California Proposition 2, Rainy Day Budget Stabilization Fund Act (2014)

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Proposition 2
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Type:Constitutional amendment
Constitution:California Constitution
Referred by:California State Legislature
Topic:State budgets
Status:Approved Approveda
2014 propositions
Seal of California.svg.png
June 3
Proposition 41Approveda
Proposition 42Approveda
November 4
Proposition 1Approveda
Proposition 2Approveda
Proposition 45Defeatedd
Proposition 46Defeatedd
Proposition 47Approveda
Proposition 48Defeatedd
EndorsementsFull text
Ballot titlesFiscal impact
Local measures
California Proposition 2, the Rainy Day Budget Stabilization Fund Act (Assembly Constitutional Amendment 1), was on the November 4, 2014 ballot in California as a legislatively-referred constitutional amendment. The measure was approved. The measure was formerly known as Proposition 44.[1]

The measure will alter the state’s existing requirements for the Budget Stabilization Account (BSA), as established by Proposition 58. The BSA is a rainy day fund. ACA 1 will also establish a Public School System Stabilization Account (PSSSA).[2][3]

ACA 1 will:[2][3]

  • Require the director of finance to submit estimates of general fund revenues and expenditures for the ensuing fiscal year and the three fiscal years thereafter within 10 days following the submission of proposed adjustments to the governor’s budget.
  • Require the controller to deposit annually into the BSA: (A) 1.5 percent of general fund revenues and (B) an amount equal to revenues derived from capital gains-related taxes in situations where such tax revenues are in excess of 8 percent of general fund revenues. Deposits to the BSA are scheduled to begin by no later than October 1, 2015. Deposits will be made until the BSA balance reaches an amount equal to 10 percent of general fund revenues.
  • Require that from the 2015-2016 fiscal year until the 2029-2030 fiscal year, 50 percent of the revenues that would have otherwise been deposited into the BSA must be used to pay for fiscal obligations, such as budgetary loans and unfunded state-level pension plans. Starting with the 2030-2031 fiscal year, up to 50 percent of revenues that would have otherwise been deposited into the BSA may be used to pay specified fiscal obligations.
  • Permit the legislature to suspend or reduce deposits to the BSA and withdraw for appropriation from the BSA upon the governor declaring a budget emergency.
  • Create a distinct budget stabilization fund known as the “Proposition 98 Reserve” or Public School System Stabilization Account (PSSSA). The PSSSA will be funded by a transfer of capital gains-related tax revenues in excess of 8 percent of general fund revenues. Funds will be appropriated from the PSSSA when state support for K-14 education exceeds the allocation of general fund revenues, allocated property taxes and other available resources.

Election results

California Proposition 2
Approveda Yes 4,831,045 69.12%

Election results via: California Secretary of State

Text of measure

See also: Ballot titles, summaries and fiscal statements for California's 2014 ballot propositions

Ballot title:[4]

State Budget. Budget Stabilization Account. Legislative Constitutional Amendment.

Official summary:

The long-form summary read:[4]

  • Requires annual transfer of 1.5% of general fund revenues to state budget stabilization account.
  • Requires additional transfer of personal capital gains tax revenues exceeding 8% of general fund revenues to budget stabilization account and, under certain conditions, a dedicated K–14 school reserve fund.
  • Requires that half the budget stabilization account revenues be used to repay state debts and unfunded liabilities.
  • Allows limited use of funds in case of emergency or if there is a state budget deficit.
  • Caps budget stabilization account at 10% of general fund revenues, directs remainder to infrastructure.[5]

Fiscal impact statement:[4]

(Note: The fiscal impact statement for a California ballot initiative authorized for circulation is jointly prepared by the state's Legislative Analyst and its Director of Finance.)

  • Some existing state debts would be paid down faster, resulting in long-term savings for the state.
  • Changes in the level of state budget reserves, which would depend on the economy and future decisions by the Governor and the Legislature.
  • Reserves kept by some school districts would be smaller.[5]

Constitutional changes

See also: Article IV and Article XVI of the California Constitution

Proposition 2 was designed to amend Section 12.5 of Article IV and Sections 20-22 of Article XVI of the California Constitution.[2]

The amendment’s full text can be read here.



The amendment was originally slated for the June 5, 2012, ballot. However, Senate Bill 202, which was enacted on October 7, 2011, moved the amendment to the 2014 ballot.[6]

On April 16, 2014, Gov. Jerry Brown (D) called on a special session of the California Legislature to replace the ballot measure with a different one that would also create a rainy day fund.[7] This replacement, which became known as ACA 1, was approved by the legislature and ultimately replaced the old measure on May 16, 2014.


