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California Proposition 30Research Paper

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Proposition 30

Description of Issue and Conflicting Policy -- the State of California has had a crisis in budget for the last several years. From the 2008 budget term, the crisis was expected to top over $40 billion in shortfalls by 2010-2011. Despite spending cuts and changes to state employee compensation programs, as well as drastic increases in tuition costs for state tuition, the cuts have hurt the State's social programs, especially education (State of California Department of Finance). Most agree that the major source of the deficit was a $15 billion decline in state tax revenue from 2007 to 2008. Other contributing factors included the continuous growth rate of salaries and benefits of California State employees during boom times, a supermajority requirement for certain legislation that tends to bog down the system, and the out-migration of a number of corporations to states with more business-friendly tax programs (Matthews; Peele).

One of the hardest hit areas in the budget was education. Not only were tuitions raised dramatically for higher education, the State Superintendent of Instruction noted that the public school system is in a state of financial emergency. There are increasing numbers of students, but budget freezes makes educational spending per student one of the lowest in the nation (California is now 47th in the nation for spending per student). Since 2009, over $18 billion has been cut from California's K-12 system, resulting in teacher and staff layoffs, increased class sizes, shortened school terms, and reduced or eliminated humanities (music, art. Etc.) programs. Citizens are quite concerned about this since almost 60% of schools have cut educational materials, 50% nursing and counseling, almost 40% have increased class sizes, and with current levels of funding, 16% of California's Public Schools will be insolvent by 2013-14. To make matters worse, schools serving low-income areas have a higher turn-over, higher inexperienced teachers, and a higher lay off rate. Fewer people are seeking teacher certification, there is no money for professional development programs, which will, over time continue to reduce standards for graduating in a California school and appropriate preparation for College (Brown).

Part 2- Analysis of Proposal -- Governor Jerry Brown understands that continued cuts can be catastrophic for California. Not only is the education system in emergency mode, the California economy must reinvest in roads, bridges, communications system, and clean energy. The State needs money to make payment to ensure a prosperous economy -- with the conservative and liberal debate centered on spending. Conservatives are opposed to new tax initiatives, despite research that shows prosperity is linked to a well-functioning infrastructure and a viable educational system (Campbell). Still, Brown cannot allow the State to lapse into bankruptcy, and has therefore lobbied for initiatives to support funding of needed programs. He believes adding $8.5 billion to the new fiscal year is well worth increasing the sales tax by 1/4 of 1 cent and boosting income tax on those earning in excess of 1/4 million dollars. "Our State budget problem was built up over a decade, and it won't be fixed overnight. These temporary increases will ensure funding for our schools until the economy improves" (Lin). Nevertheless, Brown remains adamant -- if the initiatives needed for revenue are not passed on the November ballot there will be $6 billion in additional cuts. Republicans counter with accusations that the budget is not a true picture of the economy and that even when revenues are up, cuts are being made (Lin).

The proposed solution for these issues is California Proposition 30, the Temporary Taxes to Fund Education program. This is a ballot measure that was decided at the November 6, 2012 election designed to increase taxes to prevent $6 billion in cuts to the education budget in the next fiscal year. Governor Brown led the impetus for the Proposition, combining two formerly competing programs, the "Millionaire's Tax," and "Brown's First Tax Proposal." This was also based on agreement with the California Federation of Teachers, the state's second-largest teacher's union (Marois and Nash).

Essentially, Proposition 30 has three major sections that will impact California voters:

1. California sales tax will move to 7.5%, 0.25% more than Brown's original plan and 3.45% more than current law.

2. The Proposition would create four new high-income tax brackets with taxable income over $250,000, $300,000, $500,000 and $1,000,000. This tax increase would last for seven years.

a. Incomes between $250,000-$300,000 will move from 9.3% to 10.3%

b. Incomes between $300,000-$500,000 will move from 9.3% to 11.3%

c. Incomes between $500,000-$1,000,000 will move from 9.3% to 12.3%

d. Incomes over $1,000,000 will move from 10.3% to 13.3%

3. The new tax increases will be effective retroactively for all income earned or received since January 1, 2012 (Matthews).

Opposition to the bill comes from Republican legislators, the National Federation of Independent Business, the Howard Jarvis Tax Foundation, and the Small Business Action Committee. These groups believe that the problem with California's spending issues lies more in the way the money is allocated. "From our perspective, the defeat of (Proposition) 30 will hopefully spur the legislature to do what they should have been doing for the last 15 years, which is to prioritize spending and deal with the waste issues, or luxury items, including the high-speed rail, said Jon Coupal, President of the Howard Jarvis Taxpayers Association" (Soley-Cerro).

The two conflicting sides of the argument on Proposition 30 are polarized about spending and fiscal policy, not about education. There is no debate about the overall issue: since 2006 there has been less money coming in from California tax revenues, increasing lower-income populations using social services and the public school system, and a declining and aging infrastructure. Essentially, all States were affected in some way, a combination of issues hit California quite hard. According to the Nonpartisan Legislative Analyst's Office, the economic recovery in California has been far slower than projected. Despite some improvement in export growth and technology, the weak housing market affects the economy and the construction industry, as well as financial services. People are simply spending less, which translates into lower revenues from taxes. It is the combination of deficits, operating shortfalls and additional necessary spending that combined, could equal $13 billion or more. On a positive note, in 2010-2011 the State faced an imbalance that was likely to exceed $20 billion in just the General Fund alone:

… the State faces an ongoing, multibillion dollar annual deficit, even as state revenues expand. Our forecast assumes that many billions of dollars of state budgetary and retirement obligations remain unpaid through at last 2017. if, however, the Legislature and the Governor were to eliminate the state's ongoing annual budget deficit this year or over the course of the next few years, the focus of their efforts could finally shift away from short -- term budget problems and turn to the serious long -- term fiscal issues of the state's accumulated budgetary obligations and unfunded retirement liabilities (Legislative Analyst's Office).

Part 3- Enactment and issues -- for most of the Fall, Governor Brown lobbied hard to make the public understand that he was simply out of options. Opponents accuse him of stalling on the issue with a backup plan if the initiative failed; he replied that he was completely out of options. That no one wanted to enact $6 billion in cuts, but that it was a fiscal necessity. However, California does not have a great record on passing initiatives to increase taxes. The last increase passed by California voters was Proposition 63, the Income Tax Increase for Mental Services. This tax was limited to those earning over $1 million and added a 1% increase to their tax burden to fund mental health services. That law passed by a 54-46% with a great deal of focus spent on the money it took to lobby and promote the Proposition -- almost $5 million (Follow the Money).

Most of the money raised to fund Proposition 30 was given by Teacher's Unions, Hospitals, and Service Employees, as well as the Coca Cola Company. In fact, over $30 million by only 10 supporters of the measure. The top five opponents though, Small Business Action Committees, Americans for Responsible Leadership and a private millionaire, Charles Munger, donated almost triple that (KCET).

Proposition 30 was approved with an almost identical margin as that of the earlier proposition, 54% to 46% with 9,819,385 votes counted. By county, it is interesting to see that the State was polarized by country, with the inland and Northern rural portions of the State voting no, and the highly populated counties and border areas voting yes. (See Figure 1).

Part 4 -- Summary -- Proposition 30 teaches us many things about the political process. First, it shows how both sides of an issue can agree upon the basic issue, but disagree upon the manner of execution -- Proposition 30 was polarized along Party lines from the very beginning. Second, the reality of 21st century spending is that costs have increase, drastically. To fund these increased costs,… [END OF PREVIEW]

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