PROP 98 IS TESTED AGAIN: In the tug of war over state's deficit, Schwarzenegger would like to suspend it. The California Teacher's Assn. wants reassurances.

By Eric Bailey | From the Los Angeles Times

July 17, 2009 -- Reporting from Sacramento — For years it has been this government town's equivalent of a stone fortress, a bastion of public policy under the watchful eye of a potent political army.

But this summer, Proposition 98, the law that guarantees public schools roughly 40% of general fund revenue, is being tested as it has been only a few times before.

In the final stages of the weeks-long negotiations over the state's $26.3-billion budget gap, what to do about Proposition 98 has emerged among the last, and toughest, issues.

After saying they were close to a deal Wednesday, Gov. Arnold Schwarzenegger and legislative leaders did not meet Thursday, with the governor's spokesman saying the talks were hung up over school funds.

Schwarzenegger has talked of suspending Proposition 98 and has reopened a battle with the law's guardian and protector, the powerful California Teachers Assn. Both sides have waged war over the airwaves for the last week, with dueling TV commercials typically not seen in a nonelection year.

The governor and Republicans have rejected Democratic calls for new taxes on oil or tobacco. With no added taxes, cuts to schools are among the last ways the state can balance its books.

The unpopularity of such cuts guarantees difficult negotiations. But the talks over Proposition 98 have been made even more complex by lingering suspicions each side has of the other's motives.

Democrats concede they can't avoid more cuts to schools, but they want assurances that money being carved from school budgets will be restored in future years as the economy recovers.

The exact amount of cuts from schools is still uncertain, but education officials say there will be more teacher layoffs, more kids stuffed into classes, fewer librarians and counselors and reductions in art, music and gym classes.

"For us, it's been worse than the Great Depression," said Lisa Kaplan, a Sacramento attorney and a trustee at the suburban Natomas Unified School District, which has endured steeper funding cuts than during the early 1930s.

Proposition 98 and Proposition 13 -- one a touchstone for liberals, the other for conservatives -- are the enduring benchmarks of California's initiative wars.

In a state that has seen ballot measures win and lose but mostly disappear from memory like sandcastles in a high tide, "they're the twin pillars of political sanctity," said Dan Schnur, executive director of the Jesse M. Unruh Institute of Politics at USC.

"Propositions 13 and 98 are the two big prizes in a giant political game of capture the flag."

Proposition 13, passed in 1978, restricted property taxes and required a two-thirds vote for tax increases, thereby limiting money for schools and other government programs.

Proposition 98, passed 10 years later, was the response, backed by teachers and education groups. It wrote into the state Constitution a complex formula that sets a floor below which school spending is not allowed to drop.

But unlike Proposition 13, Proposition 98 can be suspended by a two-thirds vote of the Legislature. The state has done so twice during economic slumps: in the early 1990s as California's aerospace industry declined and again earlier this decade as tax revenue tanked after the dot-com bust.

In both of those cases, the suspension came with at least tacit approval from the teachers union, which has deep pockets, a militia of more than 300,000 members to call on and a track record of making or breaking political careers. In the Capitol, the union is among the most effective lobbying forces, a constant presence in every education battle.

"Protecting the integrity of Proposition 98 is definitely a top priority," said Becky Zoglman, a teachers association spokeswoman.

The union's power was on full display after Schwarzenegger negotiated the last suspension of Proposition 98 during the down economy of 2004.

At the time, negotiators refrained from even calling the move a suspension for fear of riling the union. Instead, they dubbed it "rebenching."

"Around here, suspension is a dirty word," said John Mockler, the longtime education consultant who wrote Proposition 98. "People just get into the spin and avoid telling the truth. They know it's a bad vote. They can slash here and slash there, but can always say they didn't suspend Proposition 98."

The next year, as the economy recovered, the union grumbled that the governor had gone back on his word to restore the cuts, and Schwarzenegger paid. The teachers were a force in defeating ballot measures championed by the governor in 2005. A year later the teachers association won a multibillion-dollar lawsuit settlement requiring the state to pay back education money diverted during the downturn.

This time around, Schwarzenegger has publicly maintained that he wants to ultimately repay schools whatever money they lose during the current economic crisis.

Democrats want payback assurances written into the budget package. They also want guarantees that schools would be repaid if they lost money in future downturns. Schwarzenegger has balked at that.

Education leaders believe they've already paid dearly. In the budget signed by Schwarzenegger in February, they say, 60% of the cuts hit schools. Those reductions amounted to a cut of 12% per pupil, said Robin Swanson, spokeswoman for the Education Coalition, which represents 2.5 million teachers, parents, administrators and school board members. "It's as if they see education funding as a giant piggy bank that they can raid."

Education officials worry that an outright suspension of Proposition 98 could mean deeper reductions if the economy continues to sour.

"It could open up a Pandora's box," said Assemblywoman Julia Brownley (D-Santa Monica).

Republican officials, meanwhile, acknowledge they'd love to see Proposition 98 simply go away, but they understand the political dynamics. Education is a top priority in public opinion polls, and Republicans don't want to be singled out for making cuts. Nor do they want to take on the union.

But they also sense a potential opening.

"The CTA is doing what they always do, protecting a two-decade-old political investment and franchise," said Rob Stutzman, a GOP consultant.

Tampering with Proposition 98 over the teachers association's objection "would set a dangerous precedent," he added. "But the sands are shifting on them. Sooner or later, CTA is going to lose one of these Prop. 98 fights."