As of June 2014, California had two principle general fund reserve accounts:[3]

  • Special Fund for Economic Uncertainties (SFEU): The California Constitution, specifically Section 5.5 of Article XIII B, requires a “prudent” reserve fund in an amount determined as “reasonable and necessary” by the legislature. This general fund reserve has become known as the Special Fund for Economic Uncertainties.
  • Budget Stabilization Account (BSA): Proposition 58, passed in 2004, established a Budget Stabilization Account. Proposition 58 requires that 3 percent of estimated general fund revenues be transferred into the BSA. Transfers are required until the stabilization account reaches $8 billion or 5 percent of general fund revenues, whichever is greater. When Economic Recovery Bonds are outstanding, 50 percent of the annual transfers to the stabilization account are to be used for paying off the bonds. Transfers from the BSA to the General Fund may occur with a majority vote of the legislature and approval of the governor. Also, an executive order can suspend or reduce transfers to the BSA. California deposited funds into the BSA in 2006-7 and 2007-8, but hasn’t since. As of June 2014, the BSA had a zero balance.

The approval of Proposition 2 also creates a distinct budget stabilization fund known as the “Proposition 98 Reserve” or Public School System Stabilization Account (PSSSA). The PSSSA will be funded by a transfer of capital gains-related tax revenues in excess of 8 percent of general fund revenues. Funds will be appropriated from the PSSSA when state support for K-14 education exceeds the allocation of general fund revenues, allocated property taxes and other available resources.


California Yes 1 & 2 2014 logo.png

The campaign in support of the proposition was led by Yes on Props 1 and 2.[8]





  • Sean Parker, co-founder of Napster[38]


Gov. Jerry Brown (D), Rep. John Perez (D-53) and Allan Zaremberg, President of the California Chamber of Commerce, wrote the argument in favor of Proposition 2 found in the state’s official voter information guide:


Proposition 2 establishes a STRONG RAINY DAY FUND in the State Constitution that will force the Legislature and the Governor to save money when times are good, PAY DOWN DEBTS and PROTECT SCHOOLS from devastating cuts. Both Democrats and Republicans support Proposition 2.

By forcing the state to save money, Proposition 2 WILL REQUIRE POLITICIANS TO LIVE WITHIN THEIR MEANS AND PROTECT AGAINST UNNECESSARY TAX INCREASES. In good times, money will be placed in a constitutionally-protected reserve and used to pay down debt. In bad times, the Rainy Day Fund can be used to protect schools, public safety and other vital services.

California needs Proposition 2 because it prevents the state from spending more than it can afford. Only three years ago, California faced a $26 billion budget deficit that required the Legislature to make painful cuts and voters to approve temporary tax increases. PROPOSITION 2 WILL MAKE SURE THAT WE DON'T REPEAT THIS CYCLE OF BOOM AND BUST BUDGETING.


  • Stabilize the state's budget by ensuring temporary revenues are set aside and not committed to ongoing spending we can't afford.
  • Accelerate the state's debt payments.
  • Create an education reserve to avoid future cuts to schools.


SAN FRANCISCO CHRONICLE: The Rainy Day Fund is the “prudent course.”
STANDARD AND POOR'S: The Rainy Day Fund marks "another step in California's ongoing journey toward a more sustainable fiscal structure."
LOS ANGELES TIMES: The Rainy Day Fund "does more to promote a culture of savings in Sacramento."
MOODY'S: The Rainy Day Fund helps the state "cushion its finances from economic downturns."
FRESNO BEE: The Rainy Day Fund will "protect taxpayers against catastrophic budget deficits."
SACRAMENTO BEE: The Rainy Day Fund is "an important step toward fiscal discipline."


