Lawmakers can store tax revenue for future years in California’s rainy day fund, known as the Budget Stabilization Account. Proposition 2 would expand the fund’s maximum size from 10% of general fund tax revenue to 20%. The measure would also exempt deposits into the rainy day fund from counting against the state spending limit — and allow money that is set aside for paying state debts to cover more types of loans.
Yes Argument
California’s tax revenue is volatile because it relies overwhelmingly on the incomes of top earners, which often fluctuate with the stock market. In just the last five years, the state has had both a $97 billion surplus and a $45 billion shortfall. This measure will allow state lawmakers to better prepare for those leaner years and incentivize saving by not counting deposits into the rainy day fund as spending.
No Argument
California voters approved a constitutional spending limit in 1979 to make sure that excess state spending would be returned directly to taxpayers. This measure chips away at that law and makes tax rebates less likely. Instead, lawmakers will be allowed to stash surplus money in the rainy day fund and then use it to prop up programs when tax revenue dries up.
Key Supporters
In Support
- Gavin Newsom, California governor
- California Democratic Party
- California Federation of Labor Unions
In Opposition
- Alexandra Macedo, California Assembly Republican leader
- David Tangipa, California Assembly member
- California Republican Party
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Should California require ongoing audits of programs funded by specific taxes, and make those tax revenues subject to the state’s spending limit?
Should the state prohibit new taxes on financial assets like stocks and investment accounts and prohibit most retroactive taxes?
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Should California speed up its environmental review process for certain projects?