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Election 2012: State Proposition Guide

Produced by KQED News and The California Report

Proposition 38

Molly Munger's Tax Increases for Early Education and K-12

Paula Bronstein/Getty Images

At a Glance

  • Proposition 38 increases income tax rates on almost all Californians until 2025.
  • The money would go to K-12 public schools and early education programs, on top of school funding guaranteed by state law. For the first four years, revenues would also help pay down California's debt.
  • Prop. 38 isn't tied to this year's state budget, so if this measure passes with more votes than Prop, 30, it will trigger $5.9 billion in cuts to education and public safety programs.
  • Budget Impact: The Legislative Analyst's Office estimates Prop. 38 would bring in about $10 billion annually in increased taxes. During the initial four years, about $6 billion would be used for schools, $1 billion for early education programs and $3 billion for debt payments.

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One of two income tax propositions on this year's ballot, Proposition 38 increases tax rates on most Californians from 2013 through 2024, to fund public education and pay down the state debt.

Because Prop. 38 isn't tied to this year's state budget, if it passes with more votes than Prop. 30, education and public safety programs would still lose $5.9 billion between now and next July. That's because state legislatures included "trigger cuts" to trim the budget if Prop. 30 fails.

What Prop. 38 Changes

Here's the breakdown of the tax increases:

Single filer's annual taxable income Joint filers' annual taxable income Tax increase under Prop. 38
$0 – $7,316 $0 – $14,632 0%
7,316 – 17,346 14,632 – 34,692 0.4
17,346 – 27,377 34,692 – 54,754 0.7
27,377 – 38,004 54,754 – 76,008 1.1
38,004 – 48,029 76,008 – 96,058 1.4
48,029 – 100,000 96,058 – 200,000 1.6
100,000 – 250,000 200,000 – 500,000 1.8
200,000 – 500,000 500,000 – 1,000,000 1.9
500,000 – 1,000,000 1,000,000 – 2,000,000 2
1,000,000 – 2,500,000 2,000,000 – 5,000,000 2.1
More than 2,500,000 More than 5,000,000 2.2
Where Does the Money Go

The Legislative Analyst's Office estimates the measure would raise $10 billion for next year's state budget. During the first four years, 60 percent of revenues would go to K-12 schools, 30 percent to repaying state debt and 10 percent to early childhood education. Beginning in fiscal year 2018, the funding would shift: 85 percent of revenues would go to K-12 schools and 15 percent to early childhood programs.

These revenues would be added to the money K-12 schools already receive from the state's general fund.

How Schools Can Use the Money

Right now, district school boards decide how to spend most of the money they get. Prop 38 has strict rules on how school districts can spend the money, with specific amounts designated for technology and low-income students, for example. None of the Prop. 38 funding could be spent on salaries or pensions. Prop. 30 designates the new tax money for classroom spending only, with none to be spent on administration.

What Happens if Proposition 30 and 38 Both Pass

The state constitution says when income tax measures conflict, the one with the most votes prevails. So if Prop. 38 passes with more votes, income tax rates would increase according to Prop. 38 and, without Prop. 30, automatic budget cuts would be triggered. The Franchise Tax Board or courts would then have to step in to decide whether Prop. 30's sales tax or guarantee of realignment funding would still take effect.

Arguments For and Against:

Supporters say...

the measure guarantees additional funding for education outside of the general fund.

Lawyer Molly Munger is the main supporter and funder of Prop. 38. By late September she had spent almost $30 million on the proposition. The California State Parent Teacher Association supports Prop. 38. Most supporters of Prop. 30, such as the California Democratic Party and teachers' unions, have not taken a stand on Prop. 38.

Opponents say...

the measure is a huge tax hike for middle-income taxpayers and small businesses, whose owners pay income taxes as individuals instead of as corporations.

The California Business PAC, sponsored by the California Chamber of Commerce, is one of the few donors against the measure, as of mid-September. The California State Sheriffs' Association is also opposed.