California Proposition 58, Balanced Budget Act (March 2004)

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Proposition 58, or the California Balanced Budget Act, was on the statewide California primary ballot on March 2, 2004 as a legislatively-referred constitutional amendment, where it was convincingly approved.

Proposition 58 requires state legislators to pass a balanced budget every year. It also created a reserve fund called the Budget Stabilization Account in case of future financial trouble. It prohibited the creation of any future bonds to pay off deficits like that in Proposition 57 (the California Economic Recovery Bond Act). Proposition 58 would not have taken effect unless Proposition 57 also passed, which it did.

Propositions 57 and 58 were the centerpiece of Gov. Arnold Schwarzenegger's plan to resolve California's budget problems. Schwarzenegger campaigned heavily for the propositions' passage.

Election results

Proposition 59
Approveda Yes 4,535,084 71.2%


According to Joe Mathews and Mark Paul in their 2010 book, California Crackup: How Reform Broke The Golden State and How We Can Fix It:

"...the badly designed Budget Stabilization Account created by Prop 58 in 2004 has been a fiscal flop. Capped at $8 billion, or 5 percent of projected general fund revenues, it's too small to deal with the much larger revenue swings the state has experienced in the past three recessions. It requires the state to squirrel away 3 percent of revenues every year, without regard to California's budget or economic condition, but allows the governor to withhold all or part of the annual contribution, for any reason. And it allows up to half of the money in the account to be spent, whether it's rainy or sunny."[1]

John Myers, Sacramento Bureau Chief for KQED's The California Report, reported in July 2010 that Arnold Schwarzenegger denied on at least three occasions in 2010 that California has a rainy day fund:[1]

  • On May 6, 2010 in remarks to the Bay Area Council: "We are one of the only states in the United States that does not have a rainy day fund."
  • On May 8, 2010 in remarks to the California Chamber of Commerce: "One of the only states that does not have a rainy day fund."
  • On July 29, 2010 in remarks to the San Diego Regional Chamber of Commerce: "We don't have a rainy day fund."

Constitutional changes

California Constitution
Proposition 58:

Text of measure


The ballot title was:

The California Balanced Budget Act. Legislative Constitutional Amendment.


The question on the ballot was:

"Should the state Constitution be amended to require that the state adopt a balanced budget and provide for mid-year adjustments if the budget falls out of balance? Should the Constitution also include state budget reserve requirements and limits on future borrowing to finance budget deficits?"


The summary of the ballot measure prepared by the California Attorney General said:

  • Requires enactment of a balanced budget where General Fund expenditures do not exceed estimated General Fund revenues.
  • Allows the Governor to proclaim a fiscal emergency in specified circumstances, and submit proposed legislation to address the fiscal emergency.
  • Requires the Legislature to stop other action and act on legislation proposed to address the emergency.
  • Establishes a budget reserve.
  • Provides that the California Economic Recovery Bond Act is for a single object or work.
  • Prohibits any future deficit bonds.

Fiscal impact

See also: Fiscal impact statement

The California Legislative Analyst's Office provided an estimate of net state and local government fiscal impact for Proposition 58. That estimate was:

  • Unknown net state fiscal effects, which will vary year by year and depend in part on actions of future Legislatures.
  • Reserve provisions may smooth state spending, with reductions during economic expansions and increases during downturns.
  • Balanced budget and debt limitation provisions could result in more immediate actions to correct budgetary shortfalls.

Path to the ballot

Proposition 58 was voted onto the ballot by the California State Legislature via Assembly Constitutional Amendment 5 of the 2003—2004 Fifth Extraordinary Session (Resolution Chapter 1, 2003—2004 Fifth Extraordinary Session).

Votes in legislature to refer to ballot
Chamber Ayes Noes
Assembly 80 0
Senate 35 5

See also

External links