—Gov. Jerry Brown, Rep. John Perez and Allan Zaremberg[39]


Total campaign cash Campaign Finance Ballotpedia.png
as of December 31, 2014
Category:Ballot measure endorsements Support: $20,815,262
Circle thumbs down.png Opposition: $0

Nine ballot measure campaign committees registered in support of the initiative as of December 31, 2014:[40]

Note: A number of the campaign committees supported Proposition 2 and Proposition 1.
Committee Amount raised Amount spent
California Business Political Action Committee, Sponsored by the California Chamber of Commerce $1,169,500 $958,623
Brown; Yes on Props 1 and 2 A Bipartisan Coalition of Business, Labor, Republicans, Democrats and Governor $17,690,658 $16,378,490
Levine Ballot Issue Committee, Elevate California: Yes on 2 $222,500 $215,413
California Forward Issues Action Fund - Yes on Proposition 2 $164,606 $160,293
Think Long Committee, Inc., Sponsored by Nicolas Berggruen Institute Trust, Supporting Propositions 1 & 2 (Non-Profit 501(C)(4)) $250,000 $250,000
Southern California District Council of Laborers Issues PAC $203,662 $86,263
Laborers Pacific Southwest Regional Organizing Coaltion Issues PAC - Yes on Props 1 and 2 $842,896 $430,552
Western Plant Health Association, Supporting Propositions 1 and 2 (Non-Profit 501 (C) (6)) $100,000 $100,000
The California Conservation Campaign $171,440 $177,351
Total $20,815,262 $18,756,985

The following are the donors who contributed $250,000 or more to the campaign in support of the initiative as of October 31, 2014:[40]

Note: Some of these donors gave their money to a committee that was simultaneously supporting more than one ballot measure. When that is the case, it is not generally possible to break down how much of that donor's money specifically was spent on the campaign for a particular proposition. Those contributions are listed below with shading; readers should not assume that all or even most of a donation to a multi-purpose committee was used for expenditures related to this particular proposition.
Donor Amount
Brown for Governor 2014 $5,196,529
Sean Parker $1,000,000
L. John Doerr $875,000
California Alliance for Jobs - Rebuild California Committee $533,750
California Hospitals Committee $500,000
Doris F. Fisher $499,000
Health Net $445,600
Robert Fisher $400,000
John Fisher $351,000
Area Energy LLC $250,000
California American Council of Engineering Companies $250,000
California Farm Bureau Federation $250,000
California Association of Hospitals and Health Systems $250,000
Dignity Health $250,000
Kaiser Permamente $250,000
Northern California Carpenters Regional Council Issues PAC $250,000
Reed Hastings $250,000
SW Regional Council Of Carpenters $250,000
Think Long Committee, Inc. $250,000
Western Growers Service Corporation $250,000
William Fisher $250,000

Campaign advertisements


A Yes on 1 & 2 ad, titled "Firefighter," advocating for Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Pendulum," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Folsom," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "50 Years," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Roller Coaster," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Farmer Jake," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "5Progress," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Umbrella A," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Umbrella B," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Voces," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Vote si a las proposiciones 1 y 2," advocating Proposition 1 and Proposition 2

A Yes on 1 & 2 ad, titled "Vote si a las proposiciones 1 y 2," advocating Proposition 1 and Proposition 2


Yes on 1 & 2 ad, titled "Roller Coaster,"

Yes on 1 & 2 ad, titled "Peter Coyote,"


California 2014 NoOnProp2.jpeg

2 Bad For Kids, a project of Educate Our State, was the only campaign committee registered against Proposition 2.[41]


Former officials


  • Educate Our State[43]
  • Alliance of Californians for Community Empowerment Action (ACCE Action)[44]
  • Californians United to Reform Education[45]
  • California Partnership[44]
  • Courage Campaign Issues Committee
  • CREDO Action[46]
  • Evolve[47]
  • Potrero Hill Democratic Club[48]
  • Educate.Advocate.[49]
  • Bend The Arc: A Jewish Partnership for Justice[50]
  • California National Organization of Women[51]
  • California Council of Churches IMPACT[52]
  • California Rising[53]
  • Green Party[54]
  • Libertarian Party[55]
  • Peace and Freedom Party[56]
  • California Tea Party Groups Coalition[57]



2 Bad For Kids, a campaign against the initiative, developed a list of arguments on their webpage. They said, "If you care about fiscal responsibility, kids and public education, vote NO ON PROP 2." The following is a selection of their arguments:

Why has Educate Our State come out in opposition to Proposition 2?

We could not escape from the fact that Proposition 2 and its connected statutory triggers were both unfair and fiscally irresponsible towards schools. When we realized no one in the political fray was willing to take on the Governor, who is backing Proposition 2, since he has a reputation for fiscal austerity and seems pretty sure to be re-elected, we realized it was the job of parent volunteers to take the lead. Unlike politicians, lobbyists, and other special interests, we have nothing to lose.

