State Budget Accord Surfaces

Sacramento, CA—Outlines surfaced this week in Sacramento, including an alternative to the governor’s controversial “funding maneuver” and governor’s K-12 education program funding proposals.

Proposition 98 “Funding Maneuver” Context

In January, Governor Newsom proposed a controversial “funding maneuver” to address the fact that the state appropriated billions of dollars for K-14 education in the 2022-23 fiscal year that was above-and-beyond the minimum funding floor mandated by the California Constitution.

The constitutional funding floor, known as the Proposition 98 Guarantee, is based on three formulas and dictates the minimum level of funding that the state must spend from its General Fund in a given year on K-14 education. Of late, the Guarantee has been determined under the first of the three tests (“Test One”) which calls for approximately 39 percent of state General Fund revenues to be the funding floor for K-14 education, plus the K-14 share of local property tax revenues.

While the Guarantee mandates a funding “floor,” the state generally seeks to also treat it as a de-facto “ceiling” because each year’s funding level, if above the “floor,” becomes the base for the following year. If the state over-appropriates the Guarantee, it can be “on the hook” to continue that over-appropriation indefinitely in future years.

The Constitution allows the legislature to suspend the Guarantee, but such action requires a two-thirds majority vote and has occurred only a few times since Proposition 98 was enacted in 1988. If the Guarantee is suspended and funded below its formula level, the Constitution mandates...

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