California Proposition 2, Changes to State Budget Stabilization Fund Amendment (2014)

California Proposition 2
Election date November 4, 2014
Topic State and local government budgets, spending and finance
Status a Approved
Type Constitutional amendment	Origin State legislature

California Proposition 2 was on the ballot as a legislatively referred constitutional amendment in California on November 4, 2014. It was approved.

A "yes" vote supported making the following changes: requiring 1.5% of general fund revenues and an amount equal to revenues derived from capital gains-related taxes in situations where such tax revenues are in excess of 8% of general fund revenues to be deposited into the Budget Stabilization Fund (BSA); requiring from the 2015-2016 fiscal year until the 2029-2030 fiscal year, 50% of the revenues that would have otherwise been deposited into the BSA to be used to pay for outstanding fiscal obligations; permitting the legislature to suspend or reduce deposits to the BSA and upon the governor declaring a budget emergency; and creating the Public School System Stabilization Account (PSSSA).

A "no" vote opposed making changes to the Budget Stabilization Fund established in 2004.

Election results

California Proposition 2
Result		Votes	Percentage
Yes		4,831,045	69.12%
No		2,158,004	30.88%

Results are officially certified.

Source

Overview

The measure altered 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 also established a Public School System Stabilization Account (PSSSA).

ACA 1:

• Required 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.

• Required 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 were scheduled to begin by no later than October 1, 2015. Deposits were to be made until the BSA balance reached an amount equal to 10 percent of general fund revenues.

• Required 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.

• Permitted the legislature to suspend or reduce deposits to the BSA and withdraw for appropriation from the BSA upon the governor declaring a budget emergency.

• Created a distinct budget stabilization fund known as the “Proposition 98 Reserve” or Public School System Stabilization Account (PSSSA). The PSSSA is funded by a transfer of capital gains-related tax revenues in excess of 8 percent of general fund revenues. Funds are 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.

Text of measure

Ballot title

The ballot title for Proposition 2 was as follows:

“

State Budget. Budget Stabilization Account. Legislative Constitutional Amendment.

”

Ballot summary

The ballot summary for this measure was:

“

• 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.

”

Full Text

The full text of this measure is available here.

Fiscal impact statement

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.

”

Constitutional changes

Note: Hover over the text and scroll to see the full text.

Article IV
Sec. 12.5
Within 10 days following the submission of a budget pursuant to subdivision (a) of Section 12, following the proposed adjustments to the Governor’s Budget required by subdivision (e) of Section 13308 of the Government Code or a successor statute, and following the enactment of the budget bill, or as soon as feasible thereafter, the Director of Finance shall submit to the Legislature both of the following:

(a) Estimates of General Fund revenues for the ensuing fiscal year and for the three fiscal years thereafter.

(b) Estimates of General Fund expenditures for the ensuing fiscal year and for the three fiscal years thereafter.

Article XVI
Sec. 20
(a) The Budget Stabilization Account is hereby created in the General Fund.
(b) In each fiscal year as specified in paragraphs (1) to (3), inclusive, the Controller shall transfer from the General Fund to the Budget Stabilization Account the following amounts:

(1) No later than September 30, 2006, a sum equal to 1 percent of the estimated amount of General Fund revenues for the 2006-07 fiscal year.

(2) No later than September 30, 2007, a sum equal to 2 percent of the estimated amount of General Fund revenues for the 2007-08 fiscal year.

(3) No later than September 30, 2008, and annually thereafter, a sum equal to 3 percent of the estimated amount of General Fund revenues for the current fiscal year.

