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Mobile or Single ColumnTax to Fund Education and Early Childhood Programs.
- Pros & Cons -
Proposition 38
Tax to Fund Education and Early Childhood Programs.
Initiative Statute
The Question:
Should California’s personal income tax rates be increased during 2013-24 to provide funds for public schools, early childhood education programs, and state debt payments?
The Situation:
The personal income tax (PIT) is imposed on individual income, at rates from 1% to 9.3%, higher rates being charged as income increases. An additional 1% tax applies to annual incomes over $1 million (revenue dedicated to mental health services). The PIT revenue—totaling $49.4 billion for the 2010-11 fiscal year—goes into the state's General Fund.
California provides educational services to about 6 million public school students, served through more than 1,000 local educational agencies. Most school funding is provided through what is commonly called the Proposition 98 minimum guarantee, which totaled $43 billion in 2010-11.
Roughly 70% of this funding goes to school district governing boards, which determine the specific activities to be funded and the distribution among individual schools. The remaining 30% must be used for specific purposes, such as meals or transportation.
Most California children attend some type of early childhood program. While many families pay to participate, public funds also subsidize some children from low-income families. Because state and federal funding is insufficient, waiting lists are common.
The Proposal:
Prop 38 would increase PIT rates until 2024 on all but the lowest income bracket, impacting approximately 60% of filers. The maximum 9.3% PIT rate would be increased in stages up to 11.5% (on incomes of $2,500,000 for single filers, $5,000,000 on joint filers). The additional 1% tax for mental health services would continue to apply.
Prop 38 revenues would be dedicated to three purposes. In 2013-15, 60% of the funds would go to schools, 10% to early childhood programs, and 30% to state debt payments. In 2015-17, a somewhat higher share could be used for state debt payments. After that, up to 85% of the funds would go to schools and up to 15% would go to early childhood programs, with some revenue available for state debt payments.
Fiscal Effect:
Initially Prop 38 would generate approximately $10 billion annually, and, although likely to fluctuate, this amount would tend to grow in later years. Due to these fluctuations and other uncertainties, the longer-term revenue increases are difficult to estimate.
In the initial years, school districts would receive roughly $6 billion annually, or $1,000 per student, for schools, low-income students, and training, technology, and teaching materials. Early childhood programs would receive roughly $1 billion annually, largely for child care and preschool.
Until the end of 2016-17, the remaining $3 billion would be used to make payments on the state’s general obligation debts, thus providing savings for other public programs. After that, schools would receive more as the amounts for state debt payments decrease significantly.
A YES Vote Means:
State personal income tax rates would increase for 12 years. The additional revenues would be used for schools, child care, preschool, and state debt payments.
A NO Vote Means:
State personal income tax rates would remain at their current levels. No additional funding would be available for schools, child care, preschool, and state debt payments.
Supporters Say:
- Prop 38 makes schools a priority again, guaranteeing funding to restore a well-rounded education.
- School districts could use the funds in different ways at different schools—expenditures would be determined locally.
Opponents Say:
- Taxpayers would be locked into higher taxes until 2024, with virtually no accountability as to how the money is spent.
- Under Prop 38, there are no requirements to improve school performance or get rid of bad teachers.
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Measure Rejected
Voted on November 6, 2012
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