This year will be the first in which “public investment impact disclosures” will appear on the ballot, along with the ballot titles for I-2109, I-2117, and I-2124. (Initiative texts, fiscal impact statements, and public investment impact disclosures are available here. There is a lawsuit about the applicability of the public investment impact disclosures to these initiatives, which the state Supreme Court will consider on August 9.)

The public investment impact disclosures are required for ballot measures that would repeal, levy, or modify any tax or fee and would change state revenues. As I showed when the disclosures were enacted by the Legislature in 2022, they don’t provide meaningful context for voters.

The public investment impact disclosure for I-2109, which would repeal the capital gains tax, states: “This measure would decrease funding for K-12 education, higher education, school construction, early learning, and childcare.” (Emphasis added.)

First, this does not reflect the official fiscal impact statement for I-2109. Under current law, the first $500 million in capital gains tax revenues are deposited in the education legacy trust account (ELTA), which may be used for public schools, expanding access to higher education, early learning, and child care. (The ELTA funding is a small share of total state funding for these budget areas.) Any revenues above that threshold are deposited in the common schools construction account (CSCA).

However, the fiscal impact statement, based on the June revenue forecast, estimates that the capital gains tax will not exceed the $500 million threshold in any year of the forecast period. (This accounts for the fact that capital gains revenue collections dropped considerably this year. Beware any fiscal analysis of I-2109 that relies on the February revenue forecast.) Consequently, it is not accurate to claim in the disclosure that funding for school construction would decrease.

Second, to my general concern with these disclosures, it is impossible to say how the 2025 Legislature would respond to a repeal of the capital gains tax. Although this source of education funding would decrease, other sources could increase—through tax changes, economic growth, or by reducing spending elsewhere in the budget. There would be options other than reducing education spending.