San Francisco Chronicle: Calif. voters face 2 tax measures on ballot
media mentionWyatt Buchanan
Updated 11:30 p.m., Saturday, September 22, 2012
Sacramento —
Californians will decide two tax measures on the November ballot that would have similar impacts on their wallets but vastly different, and in some ways unknowable, effects on the state’s budget and funding for public education.
Proposition 30 and Proposition 38 are competing for voter support: Under the California Constitution, only one of the measures could take effect, even if both were to win approval, because they conflict with each other.
Both ask taxpayers for tens of billions of dollars more, with the wealthiest 1 percent of Californians paying the lion’s share. Both claim they will help public schools, which is by far voters’ top priority according to myriad polls.
But from there they diverge.
Prop. 38 sends its tax dollars directly to K-12 schools. For the first four years of the 12-year tax, it would also provide $1 billion a year for early childhood programs and $3 billion a year for debt obligations to help ease the state’s budget crisis. Afterward, 85 percent of its funds would go to K-12 public schools and 15 percent to early childhood. None would go to the general fund that pays not only for public education, but also for colleges and universities, public health programs, public safety, welfare and prisons.
General fund
Prop. 30 raises its tax dollars to benefit not only public schools, but also other programs paid for by the general fund including public colleges and universities and public safety programs. The measure also would put into the Constitution a provision to dedicate money from the vehicle license fee, about $6 billion a year, to local governments to cover the costs of state programs that have been shifted to their jurisdictions, such as housing inmates in county jails instead of state prisons.
There’s also another big difference between the propositions: trigger cuts, a set of automatic spending cuts built into the state budget this year if voters reject Prop. 30.
Gov. Jerry Brown is the principal proponent of Prop. 30, which has received endorsements and campaign contributions from a number of organizations in the state, including the California Teachers Association and labor unions representing education and public safety, business groups, education leaders and many others.
Trigger cuts
But he also has been criticized for tying his measure to the trigger cuts, which would chop nearly $6 billion from state spending on Jan. 1, mostly from public schools. The result, educators warn, would be an almost immediate 5 percent tuition hike at the California State University system, likely tuition hikes at the University of California, the shortening of the school year by five days in the San Francisco Unified School District and by as much as a month elsewhere, and the possible bankruptcy this spring of City College of San Francisco.
Some say the trigger cuts are an unfair scare tactic that holds voters hostage. Brown says Californians face “a day of reckoning.”
He said he and his wife, Anne Gust Brown, had tried to persuade the wealthy backer of Prop. 38, Molly Munger, to pull her measure from the ballot but she refused.
The Pasadena resident and civil rights attorney is personally paying for the Prop. 38 campaign. Early on she won the backing of the California State PTA, which is the public face of the campaign, and many school districts throughout California have endorsed the measure.
Munger says she was compelled to push her measure after years of watching the state tumble to the bottom of the nationwide ranking of per-pupil spending. When she attended public schools, she said, California was near the top in per-pupil spending and now it’s near the bottom. Prop. 38 would distribute its tax dollars to schools on a per-pupil basis.
Public schools, she says, have reached a breaking point. She said Californians must act now to ensure that young people receive quality education, something she calls a civil rights issue. Her measure ensures that a portion of the revenue would go to schools with low-income students. and for training staff and buying up-to-date technology and teaching materials.
“We’ve got a civil rights problem all right,” she said. “There’s a group of people in California that are suffering from a political consensus of the powers that be that hurts them … and we are all now fighting the battle to get fairness for these kids, and that’s what Prop. 38 is all about.”
With the tax burden of both measures falling largely on Californians who make more than $500,000 per year, deciding how to spend that money is the real difference between the measures, said Meg Wiehe, state tax policy director for the nonprofit and nonpartisan Institute on Taxation and Economic Policy in Durham, N.C.
Different goals
“If I were a Californian, that might be the one question I’m asking myself, ‘Where do I want the money to go?’ ” Wiehe said. “They both have very different end goals with the amount of money raised.”
The measures use similar methods to raise new revenue.
Under Prop. 30, the sales tax would increase by 1 cent for every $4 for four years, an increase that would affect all Californians. Additionally, the personal income tax rate on high earners – starting with individuals who earn more than $250,000 per year and couples who earn more than $500,000 per year – would increase substantially for seven years.
The income tax increase on high earners would make up the bulk of the money raised by the proposition. According to the Legislative Analyst’s Office, Prop. 30 would raise about $6 billion per year, though that would decrease as taxes are phased out.
Estimates from the Department of Finance are higher – as much as $7.6 billion per year – but both projections are subject to considerable uncertainty because of the fluctuations in earnings for those at the top.
Under Prop. 38, revenue would be raised by increasing the personal income tax rate for all but the lowest bracket of earners in the state. However, about 40 percent of people who file tax returns – largely those with a number of tax credits such as the elderly and the poor – would not see any increase in their taxes, according to the Legislative Analyst’s Office.
The measure raises about $10 billion per year for 12 years.
Under both measures, the top 1 percent of earners would bear most of the burden, according to the Institute on Taxation and Economic Policy, which has estimated what the increase will cost people in different income groups.
The analysis found that for people making more than about $530,000 per year, taxes under Prop. 30 would increase by nearly $22,000 annually and under Prop. 38 the annual increase would be about $23,000.
Most votes
If both propositions pass, the measure that receives the most votes will take effect, according to the state Constitution.
If Prop. 30 gets more votes, only its provisions would take effect. If Prop. 38 gets more votes, its income tax hikes would be enacted, but it would probably be up to a court to decide whether other elements of Prop. 30 would be enacted.
Still, the only way to avoid the trigger cuts is for Prop. 30 to take effect, though if Prop. 38 is the choice of voters the Legislature and the governor could rework the budget to account for the increased revenue.
Given the state’s complex rules for funding schools – and the prerogative of the governor and the Legislature to make changes in law affecting the budget – determining whether Prop. 30 or Prop. 38 is better for schools is open to debate, said Jason Sisney, who oversees state and local finances as the deputy legislative analyst in the Legislative Analyst’s Office.
“It is reasonable to say that if you’re only interested in schools, and you’re interested in what effects the ballot would have on schools, schools will likely be better off if one of the measures passes than if neither of them passes,” Sisney said.
What’s the difference?
Prop. 30
— Raises income tax for anyone earning more than $250,000 a year
— Raises state sales tax by 1 cent for every $4 spent
— Sales tax expires after four years; income tax expires after seven years
— Prevents trigger cuts
— Funds K-12, colleges and universities, and other programs
Prop. 38
— Raises income tax for anyone earning more than $17,000 a year
— Does not raise the state sales tax
— Income tax expires after
12 years
— Does not prevent trigger cuts
— Funds K-12 and early childhood education
Wyatt Buchanan is a San Francisco Chronicle staff writer. E-mail: [email protected]