This is a perfect example of why children always come last in Sacramento (lest we forget, we are 51st by a LARGE margin in student-teacher, student-counselor AND student-librarian ratios, not to mention at or near the bottom in the nation in per pupil funding - yes even AFTER Proposition 30). Children have no lobby, and no money. And they cannot vote. They need us to be our voice. Do you want to give children a voice? Vote NO on Prop 2, for starters.

Why does Educate Our State say Proposition 2 is unfair and fiscally irresponsible?

Proposition 2 breeches the minimum guarantee Californians made to our schoolchildren – a guarantee that the Governor and the Legislature assured schools would protect them. Remember, the state diverts BILLIONS of local school property taxes that are allocated to public education each year -- $8.4 billion this year alone -- to pay its debts.

Now the State is saying it won’t necessarily replace those funds. That’s unfair. As if that were not already devastating to schools, the Legislature decided to require local school districts to spend all but three weeks of their savings the minute the state saves a nickel. It did this without public comment or LAO analysis. We see this as unfair to schools and schoolchildren and extraordinarily fiscally irresponsible.

Why should I care about this?
Over 100 years ago, California voters said that our first priority would be funding public education (California Constitution Article XIV Section 8).

Over 25 years ago, California voters said that we would spend at least the proportion of state revenues on schools and community colleges that we had in 1986-87, roughly 40% (Proposition 98).

We have never seen a poll (or heard a politician) say that education is a low priority for Californians – and yet the state is trying now, having cut schools’ share of local property taxes down to 33%, to cut public education’s share of State’s income taxes below 40%!

Time and time again we see money taken FROM schools, while pretending to be helping schools. Why? In part, we believe, because children cannot vote and they do not have expensive lobbyists representing their interests. Sacramento has a lot more to gain with rhetoric than results for public education.

Put kids first. Vote NO on Prop 2. Show Sacramento you don't buy the rhetoric. We are at the bottom of the nation in public education - what's the excuse? [5]

2 Bad For Kids [59]

Ellen Brown (G) of the Public Banking Institute called the amendment a "catastrophic bust" and argued for a state-owned bank in lieu of the proposed fund. She argued the following:[58]

  • "But a rainy day fund takes money off the table, setting aside funds we need now to reverse the damage done by Wall Street’s last collapse. The brutal cuts of 2008 and 2009 shrank the middle class and gave California the highest poverty rate in the country."
  • "Having a state-owned bank can substitute for a rainy day fund. Banks don’t need rainy day funds, because they have cheap credit lines with other banks. Today those credit lines are at the extremely low Fed funds rate of 0.25%. A state with its own bank can take advantage of this nearly-interest-free credit line not only for emergencies but to cut its long-term financing costs in half."
  • "Rather than setting aside our hard-earned surplus to pay the piper on demand, we could be using it to create the credit necessary to establish our own economic independence. California is the ninth largest economy in the world, and the world looks to us for creative leadership. “As goes California, so goes the nation.” We can lead the states down the path of debt peonage, or we can be a model for establishing state economic sovereignty."