(c) The transfer of moneys shall not be required by subdivision (b) in any fiscal year to the extent that the resulting balance in the account would exceed 5 percent of the General Fund revenues estimate set forth in the budget bill for that fiscal year, as enacted, or eight billion dollars ($8,000,000,000), whichever is greater. The Legislature may, by statute, direct the Controller, for one or more fiscal years, to transfer into the account amounts in excess of the levels prescribed by this subdivision.
(d) Subject to any restriction imposed by this section, funds transferred to the Budget Stabilization Account shall be deemed to be General Fund revenues for all purposes of this Constitution.
(e) The transfer of moneys from the General Fund to the Budget Stabilization Account may be suspended or reduced for a fiscal year as specified by an executive order issued by the Governor no later than June 1 of the preceding fiscal year.
(f)

(1) Of the moneys transferred to the account in each fiscal year, 50 percent, up to the aggregate amount of five billion dollars ($5,000,000,000) for all fiscal years, shall be deposited in the Deficit Recovery Bond Retirement Sinking Fund Subaccount, which is hereby created in the account for the purpose of retiring deficit recovery bonds authorized and issued as described in Section 1.3, in addition to any other payments provided for by law for the purpose of retiring those bonds. The moneys in the sinking fund subaccount are continuously appropriated to the Treasurer to be expended for that purpose in the amounts, at the times, and in the manner deemed appropriate by the Treasurer. Any funds remaining in the sinking fund subaccount after all of the deficit recovery bonds are retired shall be transferred to the account, and may be transferred to the General Fund pursuant to paragraph (2).

(2) All other funds transferred to the account in a fiscal year shall not be deposited in the sinking fund subaccount and may, by statute, be transferred to the General Fund.

(a)

(1) The Budget Stabilization Account is hereby created in the General Fund.

(2) For the 2015–16 fiscal year and each fiscal year thereafter, based on the Budget Act for the fiscal year, the Controller shall transfer from the General Fund to the Budget Stabilization Account, no later than October 1, a sum equal to 1.5 percent of the estimated amount of General Fund revenues for that fiscal year.

(b)

(1) For the 2015–16 fiscal year and each fiscal year thereafter, based on the Budget Act for the fiscal year, the Department of Finance shall provide to the Legislature all of the following information:

(A) An estimate of the amount of General Fund proceeds of taxes that may be appropriated pursuant to Article XIII B for that fiscal year.

(B)

(i) An estimate of that portion of the General Fund proceeds of taxes identified in subparagraph (A) that is derived from personal income taxes paid on net capital gains.

(ii) The portion of the estimate in clause (i) that exceeds 8 percent of the estimate made under subparagraph (A).

(C) That portion of the state’s funding obligation under Section 8 that results from including the amount calculated under clause (ii) of subparagraph (B), if any, as General Fund proceeds of taxes.

(D) The amount of any appropriations described in clause (ii) of subparagraph (B) of paragraph (1) of, or subparagraph (C) of paragraph (2) of, subdivision (c), that are made from the revenues described in clause (ii) of subparagraph (B) of this paragraph.

(E) The amount resulting from subtracting the combined values calculated under subparagraphs (C) and (D) from the value calculated under clause (ii) of subparagraph (B). If less than zero, the amount shall be considered zero for this purpose.

(F) The lesser of the amount calculated under subparagraph (E) or the amount of transfer resulting in the balance in the Budget Stabilization Account reaching the limit specified in subdivision (e).

(2) In the 2016–17 fiscal year, with respect to the 2015–16 fiscal year only, and in the 2017–18 fiscal year and each fiscal year thereafter, separately with respect to each of the two next preceding fiscal years, the Department of Finance shall calculate all of the following, using the same methodology used for the relevant fiscal year, and provide those calculations to the Legislature:

(A) An updated estimate of the amount of General Fund proceeds of taxes that may be appropriated pursuant to Article XIII B.

(B)

(i) An updated estimate of that portion of the General Fund proceeds of taxes identified in subparagraph (A) that is derived from personal income taxes paid on net capital gains.

(ii) That portion of the updated estimate in clause (i) that exceeds 8 percent of the updated estimate made under subparagraph (A).

(C) The updated calculation of that portion of the state’s funding obligation under Section 8 that results from including the updated amount calculated under clause (ii) of subparagraph (B), if any, as General Fund proceeds of taxes.

