SACRAMENTO, Calif. /California Newswire/ — Governor Schwarzenegger yesterday (Oct. 20) issued the following statement after signing AB 1619, which will place the historic budget reform achieved in recent budget negotiations on the presidential primary election ballot in 2012:
“California’s budgeting process has been in desperate need of reform that limits spending in good years so we can save money for tough economic times. This rainy day fund is a historic reform that will end the drastic swings in state revenue that punish California’s most vulnerable citizens.”
To help avoid boom-and-bust budget cycles in the future, AB 1619 will place a constitutional amendment before the voters that would substantially strengthen the state’s rainy day fund. The amendment will include more stringent deposit requirements in good budget years that will provide a greater cushion for bad budget years. Specifically, the amendment will:
* Make potential rainy day fund savings larger, require annual contributions to the fund and capture spikes in revenues into the fund:
* The rainy day fund savings would go from 5 percent to 10 percent of General Fund Revenues.
* The state would have to make 3 percent payments into the rainy day fund, except in years with large deficits when the state can withdraw money from the fund or when the rainy day fund is full.
* Half of the annual payment into the rainy day fund would be used for one-time infrastructure and debt service.
* Revenues above the state’s last twenty years of revenue performance would be put in the rainy day fund. When the rainy day fund is full, any peak revenues would be used to repay budgetary debt or for one-time purposes like infrastructure and tax rebates.
* Peak revenue needed to meet Proposition 98 obligations would be excluded, so that Proposition 98 will be fully funded without encroaching on funding for other programs.
Restrict the use of rainy day funds to rainy days:
* Funds would be used to cover a budget shortfall – to increase revenues up to the previous year’s expenditures adjusted for inflation and population growth.
* A 50-50 percent regulator provision would prevent the legislature from spending all rainy day funds in a single year, or two.