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Description: Compared to the Governor’s budget, we estimate less General fund revenue in both the current and budget years. Given the particular formulas that drive Proposition 98, our revenue estimates result in a higher minimum guarantee in 2007-08. This counterintuitive result means the Legislature is likely to face more challenging trade-offs in its budget deliberations. In this section, we also (1) provide an update on outstanding Proposition 98 “settle-up” obligations, (2) describe the effect of a declining K-12 student population on the Proposition 98 minimum guarantee, and (3) discuss factors that might lead to the Proposition 98 Test 1 factor becoming operative in the near future.