(D) The amount of any appropriations described in clause (ii) of subparagraph (B) of paragraph (1) of, or subparagraph (C) of paragraph (2) of, subdivision (c), that are made from the revenues described in clause (ii) of subparagraph (B) of paragraph (1).

(E) The amount resulting from subtracting the combined values calculated under subparagraphs (C) and (D) from the value calculated under clause (ii) of subparagraph (B). If less than zero, the amount shall be considered zero for this purpose.

(F) The amount previously transferred for the fiscal year by the Controller from the General Fund to the Budget Stabilization Account pursuant to subdivisions (c) and (d).

(G) The lesser of (i) the amount, not less than zero, resulting from subtracting, from the amount calculated under subparagraph (E), the value of any suspension or reduction of transfer pursuant to paragraph (1) of subdivision (a) of Section 22 previously approved by the Legislature for the relevant fiscal year, and the amount previously transferred for that fiscal year by the Controller as described in subparagraph (F), or (ii) the amount of transfer resulting in the balance in the Budget Stabilization Account reaching the limit as specified in subdivision (e).

(c)

(1)

(A) By October 1 of the 2015–16 fiscal year and each fiscal year thereafter to the 2029–30 fiscal year, inclusive, based on the estimates set forth in the annual Budget Act pursuant to paragraphs (2) and (3) of subdivision (h), and the sum identified in paragraph (2) of subdivision (a), the Controller shall transfer amounts from the General Fund and the Budget Stabilization Account, pursuant to a schedule provided by the Director of Finance, as provided in subparagraph (B).

(B) Notwithstanding any other provision of this section, in the fiscal year to which the Budget Act identified in subparagraph (A) applies:

(i) Fifty percent of both the amount identified in paragraph (2) of subdivision (a), and the amount resulting from subtracting the value calculated under subparagraph (C) of paragraph (1) of subdivision (b) from the value calculated under clause (ii) of subparagraph (B) of paragraph (1) of subdivision (b), shall be transferred from the General Fund to the Budget Stabilization Account.

(ii) The remaining 50 percent shall be appropriated by the Legislature for one or more of the following obligations and purposes:

(I) Unfunded prior fiscal year General Fund obligations pursuant to Section 8 that existed on July 1, 2014.

(II) Budgetary loans to the General Fund, from funds outside the General Fund, that had outstanding balances on January 1, 2014.

(III) Payable claims for mandated costs incurred prior to the 2004–05 fiscal year that have not yet been paid, and that pursuant to paragraph (2) of subdivision (b) of Section 6 of Article XIII B are permitted to be paid over a term of years, as prescribed by law.

(IV) Unfunded liabilities for state-level pension plans and prefunding other postemployment benefits, in excess of current base amounts as established for the fiscal year in which the funds would otherwise be transferred to the Budget Stabilization Account. For the purpose of this subclause, current base amounts are those required to be paid pursuant to law, an approved memorandum of understanding, benefit schedules established by the employer or entity authorized to establish those contributions for employees excluded or exempted from collective bargaining, or any combination of these. To qualify under this subclause, the appropriation shall supplement and not supplant funding that would otherwise be made available to pay for the obligations described in this subclause for the fiscal year or the subsequent fiscal year.

(2)

(A) By October 1 of the 2030–31 fiscal year and each fiscal year thereafter, based on the estimates set forth in the annual Budget Act pursuant to paragraphs (2) and (3) of subdivision (h), the Controller shall transfer amounts from the General Fund to the Budget Stabilization Account, pursuant to a schedule provided by the Director of Finance, as provided in subparagraph (B).

(B) In the fiscal year to which the Budget Act identified in subparagraph (A) applies, both the amount identified in paragraph (2) of subdivision (a), and the amount resulting from subtracting the value calculated under subparagraph (C) of paragraph (1) of subdivision (b) from the value calculated under clause (ii) of subparagraph (B) of paragraph (1) of subdivision (b), shall be transferred from the General Fund to the Budget Stabilization Account.

