“I want to be clear — our lawsuit is not to blow up the whole education budget. We are focused on one issue in a 200-plus page budget that opens the door for further manipulation of Proposition 98,” said CSBA CEO & Executive Director Vernon M. Billy in a special CSBA webinar covering the lawsuit. “The voters intended for Prop 98 to provide an objectively determined minimum level of education spending each year that would essentially insulate schools from arbitrary manipulation. CSBA’s focus, now and in the future, is to ensure the integrity of Prop 98 and that schools in the state receive the resources they are guaranteed by this initiative.”
Prop 98 provides a set of formulas used to determine the minimum level of educational funding California must provide each year. This minimum level — typically called the minimum funding guarantee (guarantee) — is determined by one of three formulas, or “tests.” Test 1 calculates the guarantee as a percentage of the state general fund, while Tests 2 and 3 require the guarantee to mirror the prior-year funding actually allocated to local educational agencies — whether at or above the prior year’s guarantee — plus increases to account for inflation, average daily attendance and other factors. Generally speaking, Test 2 or 3 result in higher levels of funding than Test 1, and therefore those tests determine the guarantee. However, because Tests 2 and 3 are based in part on that funding, any decrease to prior-year funding permanently reduces the guarantee in all future years. Because of this, the integrity of Prop 98, and the tests’ calculation, are vigorously defended by CSBA.
CSBA’s lawsuit primarily challenges subdivision (d) of Education Code Section 41206.4 (Section 41206.4), which was passed as part of the 2024 Education Omnibus Budget Trailer Bill. When tax collections are delayed and the state distributes Prop 98 funding based on its own estimates instead of confirmed tax receipts, EC 41206.4 directs the state to exclude any allotment over the guarantee from future years’ Prop 98 calculations if it later discovers that the distribution provided to schools exceeded the guarantee for that fiscal year.
While this may seem minor, CSBA believes that this subdivision impermissibly alters the application of Tests 2 and 3 by excluding funding actually allocated to LEAs. This is directly contrary to the constitutional language of Prop 98, which requires that “total allocations” be included when calculating Tests 2 and 3. In doing so, EC 41206.04 effectively limits future-year funding levels by ensuring that the amount calculated by these two tests will be artificially low, establishing a lower baseline and potentially lowering funding for schools indefinitely. Because of this, CSBA believes this subdivision contradicts both the plain language and intent of Prop 98 and the California Constitution and should therefore be declared invalid and the director of the Department of Finance ordered to calculate the guarantee by including all funding actually allocated to LEAs.
“This is a very narrow lawsuit on a very narrow piece of law, but it has the opportunity for expansion and that is one of the reasons we took this action,” explained Lindgren-Bruzzone. “We view this as an encroachment on Prop 98. We believe in maintaining the integrity of Prop 98 and any unconstitutional encroachment on that is something we will take on. Challenging it may discourage the state from trying to make these incremental changes that might not seem that problematic, as they are limited to certain circumstances, but continually chip away at Prop 98. We see ourselves as the bulwark against unconstitutional change.”
CSBA will continue to update its membership on the status of the lawsuit as well as its defense of Prop 98 and education funding.