This post is authored by Chris Hoene, Executive Director of the California Budget & Policy Center.
In November 2012, California voters approved Proposition 30, a constitutional amendment that increases personal income tax rates on very-high-income Californians through 2018 and raises the state’s sales tax rate by one-quarter cent through 2016. Governor Jerry Brown championed and campaigned for Proposition 30 after state policymakers’ made widespread and deep cuts to various state programs and services during and after the Great Recession. Confronted with ongoing state budget shortfalls, and the threat of additional cuts to education and other vital services, the Governor, other state leaders, and a broad coalition — encompassing educators, labor, health care providers, faith organizations, community groups, businesses, and others — backed Proposition 30’s temporary tax increases as a means to stabilizing the budget and ensuring adequate revenues to support public investments that would position the state for economic growth.
What has Proposition 30 meant for California? Since its passage, the state’s General Fund revenues have grown from $93 billion in 2012-13 to a projected $115 billion for 2015-16. This has been driven by a combination of economic growth and Proposition 30’s tax increases, but Proposition 30 alone raises approximately $8 billion for 2014-15 (the current fiscal year) and that figure is expected to be even higher in 2015-16. These new revenues have allowed the state to significantly reinvest in K-12 schools and community colleges. In 2011-12, the low point for state budget after the recession, the state’s commitment to schools and community colleges totaled $47.2 billion. For 2015-16, this commitment is projected to be $68.4 billion. Looking just at K-12 schools, the growth in state spending since 2011-12 amounts to an increase of more than $2,000 per student. California also has slowly begun to reinvest in its state university systems (the California State University and University of California), has created and invested in a new and stronger rainy day fund, and is paying down budgetary debts. Currently, the state is poised to enact its first-ever Earned Income Tax Credit (EITC) in 2015-16, a refundable tax credit targeted to the state’s lowest-income households. Read More