(C) Notwithstanding any other provision of this section, the Legislature may appropriate up to 50 percent of both the amount identified in paragraph (2) of subdivision (a), and of the amount resulting from subtracting the value calculated under subparagraph (C) of paragraph (1) of subdivision (b) from the value calculated under clause (ii) of subparagraph (B) of paragraph (1) of subdivision (b), for one or more of the obligations and purposes described in clause (ii) of subparagraph (B) of paragraph (1).

(3) The transfers described in this subdivision are subject to suspension or reduction pursuant to paragraph (1) of subdivision (a) of Section 22.

(d) By October 1 of the 2016–17 fiscal year and each fiscal year thereafter, based on the estimates set forth in the annual Budget Act pursuant to paragraphs (4) and (5) of subdivision (h), the Controller shall transfer amounts between the General Fund and the Budget Stabilization Account pursuant to a schedule provided by the Director of Finance, as follows:

(1) If the amount in subparagraph (G) of paragraph (2) of subdivision (b) is greater than zero, transfer that amount from the General Fund to the Budget Stabilization Account, subject to any suspension or reduction of this transfer pursuant to paragraph (1) of subdivision (a) of Section 22.

(2) If the amount described in subparagraph (F) of paragraph (2) of subdivision (b) is greater than the amount calculated under subparagraph (E) of paragraph (2) of subdivision (b), transfer that excess amount from the Budget Stabilization Account back to the General Fund.

(e) Notwithstanding any other provision of this section, the amount of a transfer to the Budget Stabilization Account pursuant to paragraph (2) of subdivision (a) and subdivisions (c) and (d) for any fiscal year shall not exceed an amount that would result in a balance in the account that, when the transfer is made, exceeds 10 percent of the amount of General Fund proceeds of taxes for the fiscal year estimated pursuant to subdivision (b). For any fiscal year, General Fund proceeds of taxes that, but for this paragraph, would have been transferred to the Budget Stabilization Account may be expended only for infrastructure, as defined by Section 13101 of the Government Code, as that section read on January 1, 2014, including deferred maintenance thereon.
(f) The funds described in subdivision (b) as General Fund proceeds of taxes are General Fund proceeds of taxes for purposes of Section 8 for the fiscal year to which those proceeds are attributed, but are not deemed to be additional General Fund proceeds of taxes on the basis that the funds are thereafter transferred from the Budget Stabilization Account to the General Fund.
(g) The Controller may utilize funds in the Budget Stabilization Account, that he or she determines to currently be unnecessary for the purposes of this section, to help manage General Fund daily cash flow needs. Any use pursuant to this subdivision shall not interfere with the purposes of the Budget Stabilization Account.
(h) The annual Budget Act shall include the estimates described in all of the following:

(1) Paragraph (2) of subdivision (a).

(2) Clause (ii) of subparagraph (B) of paragraph (1) of subdivision (b).

(3) Subparagraph (F) of paragraph (1) of subdivision (b).

(4) Clause (ii) of subparagraph (B) of paragraph (2) of subdivision (b).

(5) Subparagraph (G) of paragraph (2) of subdivision (b).

Sec. 21
(a) The Public School System Stabilization Account is hereby created in the General Fund. (b) On or before October 1 of each fiscal year, commencing with the 2015–16 fiscal year, based on the amounts identified in the annual Budget Act pursuant to subdivision (b) of Section 20, the Controller shall transfer, pursuant to a schedule provided by the Director of Finance, amounts from the General Fund to the Public School System Stabilization Account as follows:

(1)

(A) For the 2015–16 fiscal year, and for each fiscal year thereafter, any positive amount identified in subparagraph (C) of paragraph (1) of subdivision (b) of Section 20 shall be transferred from the General Fund to the Public School System Stabilization Account in the amount calculated under subparagraph (B), subject to any reduction or suspension of this transfer pursuant to any other provision of this section or paragraph (3) of subdivision (a) of Section 22.

