Assembly hearing advances debate on raising California's rainy day fund cap and changing deposit rules

SACRAMENTO

California lawmakers and fiscal experts on Tuesday heard competing proposals to change the state's Budget Stabilization Account, commonly known as the rainy day fund, as the Legislature prepares for the May revision and a potential voter measure. The hearing in the Assembly Budget Committee on Accountability and Oversight included a presentation by the Legislative Analyst's Office and testimony from the Department of Finance, advocates, labor and fiscal-policy groups.

The Legislative Analyst's Office's Anne Hollingshead said Proposition 2 (2014) set the current rules tying annual base deposits and a formula for excess capital gains to the BSA. "The base amount...is 1.5% of general fund tax revenues," Hollingshead said, and that base is split roughly 50/50 between BSA deposits and certain debt payments. She told committee members the current structure means that, "under current policy...reserves could cover about one third of funding shortfalls over 50 years" in the LAO's benchmark model.

Assemblymember Valencia, author of ACA 1, argued the current 10% constitutional cap on the BSA is too low and urged voters be given the chance to raise the cap. "When times are good, we save," Valencia said in opening remarks. ACA 1 would raise…