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Understanding the Proposition 98 Consequence the Failure of the 2008-09 Cuts

Essentially, we're currently in a Proposition 98 Test 1 year, which provides a fixed percentage of state general fund money to K-12 and community colleges. With the redevelopment shift before the year ended, a smaller fixed percentage would have been required, which would have kept Proposition 98 in Test 1 year in 2008-09. Without it, there is a likelihood that Proposition 98 is actually Test 3, or the change in K-12 enrollment and per capita general fund.

While the actual "Tests" wouldn't generate significantly different guarantee, Test 3 provides a "maintenance factor" while Test 1 does not. A maintenance factor is meant to be provided when actual Proposition 98 funding lags per capita personal income growth (Test 2). This was the issue in Proposition 1B on the May 19 ballot, and the Education Coalition has threatened to sue to get a court to say that Proposition 98 intended to have a maintenance factor created under Test 1. The prospect of such a lawsuit is unclear, particularly after the voters said "no, thank you."While there has been talk of providing K-14 that "maintenance factor" as a matter of policy, and the Conference Committee budget includes statutory language to enable that, moving K-14 to Test 3 in 2008-09 would guarantee it, and the repayment would be "required" beginning 2009-10 rather than 2011-12, as provided in the Conference Committee budget. The repayment is believed to be $3.6 billion in 2009-10, which is obviously problematic given a shortfall already estimated at $24 billion. On a two-thirds vote, the Legislature can essentially delay it, which opens up the can of worms of a Proposition 98 suspension, where there is no floor.