(B) The Director of Finance shall calculate the amount by which the positive amount identified in subparagraph (C) of paragraph (1) of subdivision (b) of Section 20, in combination with all other moneys required to be applied by the State for the support of school districts and community college districts for that fiscal year pursuant to Section 8, exceeds the sum of the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B and allocated local proceeds of taxes in the prior fiscal year, plus any allocations from the Public School System Stabilization Account in the prior fiscal year, less any transfers to the Public School System Stabilization Account pursuant to this section in the prior fiscal year and any revenues allocated pursuant to subdivision (a) of Section 8.5, adjusted for the percentage change in average daily attendance and adjusted for the higher of the change in the cost of living pursuant to paragraph (1) of subdivision (e) of Section 8 of Article XIII B or the cost of living adjustment applied to school district and community college district general purpose apportionments.

(2)

(A) Commencing with the 2016–17 fiscal year, and for each fiscal year thereafter, to the extent the amount calculated under this paragraph exceeds the amounts previously transferred by the Controller from the General Fund to the Public School System Stabilization Account for a preceding fiscal year, any positive amount calculated pursuant to subparagraph (C) of paragraph (2) of subdivision (b) of Section 20 for that fiscal year shall be transferred from the General Fund to the Public School System Stabilization Account in the amount calculated under subparagraph (B), subject to any reduction or suspension of this transfer pursuant to any other provision of this section or paragraph (3) of subdivision (a) of Section 22.

(B) The Director of Finance shall calculate the amount by which the positive amount identified in subparagraph (C) of paragraph (2) of subdivision (b) of Section 20, in combination with all other moneys required to be applied by the State for the support of school districts and community college districts for that fiscal year pursuant to Section 8, exceeds the sum of the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B and allocated local proceeds of taxes in the prior fiscal year, plus any allocations from the Public School System Stabilization Account in the prior fiscal year, less any transfers to the Public School System Stabilization Account pursuant to this section in the prior fiscal year and any revenues allocated pursuant to subdivision (a) of Section 8.5, adjusted for the percentage change in average daily attendance and adjusted for the higher of the change in the cost of living pursuant to the paragraph (1) of subdivision (e) of Section 8 of Article XIII B or the cost of living adjustment applied to school district and community college district general purpose apportionments.

