January 2019

Proposition 98 Overview

Tracking Changes in Proposition 98 Funding

(Dollars in Millions)

  2017-18   2018-19
  June 2018 Estimate January 2019 Estimate Change   June 2018 Estimate January 2019 Estimate Change
Minimum Guarantee              
General Fund $53,381 $52,843 -$538   $54,870 $54,028 -$842
Local property tax 22,236 22,610 374   23,523 23,839 316
   Total $75,618 $75,453 -$164   $78,393 $77,867 -$526
General Fund above guarantee $0 $44 $44   $0 $0 $0
Settle-up payment for LCFF 0 0 0   0 475 475
   Total Funding $75,618 $75,498 -$120   $78,393 $78,342 -$50
               
Key Inputs              
Operative "test" 2  1 —   2 3 —
K-12 attendance change 0.01% -0.13% -0.14%   -0.29% -0.33% -0.04%
Maintenance factor payment $1,325  $1,201 -$124   $0 $0 $0
               
Notes:              
Attendance: For purposes of calculating the minimum guarantee, the State Constitution has a two-year hold harmless provision related to drops in student attendance. Specifically, a decline in attendance is deemed to be zero if it occurs within two years of an attendance increase. Although attendance has been declining for several years, the June budget plan assumed that attendance would increase in 2017-18—effectively zeroing out the attendance decline projected for 2018-19. By contrast, the Governor's budget incorporates recent data showing an attendance decline in 2017-18. This decline makes the two-year hold harmless provision inoperative and results in a lower guarantee both years.
Maintenance Factor: After the adoption of the June 2018 budget plan, the state completed a process to true up its previous calculations of the minimum guarantee from 2009-10 through 2016-17. These true-up adjustments showed that the state did not create as much maintenance factor in those years as it previously estimated. The effect of these adjustments—reflected in the Governor's budget—is to reduce the maintenance factor payment required in 2017-18 by $124 million.
True-Up Account: The 2018-19 budget plan created the Proposition 98 true-up account to adjust school funding automatically when the minimum guarantee drops relative to previous estimates. The Governor's budget proposes to rescind the true-up account and address each year differently. For 2017-18, the budget proposes to leave General Fund spending $44 million above the revised estimate of the guarantee. For 2018-19, the budget proposes to reclassify $475 million in spending above the guarantee as a settle-up payment. From an accounting perspective, this settle-up payment is attributable mostly to 2009-10—a year in which the guarantee ultimately was higher than the appropriated amount for that year. Upon making this payment, the state would eliminate all outstanding settle-up.
LCFF = Local Control Funding Formula.