- Created on Monday, 28 April 2014 16:39
- Written by IVN
Sacramento, California - Governor Edmund G. Brown Jr. will testify at an Assembly Budget Committee hearing today in Sacramento on a proposal to establish a Rainy Day Fund that allows the state to save for the future, while paying down its debts and unfunded liabilities.
In 2010, the Legislature approved the proposal on the November 2014 ballot - ACA 4 - for the consideration of the voters. However, that proposal does not address the volatility of capital gains revenue, does not provide a reserve for schools to help cushion future downturns and constrains the state's ability to pay down long-term liabilities.
Earlier this month, Governor Brown called a special session of the Legislature to address ACA 4’s shortcomings and strengthen the state’s Rainy Day Fund. The Governor’s proposal – introduced with his 2014-15 Budget in January – helps the state better protect schools from deep budget cuts, stabilize finances when capital gains revenues swing and build a prudent reserve, while paying down debt.
Specifically, the Governor has proposed the following changes to the fund:
- Increase deposits when the state experiences spikes in capital gains revenues, the state’s most volatile tax revenue.
- Allow supplemental payments to accelerate the state’s payoff of its debts and liabilities.
- Raise the maximum size of the Rainy Day Fund to 10 percent of General Fund revenues.
- Limit withdrawals to ensure the state does not overly rely on the fund at the start of a downturn.
- Create a Proposition 98 reserve to smooth school spending and avoid future cuts. This reserve for schools makes no changes to the guaranteed level of funding dedicated to schools under Proposition 98. In addition, the Proposition 98 reserve would not begin until school funding is fully restored following cuts made during the Great Recession.