JUDGE OKs PROP 98 SHELL GAME: More manipulations if November tax fails

By John Fensterwald - Educated Guess |  http://bit.ly/MjCmaP

6/08/12  ::  A Superior Court judge last week lopped a limb off Proposition 98. Fans of Monty Python might have been amused; school districts will not be.

The three-paragraph ruling by San Francisco Superior Court Judge Harold Kahn simply reaffirmed a tentative ruling he issued in March. Back then he ruled that nothing prevents the governor and Legislature from shifting money out of the General Fund, even if that in turn leads to less funding for K-12 schools and community colleges under Proposition 98, the law setting minimum funding for schools.

The loss is significant. As part of the 2011-12 state budget, Gov. Jerry Brown transferred about $5 billion in sales tax and vehicle license fee revenues to a special fund as part of his shifting of state safety and social services to counties and cities. Had the money stayed in the General Fund, roughly 40 percent, or $2.1 billion, would have gone to the Proposition 98 guarantee.

The California School Boards Association, the Association of California School Administrators, and three school districts sued, claiming that was an illegal diversion of money owed schools. Their attorneys argued that voters passed Proposition 98 in 1988 to prevent manipulation of minimum dollars owed schools. Legislators could suspend the minimum obligation with a two-thirds vote, while acknowledging that the money owed had to be restored over time. They didn’t do this. Or, if they still wanted to set up a special fund outside of the General Fund, they could pay a higher percentage to schools of a diminished General Fund. Lawmakers didn’t do this either.

Kahn didn’t put enough in writing to fathom his thinking, but during oral arguments in March he implied that if drafters of Prop 98 had wanted to prevent the siphoning of money through special funds, they would have put it into the initiative. Lawyers for the plaintiffs argued that the intent of voters was clear: a minimum funding level that shouldn’t be tampered with.

ACSA and the CSBA haven’t decided whether to appeal Kahn’s ruling. Superior Court decisions are not cited by other courts as precedent-setting decisions, so there’s always a gamble going to the Court of Appeals. Meanwhile, Brown plans further tampering with Prop 98 if his tax initiative fails in November. He is proposing to stuff $2.6 billion in school construction bond payments, which had been funded as part of the non-Prop-98 part of the General Fund, into Prop 98. In effect, that would create a cut in funding for schools.

Though the circumstances are different, Kahn’s ruling will encourage these types of manipulations.