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Eyeing Education Funding With California Prop 38

by Bob Morris, published

Education funding with California Prop 38 would come from the proposition's hike to state income tax rates for virtually all Californians in order to raise $10 billion a year. The funds would also go to paying off debt. Seventy percent of the revenue will go towards financing schools and early care, with the remaining thirty percent earmarked for paying down debt. (The State of California made $4.7 billion in bond debt payments in 2010-2011 with $3.2 billion of that going towards education debt.)

Behind this placid proposition lie major conflicts. Proposition 38 is led and primarily financed by attorney Molly Munger, daughter of billionaire Berkshire-Hathaway Vice-Chair Charles Munger. It competes directly with Gov. Jerry Brown's Prop 30, which also seeks to fund education. The overriding difference between the two is that Prop 30 will block $6 billion in mandated budget cuts from happening in January 2013. Prop 38 will not. However, there is no guarantee that Prop 30 estimates of revenue are accurate. If there is a shortfall, then it will have merely postponed the next budget crisis by a few months.

Prop 30 has a good chance of passing. Prop 38 does not. However, if Munger makes a big ad push and goes negative on Prop 30, it could kill that proposition too.

The sad truth is, however, that if she does this – as she suggested the other day – her measure still won’t pass, but she can probably kill Brown’s Prop. 30. “Funded opposition” is the one thing Brown’s advisers have been afraid of all along.

Proposition 38:

  • Increases personal income tax rates on annual earnings over $7,316 using a 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.

The Yes on 38 campaign says:

Proposition 38 is the only education initiative on the ballot because it guarantees that new education dollars go straight to every local school, and can be used to restore cuts to improve student learning. Instead of investing in our schools, political leaders from both parties have been cutting funds. Because of this, Proposition 38 was created and is endorsed by the California State PTA, school districts, education advocates, and the Advancement Project, with funding from civil rights attorney Molly Munger. Prop 38 raises $10 billion a year for schools, puts it into a secure trust fund that Sacramento politicians can't touch, and distributes the money evenly on a per-child basis to every public school.

The most visible No on 38 campaign focuses on how higher taxes will hurt the economy of California.

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.

Some people advocate that voting for both propositions in order to insure that education be funded, although most aren't quite sure what the consequences of both propositions winning would be.

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