CEO’s note
by Vernon M. Billy
Practicality and principle
n his final presidential address, Abraham Lincoln told the nation, “Important principles may and must be inflexible.” As a man who had recently led America through the most searing conflict in its history, Lincoln knew that maintaining core values requires constant vigilance. He also realized that the occasional lapse, the seemingly innocuous exception, can devolve into a habit that deprives a man, a community or a country of its integrity.
Our dedication to Prop 98 during the 2024–25 budget process epitomizes this idea. Over the last 10 months, our commitment was sorely tested by a series of attempts to undermine both the law and the State Constitution. Yet, we held firm through contentious negotiations and, in the end, preserved the sanctity of Prop 98 and protected it for future generations of students. This was a great victory, one that many doubted was possible and one that was aided greatly by the advocacy of CSBA members who prevailed upon Gov. Gavin Newsom and the Legislature to protect Prop 98.
I’m grateful the membership rallied when called upon and upset that it was necessary in the first place. But our hand was forced from the very beginning of the year when the Governor unveiled his January Budget Proposal. On the surface, the proposal was good for TK-14 schools. It was widely hailed by the media and even appeared promising to us at first glance, but when you peeled back the top layer of the onion, the Governor’s budget revealed an ominous surprise.
To address a funding shortfall in the 2022–23 fiscal year, the Governor proposed a new maneuver to fully fund Prop 98 in the prior fiscal year by borrowing money from non-Prop 98 sources and pledging to repay the money over a five-year period. Crucially, the Newsom Administration would have scored $8 billion in 2022–23 funding — which was already given to schools — as non-Prop 98 money, meaning it would not count toward the Prop 98 Guarantee in future years.
While this maneuver would have prevented deep cuts to education in the current fiscal year, it also would have lowered the minimum Prop 98 funding guarantee for TK-12 permanently, resulting in lower funding in the future. Because the Prop 98 funding guarantee is dependent on prior year funding levels, lowering Prop 98 in one year is not an isolated event, instead, it results in ongoing and potentially permanent reductions to public education funding. Initial estimates placed this funding loss between $12 and $15 billion over the three-year budget period from 2022–23 to 2024–25 — vastly outweighing the short-term gains of manipulating Prop 98. And to make matters worse, our attorneys determined this tactic was also a violation of the California Constitution.
CSBA asked the Legislature to reject the proposed funding maneuver and ensure any efforts to reduce or alter education funding were in alignment with the statutory and constitutional provisions of Prop 98. This advocacy came against a backdrop of concerning financial trends for schools that included a gigantic state budget deficit, the pending expiration of pandemic relief funding and declining enrollment.
When the Governor unveiled his May Budget Revision, we were dismayed to see he not only retained the suspect Prop 98 maneuver, but also invested another $800 million in this gambit, bringing the total funding reclassified as non-education spending to $8.8 billion. In response, CSBA President Albert Gonzalez released a statement decrying the proposal. “This accounting gimmick would lower the baseline for calculating education funding in subsequent years, subjecting California schools to lower revenue for the foreseeable future,” Gonzalez said. “This sets a terrible precedent that potentially destabilizes education funding and undermines the voters’ intent when they passed Proposition 98 more than 35 years ago.”
Others in the education community struck a more conciliatory stance, suggesting the budget was as good as we could expect given the massive deficit. CSBA wasn’t satisfied with that perspective. Instead of lying down, we intensified our advocacy through conversations with the Legislature and administration about the harmful nature of the Prop 98 manipulation to future year school funding, while our Legal team detailed the unconstitutional nature of the proposal in a webinar, “May Revise: Prop 98 Under Siege.” We produced a sample resolution for boards to adopt, talking points for members to press the case, a presentation to explain the budget to their community, engaged our Delegates at the May Delegate Assembly meeting and launched an action alert that allowed members to contact the Governor and Legislature and urge them to reject the Prop 98 maneuver. I even recorded a video urging members to express their outrage about the Prop 98 manipulation. That’s not something I normally do, but this wasn’t a conventional situation, and it required an extraordinary response.
On May 28, our defense of Prop 98 paid substantial dividends when the administration revealed changes to the funding maneuver that incorporated many of the requests made by CSBA and our members. It wasn’t a perfect solution, as the final agreement maintained a narrow maneuver that would allow the state to reduce the minimum funding guarantee after the fact in years with a delayed tax return filing deadline. This maneuver applies to rare scenarios and is much less likely to be employed than the versions included in 2024 budget proposals. But since any violation of Prop 98 leads us down a slippery slope, we are considering litigation to overturn the statute. That aside, there’s no question that, thanks in large part to CSBA’s efforts, the final budget agreement does a vastly better job of safeguarding Prop 98 and represents a massive improvement from where we began in January.
By doing away with the proposal to reclassify $8.8 billion in Prop 98 funding as non-Prop 98 money, the administration proposed several changes intended to keep Prop 98 whole and maintain public education funding at current levels. Specifically, they decided against reclassifying $6.2 billion in Prop 98 funding as non-Prop 98 funding, thereby maintaining the floor for Prop 98 and protecting education funding in the outyears. The administration also opted to suspend Prop 98 in the 2023–24 fiscal year, creating $4.2 billion in maintenance factor (debt to be repaid to public education), utilized three year-over-year deferrals — each less than $3 billion, and exhausted the Prop 98 Reserve to mitigate cuts to education in the current fiscal year.
These wins reflect CSBA’s advocacy and insistence that the budget agreement adhere to the Constitution. Although not perfect, it includes components that ensure the principles of Prop 98 remain and offers a better alternative to a permanent reduction in public education funding. Of course, CSBA did not take Prop 98 suspension lightly, but considered it preferable to alternatives that would undermine the integrity of the law and set the precedent of subverting Prop 98 whenever the Governor or Legislature deem it convenient. It was a matter of both practicality and principle, and our devotion, or “inflexibility” in Lincoln’s terms, was essential to protecting Prop 98 and preserving the foundation of California’s school funding system.