California schools dodged a major budget threat this week as voters chose to make permanent a tax on high earners that has helped fund K-12 education for more than a decade.
Proposition 3, backed heavily by the state’s largest teachers union, passed with roughly 59% approval. The measure locks in an income tax surcharge on wealthy Californians that otherwise was set to expire in 2031. Voters first approved the tax in 2012 and renewed it in 2016, but without Tuesday’s vote, schools would have faced losing billions of dollars in annual funding just as that sunset date approached.
For education advocates across the state, including those in the Inland Empire where school districts have long grappled with funding gaps, the outcome offered a sense of relief.
“Voters reaffirmed how important it is to keep investing in public education,” said Debra Schade, president of the California School Boards Association and a board member for the Solana Beach school district near San Diego. “California students deserve that.”
Since it first took effect, the tax has generated between $5 billion and $15 billion a year, accounting for as much as 15% of total school funding statewide. Had voters rejected the extension, schools would have begun losing that revenue in 2031, likely triggering painful budget cuts in districts already stretched thin.
The California Teachers Association poured nearly $60 million into the campaign and mobilized members to knock on more than 200,000 doors statewide. Union president David Goldberg called the measure essential to protecting both school budgets and teaching jobs.
Speaking Tuesday night, Goldberg said he was pleased, though not shocked, by the result.
“In practical terms, this means we’ll have stable funding for schools, and students won’t have to worry about losing their teachers,” Goldberg said. “On a deeper level, it shows Californians are willing to stand behind public education.”
The tax applies to individuals earning more than $371,000 annually or couples earning above $743,000. With Proposition 3’s passage, those top earners will continue paying a 12.3% income tax rate — among the highest in the nation.
A Bait and Switch?
Critics of the measure argue California cannot keep relying indefinitely on taxing its wealthiest residents, warning that many could simply relocate to lower-tax states, eroding the very revenue the measure is meant to protect. Roughly 200 of those high earners could also face an additional one-time 5% tax if voters separately approve Proposition 40, a billionaire tax measure also on this year’s ballot.
Opponents say the original tax was pitched as a temporary fix to help schools survive the Great Recession, and that making it permanent breaks that promise. They also question whether the tax is still needed, pointing to years of declining student enrollment alongside rising state education spending.
Revenue from the tax flows into the state’s Proposition 98 formula, which guarantees that roughly 40% of general fund revenue goes toward education. Of that money, about 89% supports K-12 schools, while 11% goes to community colleges. Any surplus generated by the tax is funneled into a state reserve account.
Rising Costs, Shrinking Enrollment
California funds schools largely based on daily student attendance, a number that has been falling for roughly a decade as families move to more affordable states, immigration slows and birth rates decline.
At the same time, districts have been hit with soaring insurance costs and expensive repairs to aging campuses, among other rising expenses. Although state funding for schools has increased in recent years, many administrators say it still hasn’t kept pace with the growing cost of running a district.
Original source: CalMatters