Media editorial positions

See also: Endorsements of California ballot measures, 2014


  • San Francisco Chronicle: "All of California’s services in public investments will benefit when the state has a healthier fiscal future, and Prop. 2 is one more step in that direction."[60]
  • Los Angeles Times: "Proposition 2 would help keep Sacramento from falling into the familiar trap of overspending in flush times while ignoring its debts and other long-term needs. The Times urges a yes vote."[61]
  • Orange County Register: "We believe this measure, a legislatively-referred constitutional amendment, will succeed in actually building up the state’s reserves where Prop. 58 failed. As such, the Register urges a Yes vote on Prop. 2."[62]
  • San Jose Mercury News: "Proposition 44 [Proposition 2] would impose desperately needed fiscal discipline on lawmakers, and that deserves voter support."[63]
  • U-T San Diego: "This proposal would create a healthier budget status quo. Vote yes on Proposition 2."[64]
  • Sacramento Bee: "California’s tax structure relies heavily on high earners. Their income can fluctuate dramatically from year to year, which means the state will be flush some years and broke other years. Proposition 2 would help sand down those spikes. Voters should embrace the change."[65]
  • La Opinion: "Esta iniciativa, que es una enmienda constitucional, beneficiará las inversiones cuando la salud financiera del estado es buena. En los periodos de crisis evitará los recortes draconianos a los servicio estatales de importancia tal como ocurrió en la última pasada."[66]
  • Santa Rosa Press Democrat: "Proposition 2 would go far in helping the state pay down existing debt, brace itself against the highs and lows of a revenue stream tied too closely to capital gains and provide a cushion against future spending cuts. Moreover, it would force state lawmakers to be better stewards of taxpayer funds."[67]
  • Contra Costa Times: "Proposition 2 would impose desperately needed fiscal discipline on lawmakers, and that deserves voter support."[68]
  • Milpitas Post: "It increases the so-called rainy day fund of cash reserves derived from surplus revenues against the day when they will be needed. It is also deserving enactment with a "yes" vote."[69]
  • Riverside Press-Enterprise: "That protective restraint is Prop. 2. It merits the support of California voters."[70]
  • Bakersfield Californian: "Proposition 2 is a mind-numbingly complicated 'rainy day' plan that would force spending restraint and savings on an always-reluctant Legislature and state government bureaucracy."[71]
  • Fresno Bee: "Voters should embrace the initiative and the changes it would bring to our state's boom-or-bust revenue streams. This proposal is the result of compromises made by leaders of both political parties and comes after years of negotiations. Vote "yes"on Proposition 2."[72]
  • Los Angeles News Group: "Since our elected leaders can’t budget for a rainy day simply because it’s a good idea, Proposition 2 on the state’s November ballot seeks to write into law the necessity to do so. Given the reality of how close to the fiscal edge California came in recent economic downturns, we strongly endorse a yes vote on Prop. 2."[73]
    • Los Angeles News Group endorsement included the following affiliate publications: Daily Breeze,[74] San Gabriel Valley Tribune,[75] Pasadena Star News,[76] Whittier Daily News,[77] Daily Bulletin,[78] San Bernardino Sun [79]
  • The Malibu Times: "'Yes' — actually an emphatic 'Yes.' It creates a rainy day fund, had full bipartisan support in the legislature without a dissenting vote and hopefully will get us off the merry-go-round of spending too much money in the good years and not having enough in the bad years."[80]
  • Monterey County Herald: "Under the title State Budget — Budget Stabilization Account, this measure takes on one of the big problems that can face California's finances: predictability."[81]
  • Victorville Daily Press: "They spend it all, and then some, every year. Force them to save. Vote Yes on 2."[82]
  • San Diego CityBeat: "The idea is to help lessen the volatility of California’s boom-and-bust budget cycles. Pretty much everyone is for it—including both the Democratic and Republican parties—and there’s no real opposition. Add us to the list of supporters."[83]
  • Marin Independent Journal: "The state's fiscal outlook is improving, but California still faces a mountain of debt, including state and local pension debt. Proposition 2 will make sure that greater budgetary prudence is used in running California."[84]


  • East Bay Express endorsed a "no" vote.[85]
  • Napa Valley Register: "We were also dismayed by the provision, inserted at the last minute without adequate public or legislative review, that would limit the amount that school districts can accumulate in their own reserve funds. This provision was not subject to sufficient scrutiny and appears to be an effort by labor groups to force school districts to spend money that officials believe would better be saved."[86]
  • Ventura County Star endorsed a "no" vote.[87]


See also: Polls, 2014 ballot measures
California Proposition 2 (2014)
Poll Support OpposeUndecidedMargin of ErrorSample Size
Public Policy Institute of California
9/8/2014 - 9/15/2014
Hoover Institute Golden State Poll
10/3/2014 - 10/17/2014
Public Policy Institute of California
10/12/2014 - 10/19/2014
USC Dornsife/Los Angeles Times Poll
10/22/2014 - 10/29/2014
AVERAGES 48% 28.25% 23.25% +/-3.41 1,554
Note: The polls above may not reflect all polls that have been conducted in this race. Those displayed are a random sampling chosen by Ballotpedia staff. If you would like to nominate another poll for inclusion in the table, send an email to

Path to the ballot

See also: Amending the California Constitution

The timeline for the enactment of ACA 1 was as follows:[88]

Similar measures

See also

Additional reading

External links

Basic information

Suggest a link




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  2. 2.0 2.1 2.2 California Secretary of State, "ACA 1," accessed June 19, 2014
  3. 3.0 3.1 3.2 California Legislature, "ACA-1 Bill Analysis," accessed June 19, 2014
  4. 4.0 4.1 4.2 Official Voter Information Guide for November 4, 2014 Election, "Ballot Title and Summary," accessed September 9, 2014
  5. 5.0 5.1 5.2 5.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  6. Sacramento Bee, "Union-backed measures in Calif. leave governor in jam," September 11, 2011
  7. The Sacramento Bee, "Governor calls special session on rainy-day fund," April 16, 2014 (dead link)
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