K thru 12 Education
Proposition 98 Guarantee

A voter-approved constitutional amendment, Proposition 98, guarantees minimum funding levels for K-12 schools and community colleges. The guarantee, which went into effect in the 1988-89 fiscal year, determines funding levels according to a multitude of factors including the level of funding in 1986-87, General Fund revenues, per capita personal income and school attendance growth or decline.

Proposition 98 originally mandated funding at the greater of two calculations or Tests (Test 1 or Test 2). In 1990, Proposition 111 (SCA1) was adopted to allow for a third funding test in low revenue years. As a result, three calculations or tests determine funding for school districts and community colleges (K-14). The calculation or test that is used depends on how the economy and General Fund revenues grow from year to year.


PROPOSITION 98 TEST CALCULATIONS
 Test 1-Percent of General Fund Revenues: Test 1 is based on a percentage or share of General Fund tax revenues. Historically, school districts and community colleges (K-14) received approximately 40 percent in the 1986-87 fiscal year. As a result of the recent shifts in property taxes to K-14 schools from cities, counties, and special districts, the current rate is approximately 40.96 percent.

 Test 2-Adjustments Based on Statewide Income: Test 2 is operative in years with normal to strong General Fund revenue growth. This calculation requires that school districts and community colleges receive at least the same amount of combined state aid and local tax dollars as they received in the prior year; adjusted for enrollment growth and growth in per capita personal income.

 Test 3-Adjustment Based on Available Revenues: Test 3 is used in low revenue years when General Fund revenues decline or grow slowly. During such years, the funding guarantee is adjusted according to available resources. A low revenue year is defined as one in which General Fund revenue growth per capita lags behind per capita personal income growth more than one-half percentage point. Test 3 was designed so that education is treated no worse in low revenue years than other segments of the state budget.

In years following a Test 3 funding level, the state is required to provide funding to restore what was not allocated the previous year. This is often referred to as a maintenance factor.

For fiscal year 2006-07, Proposition 98 funding was $55.1 billion, of which the General Fund share was $41.4 billion. Local property taxes covered the balance. The 2007-08 Proposition 98 funding is estimated to increase to $55.7 billion. The General Fund share in 2007-08 is $40.7 billion which is $1.4 billion lower than the level of Proposition 98 General Fund appropriations included in the 2007 Budget Act. However, recognizing a reduction of that magnitude would be very difficult for schools to absorb mid-year, the Budget proposes to reduce the 2007-08 Proposition 98 appropriations by $400 million. This results in a Proposition 98 Guarantee of $56.7 billion in 2007-08.

The Proposition 98 Guarantee for 2008-09 is projected to grow to $59.7 billion of which $43.6 billion would be from the General Fund. However, as part of the budget-balancing reductions proposed by the Administration, Proposition 98 General Fund will be reduced to $39.6 billion. Thus, the Administration proposes to suspend the Proposition 98 Guarantee and provide $4 billion, or 9.2 percent, less than the Guarantee would have required in 2008-09.

The totals above include funding for K-12, community colleges and other state agencies that serve students. K-12 Proposition 98 per-pupil expenditures in the Governor's Budget are $8,458 in 2008-09, down from $8,558 in 2007-08.
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CHAPTER HIGHLIGHTS for K thru 12 Education Back to Top

 K-12 School Spending and Attendance
image of black pointing arrowProposition 98 Guarantee
 California State Teachers' Retirement System
 Proposed Workload Budget
 Proposed Budget Balancing Reductions
 Other Special Session Issues
 Program Enhancements and Other Budget Adjustments
PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - K thru 12 Education (pdf * - 329K) -
Provides this entire K thru 12 Education Chapter in pdf format.
ADDITIONAL INFORMATION Back to Top
Proposed Budget Detail - K thru 12 Education
Displays Proposed Budget Detail information for K thru 12 Education.