully assess the merits of the lawsuit. A hearing was scheduled for July 9. Munger alleged that the change was an "abuse of political process and legislative power." A judge ruled that Senate Bill 1039 could remain in effect.

The Howard Jarvis Taxpayers Association also filed a lawsuit regarding Senate Bill 1039 in California's 3rd District Court of Appeals challenging the order in which the propositions were numbered by California's Secretary of State Debra Bowen.

See also

2012 Measures

• 2012 Measures
• Education on the ballot
• Taxes on the ballot
• 2012 legislative sessions

California

• California ballot measures
• California ballot measure laws

News and analysis

• Ballot measure lawsuits
• Ballot measure readability
• Ballot measure polls

External links

Suggest a link

• November 2012 official voter guide
• Ballot title, summary and LAO analysis of Proposition 38
• Arguments for and against Proposition 38 in the official state voter guide
• Letter requesting a ballot title for Version #11-0088
• Letter requesting a ballot title for Version #11-0100
• Living Voters Guide to Proposition 38
• Proposition 38, an overview prepared by the League of Women Voters of California
• Proposition 38 on Voter's Edge
• Proposition 38 Cheatsheet from KCET
• Proposition 38 on California Choices (sponsored by Next 10, IGS at UC Berkeley, the UC San Diego Political Science Department, the Bill Lane Center for the American West at Stanford, and the Center for CA Studies at Sac State)
• Proposition 38 at the California Voter Foundation

Supporters:

• Our Children Our Future 2012, main website supporting Proposition 38
• "Yes on Proposition 38" on Facebook
• "Yes on Proposition 38" on Twitter
• Campaign finance reports of the "Yes on Proposition 38" campaign committee
• Campaign finance reports of the Greenlining Action Fund/Yes on 33 and 38 campaign committee

Opponents:

• Stop the Middle Class Tax Hike, main website opposing Proposition 38
• "No on Prop 38" on Facebook
• "No on Prop 38" on Twitter
• Campaign finance reports of the "Stop the Middle Class Income-Tax Hike campaign committee
• Campaign finance reports of the "No on Proposition 38" campaign committee

Additional reading:

• Propositions 30, 38 set to go head-to-head
• Propositions 30, 38 offer school districts much-needed relief
• Along Came Molly: The Irony of California's Ballot Measures
• School Budgets Are on the Ballot in California