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Proposition 55: Tax Extension to Fund Education and Healthcare. Constitutional Amendment.

The California Labor Federation supports this measure. Want to learn more? Steve Smith discusses how “Prop 55 Prevents School Cuts, Keeps California Moving in Right Direction” in California Labor’s 2016 Top Props Series. Check it out here.

vote-yes

Click here to download California Labor’s 2016 Endorsements & Ballot Measures Analyses

A YES vote on this measure means:

The temporary personal income tax increases enacted in 2012 will be extended for twelve years and revenue  will be allocated to K-12 schools, community colleges and healthcare services.

A NO vote on this measure means:

The temporary sales and personal income tax increases enacted in 2012 will not be extended and both will expire by 2018.

Official Secretary of State Ballot Summary:   

  • Extends by twelve years the temporary personal income tax increases enacted in 2012 on earnings over $250,000 (for single filers; over $500,000 for joint filers; over $340,000 for heads of household).
  • Allocates these tax revenues 89% to K-12 schools and 11% to California Community Colleges.
  • Allocates up to $2 billion per year in certain years for healthcare programs.
  • Bars use of education revenues for administrative costs, but provides local school governing boards’ discretion to decide, in open meetings and subject to annual audit, how revenues are to be spent.

Background:

In 2012 voters approved Proposition 30 which imposed a temporary increase in the sales tax and in the personal income tax on high-income individuals. The revenues from the taxes were allocated with the formula of 89% to K-12 education and 11% to community colleges. Proposition 30 specified that the sales tax increase would sunset in 2016 and the personal income tax would sunset in 2018.

During the recession, California made $56 billion in cuts to the state budget, including $20 billion in cuts to public schools. During the same period, California schools lost more than 30,000 certificated employees. The passage of Proposition 30 prevented further cuts, estimated at $6 billion, from education in the state budget that year. A report by the California Budget & Policy Center estimates that since the passage of Proposition 30, California’s spending per K-12 student has increased significantly, relative to the rest of the US, closing the spending gap between California and other states. California is spending an estimated $1,800 more per K-12 student in 2014-15 than in 2012- 13. As a result, California ranked 29th nationally in spending per student in 2014-15, an improvement from the state’s ranking of 42nd nationally in 2012. However, California’s ranking likely would be lower if the state’s high cost of living were taken into account. Education Week’s annual rating, which takes into account regional costs of living, ranks California at 46th among states for per-pupil spending.

The Proposition 30 personal income tax increases expire at the end of 2018, halfway through the state’s fiscal year. According to estimates, the expiration will leave a permanent gap in state General Fund revenues of an estimated $4.9 billion in 2018-19 and increasing to a gap of $8.5 billion in 2019-20, with annual revenue losses continuing indefinitely.

This initiative would amend the state Constitution to extend the Proposition 30 tax increase on high-income Californians, but would not extend the temporary sales tax increase. It would allocate revenue to education by public schools and bar the use of funds for school administration costs.  It also allocates a certain amount to children’s public healthcare programs. The initiative also specifies that revenues from the income tax increase would be eligible for deposit in the state’s rainy day fund, and is not exempt from diversion.

Legislative Analyst and Director of Finance estimate of fiscal impact: 

Increased state revenues annually from 2019 through 2030—likely in the $5 billion to $11 billion range initially—with amounts varying based on stock market and economic trends. Increased revenues would be allocated under constitutional formulas to schools and community colleges, budget reserves and debt payments, and health programs, with remaining funds available for these or other state purposes.

Support and Opposition:

Supporters, including the California Federation of Teachers, California School Employees Association and many others, argue that while Prop 30 has been a major success, public education in California is still seriously underfunded. The state ranks near the bottom in of the nation in per-pupil spending, class-size average and per-student ratio in nurses, librarians and counselors. They argue that California students, schools and colleges can’t afford to go back to the days of massive teacher layoffs, larger class sizes, and cuts to programs like art and music and that we should protect schools and vital services, like health care for children, from cuts.

Opponents, mainly the California Chamber of Commerce, argue that the Proposition 30 tax increases were intended to be temporary, and this initiative makes them virtually permanent, even when the budget is balanced. The argue that the extension of the personal income tax will hurt small businesses of under 100 employees because the owners of those businesses file personal, not corporate, income tax. These small business owners will bear the brunt of the tax, even though the state budget is currently balanced.

Prior Positions:

The Labor Federation supported Proposition 30 that originally imposed the income and sales tax increase approved by voters in 2012.


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