(c) Commencing with the 2016–17 fiscal year, and for each fiscal year thereafter, if the amount calculated pursuant to subparagraph (C) of paragraph (2) of subdivision (b) of Section 20 for a fiscal year is less than the amounts previously transferred by the Controller from the General Fund to the Public School System Stabilization Account for that fiscal year, the amount of this difference shall be appropriated and allocated by the State from the Public School System Stabilization Account for the support of school districts and community college districts.
(d) Notwithstanding any other provision of this section, the amount transferred to the Public School System Stabilization Account pursuant to subdivision (b) for a fiscal year shall not exceed the amount by which the amount of state support calculated pursuant to paragraph (1) of subdivision (b) of Section 8 exceeds the amount of state support calculated pursuant to paragraph (2) of subdivision (b) of Section 8 for that fiscal year. If the amount of state support calculated pursuant to paragraph (1) of subdivision (b) of Section 8 does not exceed the amount of state support calculated pursuant to paragraph (2) of subdivision (b) of Section 8 for a fiscal year, no amount shall be transferred to the Public School System Stabilization Account pursuant to subdivision (b) for that fiscal year.
(e) Notwithstanding any other provision of this section, no amount shall be transferred to the Public School System Stabilization Account pursuant to subdivision (b) for a fiscal year for which a maintenance factor is determined pursuant to subdivision (d) of Section 8.
(f) Notwithstanding any other provision of this section, no amount shall be transferred to the Public School System Stabilization Account pursuant to subdivision (b) until the maintenance factor determined pursuant to subdivisions (d) and (e) of Section 8 for fiscal years prior to the 2014–15 fiscal year has been fully allocated. Transfers may be made beginning in the fiscal year following the fiscal year in which it is determined, based on the Budget Act for that fiscal year, that this condition will be met. If a transfer is made for a fiscal year for which it is later determined that this condition has not been met, the amount of the transfer shall be appropriated and allocated from the Public School System Stabilization Account for the support of school districts and community college districts. No transfer shall be made for a year for which it was determined, based on the Budget Act for that fiscal year, that this condition would not be met but was subsequently determined to have been met in that year or a prior fiscal year.
(g) Notwithstanding any other provision of this section, no amount shall be transferred to the Public School System Stabilization Account for any fiscal year for which any of the provisions of subdivision (b) of Section 8 are suspended pursuant to subdivision (h) of Section 8.
(h) Notwithstanding any other provision of this section, for any fiscal year, the amount of a transfer to the Public School System Stabilization Account pursuant to subdivision (b) shall not exceed an amount that would result in a balance in the account that is in excess of 10 percent of the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B and allocated local proceeds of taxes for that fiscal year pursuant to Section 8. For any fiscal year, General Fund proceeds of taxes that, but for this subdivision, would have been transferred to the Public School System Stabilization Account shall be applied by the State for the support of school districts and community colleges.
(i) In any fiscal year in which the amount required to be applied by the State for the support of school districts and community college districts for that fiscal year pursuant to Section 8 is less than the total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII   B and allocated local proceeds of taxes in the prior fiscal year, plus any allocations from the Public School System Stabilization Account in the prior fiscal year, less any transfers to the Public School System Stabilization Account in the prior fiscal year and any revenues allocated pursuant to subdivision (a) of Section 8.5, adjusted for the percentage change in average daily attendance and adjusted for the higher of the change in the cost of living pursuant to paragraph (1) of subdivision (e) of Section 8 of Article XIII   B or the cost of living adjustment applied to school district and community college district general purpose apportionments, the amount of the deficiency shall be appropriated and allocated by the State from the Public School System Stabilization Account for the support of school districts and community college districts.
(j) Funds transferred to the Public School System Stabilization Account shall be deemed, for purposes of Section 8, to be moneys applied by the State for the support of school districts and community college districts in the fiscal year for which the transfer is made, and not in the fiscal year in which moneys are appropriated from the account.
(k) Nothing in this section shall be construed to reduce the amount of the moneys required to be applied by the State for the support of school districts and community college districts pursuant to Sections 8 and 8.5.
(l) The Controller may utilize funds in the Public School System Stabilization Account, that he or she determines to currently be unnecessary for the purposes of this section, to help manage General Fund daily cashflow needs. Any use of funds by the Controller pursuant to this subdivision shall not interfere with the purposes of the Public School System Stabilization Account.

Sec. 22
(a) Upon the Governor’s proclamation declaring a budget emergency and identifying the conditions constituting the emergency, the Legislature may pass a bill that does any of the following:

(1) Suspends or reduces by a specified dollar amount for one fiscal year the transfer of moneys from the General Fund to the Budget Stabilization Account required by Section 20.

(2)

(A) Returns funds that have been transferred to the Budget Stabilization Account pursuant to Section 20 to the General Fund for appropriation to address the budget emergency.

(B) Not more than 50 percent of the balance in the Budget Stabilization Account may be returned to the General Fund for appropriation pursuant to subparagraph (A) in any fiscal year, unless funds in the Budget Stabilization Account have been returned to the General Fund for appropriation in the immediately preceding fiscal year.

(3) Suspends or reduces by a specified dollar amount for one fiscal year the transfer of moneys from the General Fund to the Public School System Stabilization Account required by Section 21.

(4) Appropriates funds transferred to the Public School System Stabilization Account pursuant to Section 21 and allocates those funds for the support of school districts and community college districts.

