Proposition 30 Impact to State Aid

Background

Proposition 30, The Schools and Local Public Safety Protection Act of 2012, approved by the voters on November 6, 2012, temporarily increases the states sales tax rate for all taxpayers and the personal income tax rates for upper-income taxpayers.

The new revenues generated from Proposition 30 are deposited into a newly created state account called the Education Protection Account (EPA). School districts, county offices of education, and charter schools (LEAs) will receive funds from the EPA based on their proportionate share of the statewide revenue limit amount, which includes charter school general purpose funding. A corresponding reduction is made to an LEA’s revenue limit or charter school general purpose state aid equal to the amount of their EPA entitlement. LEAs will receive EPA payments quarterly beginning with the 2013−14 Fiscal Year.

2012−13 Fiscal Year Implementation – Education Code (EC) 14041 Reduction In-Lieu of EPA

To allow time for the State to collect the increased tax revenues, EPA entitlements cannot be calculated for the 2012−13 Fiscal Year until June 2013. LEAs will receive their 2012−13 Fiscal Year EPA entitlement in one lump sum payment at the end of June.

As mentioned above, each LEA’s revenue limit or charter school general purpose state aid is reduced by its EPA entitlement. To approximate the effect on state aid as a result of the EPA entitlement reduction, for 2012−13, pursuant to EC 14041(a)(9)(A), for the months of July 2012 through May 2013, CDE is required to reduce revenue limit or charter school general purpose state aid by a total of $6.9 billion. This reduction serves as a proxy for EPA entitlements that will be allocated in June. Each LEA’s proportionate share of this $6.9 billion is shown as a EC Section 14041 reduction in the respective First Principal (P-1) Apportionment exhibits available on CDE’s Web site.

Revised 2012-13 EPA Estimate

For the 2012−13 Second Principal (P-2) Apportionment certification the actual EPA entitlement paid in June 2013 will be used as the reduction to the P-2 revenue limit or charter school general purpose state aid. The latest estimates of EPA revenues for the current fiscal year, per the 2013-14 Governor’s Budget, is $6.7 billion. Using statewide entitlements for revenue limits and charter school general purpose entitlements from the 2012−13 P-1 Apportionment, CDE estimates each LEA’s 2012−13 EPA entitlement will be approximately 20 percent of their total revenue limit (deficited) or their charter school general purpose entitlement (this is slightly lower than the 21.2004 percent estimate that was used for the 2012−13 Advance and P-1 apportionments). However, an LEA’s EPA entitlement will be reduced so that funding from local property taxes and EPA does not exceed an LEA’s revenue limit or charter school general purpose entitlement, except that the reduction will not decrease an LEA’s EPA entitlement to less than $200 per ADA (for most non excess tax LEAs, the EPA entitlement will directly offset the state aid, resulting in no net difference).

For more information on the 2012−13 P-1 EPA adjustments, go to the Calculations to Determine 2012-13 P-1 posted on our Web site.

By mid-March a tool will be published on CDE’s Web site to help LEAs estimate their 2012−13 EPA entitlement and the impact on P-2 revenue limit or charter school general purpose state aid. Once the tool is made available, an e-mail message will be sent out through the PASE Listserv.