Billions of dollars in school funding hung in the balance as California voters appeared poised to extend a long-standing tax on high earners, according to early returns Tuesday night.
Proposition 3, backed heavily by the state’s largest teachers union, held a four-point lead as ballots were tallied. The measure would permanently extend an income tax surcharge on wealthy Californians that has funneled billions into K-12 schools and other public services since voters first approved it in 2012. Renewed again in 2016, the tax is currently set to expire in 2031 — a deadline that has schools and education advocates on edge.
For local school districts across the Inland Empire and greater Southern California, the outcome carries real financial stakes. The tax has generated anywhere from $5 billion to $15 billion annually in recent years, accounting for as much as 15% of total school funding statewide. Without renewal, districts would face the loss of that revenue starting in 2031, likely forcing significant budget reductions at a time when many schools are already stretched thin.
The California Teachers Association poured substantial resources into the campaign, spending close to $60 million on advertising while dispatching members to canvass more than 200,000 households statewide. Union president David Goldberg described passage of the measure as essential to safeguarding school programs and preventing layoffs among teachers.
Under the measure, the tax would continue to apply to individuals earning more than $371,000 annually, or married couples earning above $743,000. Those taxpayers would keep paying a 12.3% state income tax rate — among the highest in the nation.
Critics of Proposition 3, however, argue the state is leaning too heavily on its wealthiest residents. They warn that continually raising or extending taxes on high earners could eventually push some of them to relocate to states with friendlier tax climates, which would ultimately hurt California’s overall revenue base. Notably, roughly 200 of those same high-income residents could also be subject to a separate one-time 5% tax under Proposition 40, a billionaire’s tax measure also on this year’s ballot.
Opponents further contend that the original surcharge, approved during the depths of the Great Recession as a temporary fix, was never meant to become a permanent fixture of the state’s tax code. They also question whether it remains necessary at all, pointing to years of increased state spending on education alongside a steady decline in student enrollment statewide.
Revenue generated by the tax flows into California’s Proposition 98 formula, a constitutional guarantee that dedicates roughly 40% of the state budget to public education. Of that funding, about 89% is directed to K-12 schools, with the remaining 11% supporting community colleges. Any surplus beyond what’s required is set aside in the state’s reserve fund.
The debate over the tax comes as California schools continue to grapple with shrinking enrollment, driven by families relocating to more affordable states, slower immigration trends, and declining birth rates. Meanwhile, districts have been squeezed by rising costs tied to insurance premiums and long-overdue facility repairs. Although lawmakers have increased overall education funding in recent years, many administrators say those increases haven’t kept pace with mounting expenses — a gap that could widen further if voters ultimately decide not to extend the tax structure Proposition 3 seeks to preserve.
Original source: CalMatters