(b) For purposes of this section, “budget emergency” means any of the following:

(1) An emergency declared by the Governor, within the meaning of paragraph (2) of subdivision (c) of Section 3 of Article XIII B.

(2)

(A) A determination by the Governor that estimated resources are inadequate to fund General Fund expenditures for the current or ensuing fiscal year, after setting aside funds for the reserve for liquidation of encumbrances, at a level equal to the highest amount of total General Fund expenditures estimated at the time of enactment of any of the three most recent Budget Acts, adjusted for both of the following:

(i) The annual percentage change in the cost of living for the State, as measured by the California Consumer Price Index.

(ii) The annual percentage growth in the civilian population of the State pursuant to subdivision (b) of Section 7901 of the Government Code.

(B) The maximum amount that may be withdrawn for a budget emergency determined under this paragraph shall not exceed either an amount that would result in a total General Fund expenditure level for a fiscal year that is greater than the highest amount of total General Fund expenditures estimated at the time of enactment of any of the three most recent Budget Acts, as calculated pursuant to subparagraph (A), or any limit imposed by subparagraph (B) of paragraph (2) of subdivision (a).

Support

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

Supporters

Officials

• Jerry Brown, Governor (D)
• Neel Kashkari, Gubernatorial candidate (R)
• Dr. Michael Kirst, President, California Board of Education
• Kristin Olsen, Assembly Minority Leader-Elect (R)
• Bob Huff, Senate Minority Leader (R)
• Jeff Gorell, Assembly Budget Vice Chair (R)
• Jim Nielsen, Senate Budget Vice Chair (R)

Organizations

• California Democratic Party
• California Republican Party
• California Forward Action Fund
• California Chamber of Commerce
• League of Women Voters of California
• Howard Jarvis Taxpayers Association
• League of California Cities
• California State Association of Counties
• California Farm Bureau Federation
• Bay Area Council
• State Building and Construction Trades Council of California
• Western Growers
• Rural County Representatives of California
• Los Angeles Area Chamber of Commerce
• Fullerton Chamber of Commerce
• San Diego County Taxpayers Association
• Democratic Party of Sacramento County
• Butte County Democratic Party
• Fresno County Democrats
• Democratic Party of San Fernando Valley
• San Diego County Democratic Party
• Los Angeles County Democratic Party
• Democratic Party of Orange County
• Republican Party of San Diego County
• Nevada County Republican Party
• San Francisco Republican Party

Individuals

• Sean Parker, co-founder of Napster

Arguments

Gov. Jerry Brown (D), Asm. 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:

“	VOTE YES ON PROPOSITION 2 TO CREATE A RAINY DAY FUND THAT PROTECTS TAXPAYERS AND SCHOOLS. 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. VOTING YES ON PROPOSITION 2 WILL: 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. CREDIT RATING AGENCIES AND NEWSPAPERS SUPPORT A STRONG RAINY DAY FUND. 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." VOTE YES ON PROPOSITION 2 AND PROTECT CALIFORNIA'S BALANCED BUDGET!	”
—Gov. Jerry Brown, Asm. John Perez and Allan Zaremberg

Campaign advertisements

Television

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

Radio

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

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

Opposition

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

Opponents

Former officials

• Former California Superintendent of Public Instruction Delaine Eastin (D)

Organizations

• Educate Our State
• Alliance of Californians for Community Empowerment Action (ACCE Action)
• Californians United to Reform Education
• California Partnership
• Courage Campaign Issues Committee
• CREDO Action
• Evolve
• Potrero Hill Democratic Club
• Educate.Advocate.
• Bend The Arc: A Jewish Partnership for Justice
• California National Organization for Women
• California Council of Churches IMPACT
• California Rising
• Green Party
• Libertarian Party
• Peace and Freedom Party
• California Tea Party Groups Coalition

Individuals

• Ellen Brown, President of the Public Banking Institute

Arguments

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?	”
—2 Bad For Kids

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:

• "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."

