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LAO recommends sweeping expansion of California's rainy day fund cap, offers two deposit options
Summary
The Legislative Analyst's Office told the Senate Budget and Fiscal Review Committee that California's current reserve rules would cover about 30% of downside funding shortfalls under a conservative benchmark and recommended raising the constitutional BSA cap from 10% to 50% by 2055, with options to broaden deposit rules or deposit full excess capital gains.
The Legislative Analyst's Office recommended a major expansion of California's Budget Stabilization Account on the grounds that current rules leave the state exposed during deep revenue downturns.
"Our analysis found that for the current policy under Proposition 2 the state would be able to cover about a third or 30% of funding shortfalls over the next 50 years in that benchmark scenario," Anne Hollingshead of the LAO told the Senate Budget and Fiscal Review Committee. She said the office evaluated policies against a 90th‑percentile, 50‑year scenario to test resilience across multiple economic cycles.
Holli…
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