SACRAMENTO — A year ago today, Californians were still locked in a fierce battle over Proposition 30, Gov. Jerry Brown’s ballot initiative that raised income taxes on the wealthy and the sales tax on everyone.
One side argued that the state needed a temporary infusion of cash to keep schools and vital state programs afloat until the economy fully recovered. The other side countered that new tax money would simply line the pockets of school bureaucrats and unionized teachers — and that thousands of overtaxed “job creators” would flee California and throw the state’s still-recovering economy into reverse.
But today, few Californians are arguing that Proposition 30, which to the surprise of many political observers sailed to an easy victory in last year’s Nov. 6 election, hasn’t been a good thing for the state.
It stabilized school funding in California for the first time since the Great Recession began, allowing school districts to avert thousands of teacher layoffs. It helped the Legislature balance its budget for the first time in years without slashing social programs. And it helped a state whose fiscal mismanagement used to be fodder for late-night comedians suddenly become a poster child of sound budgeting that some say Washington, D.C., politicians should model.
“I don’t know that taxpayers much appreciated it, but it helped the state cover its costs,” said Joseph Henchman, a vice president at the Tax Foundation, a nonpartisan tax research group based in Washington.
Rosemarie Sandoval, a teacher in the San Lorenzo Unified School District, never doubted it would work — for her personally as well as her state.
“I was watching the news last year eagerly awaiting word. When I saw that Proposition 30 had passed, I started jumping with extreme excitement,” said Sandoval, 32, who for five consecutive years received a pink slip from the district in March warning her that her future as a teacher in the district was uncertain.
So every June, she would pack up her classroom and anxiously wait to learn if the district could scrape together enough cash to hire her back before the end of the summer. “I felt like all my hard work in the classroom had been reduced to a dollar amount the district had to cut,” she said. “Each time, it was a slap in the face.”
But this past spring was different. The pink slip never came in the mail.
Indeed, school superintendents and state finance officials say that the tax money generated by Proposition 30 has brought school districts something that had eluded them in recent years: financial stability.
Under the measure, the state’s sales tax was increased for four years by a quarter of a cent, costing the average Californian less than $100 a year. But the wealthy were hit harder: Income-tax rates for joint filers earning more than $500,000 — and single filers who earn at least $250,000 — were hiked for seven years from 10.3 percent to as high as 13.3 percent.
The tax increases will net the state’s public schools and community colleges about $6 billion annually.
Had Proposition 30 failed, San Lorenzo Unified would have lost nearly $5 million in state aid — larger districts stood to lose a lot more — and teachers such as Sandoval surely would have been in jeopardy once again.
Instead, a few weeks after last year’s election, Sandoval was offered a permanent job.
If Proposition 30 had failed, $6 billion in automatic “trigger” cuts would have gone into effect.
Palo Alto Unified would have dipped into its reserves to cover a $5.5 million deficit, a school official said. But many districts, such as Hayward Unified, faced more dire predicaments.
“Hayward would not have had enough in its reserves to absorb an $8 million hit if the tax measure had failed,” said Lisa Grant Dawson, the district’s assistant superintendent for business. “The district would have been insolvent.”
Though public schools would have suffered the most from a Proposition 30 defeat, other parts of the budget, including social programs and the state parks system, also would have faced more cuts.
Some of the tax measure’s critics still argue that the state’s wealthiest residents are shouldering an unfair burden — and that other Californians will come to regret the decision to raise the taxes of the rich.
No hard data has surfaced yet about multimillionaires making a run for the border. However, there are plenty of anecdotes.
“Instead of a Christmas card, I think I’m going to send your governor a thank-you present,” said Chris Plastiras, who owns Lakeshore Realty in Incline Village, Nev., just across the California border on the north shore of Lake Tahoe.
Plastiras said his firm’s sales of single-family homes are up 19.2 percent over 2012. Many of those homes are being sold to Californians, he said, and a review by his firm of 50 buyers from California found half of them either became full-time Nevada residents or intend to in the future.
Economic experts, however, warn against reading too much into anecdotes.
Jed Kolko, chief economist and vice president of analytics at the online real-estate marketplace Trulia, said that “taxes have not been the driving factor for migration recently, and it would be a surprise if Prop. 30 had a big effect on people leaving California.”
Kolko’s study of census data from 2005 through 2011 showed that although California’s richest residents face high taxes, lower-income people are more likely to leave. In fact, he said, the state saw a slight net in-migration of households making $200,000 or more during those years.
But Proposition 30’s critics contend that even if the rich haven’t yet fled California, raising taxes to plug a budget hole is a poor idea.
“We still think it reflects very bad policy and that the state should have done more to reduce spending,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “Prop. 30 was really nothing more than a coat of paint on a house that’s got a rotten foundation.”
The state’s pension obligations are still crushing, and California is still spending too freely on state workers’ salaries and benefits, Coupal said.
Besides, he noted, the taxes eventually will expire.
That’s why the Brown administration has resisted some lawmakers’ attempts to bring back expensive programs cut in recent years, said H.D. Palmer, a Department of Finance spokesman.
Although the jury is still out on the effect of Proposition 30 on the California economy, initial indications are encouraging. The state’s unemployment rate fell eight-tenths of a percentage point — to 8.8 percent — from last November to August. During the same period, the national jobless rate fell a half of a percentage point to 7.3 percent.
At Edendale Middle School in San Lorenzo, where Sandoval teaches sixth grade and three in four students are living in poverty, the extra funding from Proposition 30 has already had a big effect on the staff and students, Principal John Shimko said.
This summer, the district’s teacher turnover rate was cut in half, and all of those employees left by choice.
With more familiar adult faces in his halls and classrooms, student behavior this year has already improved. Shimko expects the stability will translate into academic gains.
“This,” he said of Proposition 30, “really helped us.”
Staff writers Theresa Harrington, Sharon Noguchi and Paul Rogers contributed to this report.
