State Propositions 1A and 72

Proposition 1A
Proposition 72
National Election November 2, 2004 webpage

None of the numerous propositions on the state ballot directly relate to education. However, Proposition 1A and Proposition 72 have a potential impact.

Proposition 1A
This proposition is the result of a bipartisan agreement reached by Gov. Arnold Schwarzenegger, the state Legislature, and advocates for local city and county governments. Authored by Democratic Senator Tom Torlakson, it was approved for the ballot by an overwhelming majority of the Assembly and Senate.

Background
In the past, state leaders have used funds from local sales and property taxes and vehicle license fees to balance the state budget, sometimes shifting these funds from cities and counties to meet their Proposition 98 obligation to schools and community colleges. In exchange for allowing a two-year shift of property taxes —$1.3 billion annually in 2004 and 2005—Schwarzenegger and the majority of the state’s legislators agreed to protect cities from such tax shifts in the future by supporting Proposition 1A.

Provisions
Proposition 1A protects local funding for public safety, health, libraries, parks, and other locally delivered services by:

• Prohibiting the state from meeting its obligation to schools and community colleges with property taxes currently allocated to cities and counties.
• Preventing the state from both reducing local sales tax rates and from limiting existing local government authority to levy such a rate.
• Requiring that vehicle license fee (VLF) revenues be allocated to local governments and county programs and that any decrease in VLF revenues be replaced with other funding.
• Preventing the state from changing the allocation of local sales tax revenues (for example, between a city and a county) unless the exchange is voluntary.
• Requiring the state to fully fund legislative mandates on local governments or, if the state is not able to do so, suspend the mandate’s requirement for that fiscal year. (An example of a mandate is requiring a local government to post notices of public meetings. Certain mandates, such as ensuring employee rights, would not be able to be suspended.)
• Allowing provisions of this proposition to be suspended only if the governor declares a fiscal necessity and two-thirds of the Legislature approve the suspension;
• Providing that funds must be repaid within three years with interest should such a suspension occur.

Fiscal impacts
The Legislative Analyst’s Office (LAO) says the proposition would result in higher and more stable local government revenues and lower resources for state programs. For a full explanation of the impact, according to the LAO, go to: www.lao.ca.gov/ballot_source/Propositions.aspx.

Proposition 1A v. Proposition 65
The official supporters of Proposition 65, a similar proposal, now urge voters to reject Proposition 65 in favor of Proposition 1A. One major difference between 1A and 65 is that Proposition 65, if approved, would prevent the $1.3 billion transfer of city and county revenues in 2004 and 2005. Go to www.lao.ca.gov/ballot/2004/1A_11_2004.htm for a table that describes the differences between the two initiatives.

Proposition 1A specifically states that if it and Proposition 65 are both approved and Proposition 1A receives more “yes” votes, none of the provisions of Proposition 65 will go into effect.

Pros and Cons
The website of the California Secretary of State gives the arguments of those in favor and opposed to Proposition 1A in the Official Supplemental Voter Information Guide at www.ss.ca.gov/elections/elections_suppvig_pg04.htm.

Proposition 72
Proposition 72 is a referendum on Senate Bill (SB) 2, which requires certain employers to provide health care coverage for their employees beginning in 2006 and establishes a program to assist lower-income employees with paying their share of health care premiums.

Background
SB 2 was passed in 2003. But when opponents gathered enough signatures to qualify Proposition 72 for the ballot, SB 2 was put “on hold.” If Proposition 72 is defeated in November, SB 2 will not go into effect. If Proposition 72 passes, SB 2 will become law.

Which employers and employees are affected
Health care researchers, according to the nonpartisan Legislative Analyst’s Office (LAO), have estimated that passage of Proposition 72 could eventually result in more than 1 million uninsured employees and dependents receiving health coverage.

Under SB 2, both full- and part-time employees are eligible for health care coverage as long as they have worked more than 100 hours per month for the same employer for three months, according to the LAO. But, according to the analysis by the LAO, SB 2 makes distinctions among employers:

• Large employers (200 or more employees in California) have to provide individual and dependent health care coverage by Jan. 1, 2006. Dependents include spouses, domestic partners, minor children, and older children who are dependent upon the employee for support.
• Medium-sized employers (50 to 199 employees in the state) have to provide health care coverage by Jan. 1, 2007 for their employees only.
• Smaller employers (20 to 49 employees in California) have to provide coverage for their employees only, if lawmakers enact a specified tax credit, which so far has not happened.
• Employers with 19 or fewer employees in the state are exempt.

How the system would work
SB 2 sets up a “pay” or “play” system, according to the LAO. Affected employers are required to pay a fee to the state to purchase health insurance coverage. They then decide whether to allow the state to purchase insurance coverage for them (“pay”), or have their fee reimbursed by arranging directly with health insurance providers for coverage (“play”).

Employers are expected to pay at least 80% of the fee, with employees making up the difference, according to the LAO. But there are provisions that help low-income employees, particularly employees currently eligible for Medi-Cal or the state’s Healthy Families Program.

For a complete description of this program, go to: www.lao.ca.gov/ballot/2004/72_11_2004.htm.

Fiscal effects
SB 2 would have a number of significant fiscal effects on state and local governments, school districts, businesses, and individuals, according to the LAO. “These effects are complex, uncertain, and difficult to predict over time,” the LAO says in its analysis of Proposition 72. “Given these uncertainties, we believe that the net savings or costs to the state and local governments are unknown.”

The LAO discusses the potential savings to counties when employers provide health care to those who had none. It also considers the impact on public employers, such as school districts, which sometimes do not provide health care coverage for part-time employees as defined by SB 2. Go to www.lao.ca.gov/ballot/2004/72_11_2004.htm for a fuller discussion.

Pros and cons
Proposition 72 has a number of proponents and opponents, including members of the education community.

Proponents include the California Teachers Association (CTA), the California Federation of Teachers (CFT), the Faculty Association of California Community Colleges, and the California Part-Time Faculty Association. Go to www.yesonprop72.com to find their views.

Opponents include the Association of California School Administrators (ACSA), the California Association of School Business Officials (CASBO), and some school districts. Go to www.stopthehealthtax.org to find their views.