The State Legislative Annotator'due south Part is calling into question the legality of Gov. Chocolate-brown's proposal to count new acquirement from Proposition 39 toward funding for education. In a report released Thursday, the LAO warns that the governor'due south plan for the initiative, the California Make clean Energy Jobs Act, violates the intent of the law.

Proposition 39, which won with 61 percent vote concluding Nov, is projected to raise upward to half a billion dollars in acquirement this financial year and as much every bit a billion per twelvemonth starting next twelvemonth  for clean energy projects. It does this by changing the tax formula for multistate corporations doing business in California to one used by most other states.

At issue is a provision of Prop. 39 that requires the country to put half of the revenues raised for each of the next five years into a new Clean Energy Job Creation Fund for free energy efficiency projects in local communities, such as hospitals. The other half of the money would go into the general fund, where it would increment the minimum schoolhouse-funding guarantee of Suggestion 98 by equally much every bit $500 1000000 this year and go up from there.

The Legislative Analyst's Office finds little to like in Governor Brown's proposal for using Proposition 39 revenues to boost the Proposition 98 school funding guarantee. Source: LAO (Click to enlarge).

The Legislative Analyst's Office finds little to like in Governor Brown'due south proposal for using Suggestion 39 revenues to boost the Proposition 98 school funding guarantee. Source: LAO (Click to enlarge).

The Governor's budget plan would count all the revenue raised by the initiative toward calculating the minimum schoolhouse funding guarantee of Proffer 98. Brown also wants to classify all Prop. 39 funds for the next v years to G-12 schools and community colleges to reduce their free energy costs by using energy efficient construction  for new schoolhouse buildings and modernizing their aging buildings. For next yr, $400.5 million would go to K-12 schools, while community colleges would receive $49.5 million.

The LAO report calls this arroyo "a serious departure from our longstanding view of how revenues are to be treated for the purposes of Proposition 98," and says it "is directly contrary to what the voters were told in the official voter guide every bit to how the revenues would be treated."

The Department of Finance disputes that interpretation. Spokesman H.D. Palmer counters that the LAO has information technology backwards. Considering Prop. 39 generates corporate taxation revenue it's counted every bit part of the general fund, even if the coin is then moved to the new Clean Energy Fund.

"In our view information technology's non a grayness issue," said Palmer. "By definition and by police force you must include those revenues when yous calculate the Prop. 98 guarantee."

The LAO too argues that this approach could too lead to "greater manipulation of the minimum guarantee" by opening the door to all types of accounting shifts. "The state could, for example, require that all sales revenue enhancement revenues be deposited directly into a special fund rather than the General Fund, thereby excluding the revenues from the Proposition 98 adding."

In an alternative proposal, the LAO recommends that the Legislature exclude Prop. 39 revenues from being counted toward the school funding guarantee and instead create a competitive grant procedure for free energy efficiency projects administered past the California Energy Committee. Schools and community colleges would be welcome to apply.

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