Ad argues to continue temporary tax increase passed in 2012

Proponents of a ballot measure to extend what voters were told would be temporary higher taxes in California correctly state that schools will benefit from Proposition 55. But the ad’s warning of $4 billion in cuts if the measure does not pass rel
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Proponents of a ballot measure to extend what voters were told would be temporary higher taxes in California correctly state that schools will benefit from Proposition 55. But the ad’s warning of $4 billion in cuts if the measure does not pass rel
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Capitol Alert

Is tax extension needed to prevent $4 billion in school cuts?

By David Siders

dsiders@sacbee.com

September 06, 2016 02:41 PM

Proponents of a ballot measure to extend higher taxes in California are running a TV ad arguing that the measure is necessary to avoid significant school funding cuts.

The ad correctly states that schools will benefit from Proposition 55 – money that could help avoid school funding reductions in future years. But the ad’s warning of $4 billion in cuts if the measure does not pass relies on an optimistic assumption of how much money the tax will raise, as well as an overly simplistic characterization of school funding estimates.

Text

It wasn’t that long ago. Years of devastating cutbacks to our schools. Thirty thousand teachers laid off. Class sizes increased. Art and music programs cut. We can’t ever go back.

So vote ‘Yes’ on Proposition 55.

Prop. 55 prevents $4 billion in new cuts to our schools.

Simply by maintaining the current tax rate on the wealthiest Californians.

No new education cuts, and no new taxes.

Vote “Yes” on 55. To help our children thrive.

Analysis

Proponents of Proposition 30 – the tax increases voters approved in 2012 – said four years ago that the higher taxes would be temporary. Now proponents of Proposition 55 want to extend one of the tax increases, pointing to the severity of spending cuts to education during the last recession.

Proposition 55 would extend by 12 years temporary personal income tax increases on earnings over $250,000 for single filers, raising an estimated $4 billion to $9 billion annually, according to the nonpartisan Legislative Analyst’s Office.

Roughly half of that amount would go to K-12 schools and community colleges, according to the LAO, while health care for poor people, budget reserves and debt payments would receive up to about $3.5 billion a year depending on the economy.

But the ad’s claim that the measure will prevent $4 billion in cuts to schools relies on an optimistic assumption about how much money Proposition 55 will raise.

If roughly half of revenue goes to K-12 schools and community colleges, as the LAO estimates, schools would receive $2 billion to $4.5 billion annually under the measure. Only in good economic years would that revenue amount to $4 billion or more.

In addition, the ad’s characterization of the tax extension as a choice between increased funding and $4 billion in cuts to schools is overly simplistic.

According to Department of Finance estimates, the state is projected to spend about $4 billion more than it generates in revenue in the 2019-2020 budget year unless it takes “corrective action.” In addition, the administration estimates that without the tax extension, money owed but not paid to schools under the state’s school funding guarantee will grow to about $3.8 billion by 2020.

But even if Proposition 55 fails, school funding is still projected to increase – not decrease – in future years. If the state budget falls into imbalance, it could take “corrective action” other than school funding cuts to generate additional revenue or reduce spending.

PoliGRAPH is The Bee’s political fact checker, rating campaign advertisements and candidate claims as True, Iffy or False.

David Siders: 916-321-1215, @davidsiders