Judge’s tentative ruling strikes down schools’ claim of Prop 98 manipulation

In a stark, two sentence ruling issued Tuesday, a San Francisco Superior Court judge tentatively rejected claims from a coalition of school groups that last summer's state budget illegally excluded sales tax revenue from the Proposition 98 guarantee.

Judge Harold Kahn issued the ruling in advance of a hearing set for today in his court.

School groups, led by the California School Boards Association and the Association of California School Administrators, argued in a suit filed in September that the 2011-12 budget agreement improperly reduced funding for K-12 public education by excluding revenues from the general fund without adjusting the Proposition 98 minimum funding calculation.

That sales tax revenue was diverted from the general fund to pay for the county realignment program.

Schools said the move violated Proposition 98 and they are owed $2.1 billion under the voter-approved guarantee's Test 1 scenario - which means the state must spend a specific percentage of general fund money on schools based on spending done in 1986-87.

In his terse ruling, however, Kahn said simply that there was nothing in the state constitution that prohibited the state from taking the action.

Nothing in the language of Proposition 98 or its ballot materials precludes the Legislature from assigning revenue to a special fund that previously had been deposited in the general fund," the judge said. "Nor, if the Legislature does so, there is nothing in the language of Proposition 98 or its ballot materials which requires the Legislature to "rebench" that revenue for purposes of Test 1."

H.D. Palmer, spokesman for the governor's Department of Finance, said the administration is pleased with the ruling.

"We're pleased that the court has issued a tentative ruling that upholds the Legislature's determination that realignment funds are not part of the state's general fund for purposes of Proposition 98 because they have been directed to local public safety programs," he said in a statement.

At issue is the portion of the 2011-12 state budget that shifted almost $6 billion in state program responsibilities to counties, primarily in the areas of criminal justice, mental health and child welfare.

The programs originally were to be funded by passage of a sales tax measure the governor hoped to be put before voters last year. When the Legislature was unable to provide that ballot provision, the realignment became part of the budget.

The school groups have argued that the 2011-12 budget "artificially" reduced the Proposition 98 funding guarantee by directing the money to the counties - money that otherwise would have been put into the state's general fund.

"The actions taken in the 2011-12 budget bills are a direct attempt to evade the requirement to either provide the required funding or suspend' and assume the obligation to restore funding in accordance with the constitutional formula," the schools argued in their petition.

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