Campaign finance

See also: Ballot measure campaign finance, 2014

The campaign finance information on this page reflects the most recent scheduled reports that Ballotpedia has processed, which covered through December 31, 2014.

Ballotpedia identified eight committees registered to support Proposition 2. Multiple committees were also registered in support of Proposition 1, and the campaign finance totals could not be disambiguated.

	Cash Contributions	In-Kind Contributions	Total Contributions	Cash Expenditures	Total Expenditures
Support	$15,344,471.62	$5,417,010.59	$20,761,482.21	$12,997,560.17	$18,414,570.76
Oppose	$0.00	$0.00	$0.00	$0.00	$0.00
Total	$15,344,471.62	$5,417,010.59	$20,761,482.21	$12,997,560.17	$18,414,570.76

Support

The following table includes contribution and expenditure totals for the committees in support of the measure.

Committees in support of Proposition 2
Committee	Cash Contributions	In-Kind Contributions	Total Contributions	Cash Expenditures	Total Expenditures
Yes on Props 1 and 2, a bipartisan coalition of business, labor, Republicans, Democrats and Governor Brown	$12,308,423.37	$5,382,235.10	$17,690,658.47	$10,996,254.78	$16,378,489.88
CA Business PAC, Yes on 1 and 2	$1,169,500.00	$0.00	$1,169,500.00	$908,622.66	$908,622.66
Conservation Action Fund - Yes on Propositions 1 and 2	$915,860.63	$26,664.91	$942,525.54	$704,612.49	$731,277.40
Laborers Pacific Southwest Regional Organizing Coalition Issues PAC - Yes on Props 1 and 2	$439,171.01	$3,725.27	$442,896.28	$10,475.50	$14,200.77
Levine Ballot Issue Committee, Elevate California: Yes on 2	$222,500.00	$0.00	$222,500.00	$215,413.38	$215,413.38
California Forward Issues Action Fund - Yes on Proposition 2	$160,355.00	$2,817.20	$163,172.20	$150,918.45	$153,735.65
Southern California District Council of Laborers Issues PAC - yes on Props 1 and 2	$128,661.61	$0.00	$128,661.61	$11,262.91	$11,262.91
California Water Association Political Issues Committee - Yes on Props 1 and 2	$0.00	$1,568.11	$1,568.11	$0.00	$1,568.11
Total	$15,344,471.62	$5,417,010.59	$20,761,482.21	$12,997,560.17	$18,414,570.76

Donors

The following were the top donors who contributed to the support committees.

Donor	Cash Contributions	In-Kind Contributions	Total Contributions
Brown for Governor 2014	$0.00	$5,196,528.75	$5,196,528.75
Sean Parker	$1,000,000.00	$0.00	$1,000,000.00
L. John Doerr	$875,000.00	$0.00	$875,000.00
California Alliance For Jobs - Rebuild California Committee	$500,000.00	$33,750.00	$533,750.00
California Hospitals Committee On Issues, Sponsored By Cahhs	$500,000.00	$0.00	$500,000.00

Methodology

To read Ballotpedia's methodology for covering ballot measure campaign finance information, click here.

Media editorial positions

See also: Endorsements of California ballot measures, 2014

Support

• 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."
• 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."
• 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."
• San Jose Mercury News: "Proposition 44 [Proposition 2] would impose desperately needed fiscal discipline on lawmakers, and that deserves voter support."
• U-T San Diego: "This proposal would create a healthier budget status quo. Vote yes on Proposition 2."
• 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."
• 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."
• 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."
• Contra Costa Times: "Proposition 2 would impose desperately needed fiscal discipline on lawmakers, and that deserves voter support."
• 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."
• Riverside Press-Enterprise: "That protective restraint is Prop. 2. It merits the support of California voters."
• 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."
• 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."
• 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."
  • Los Angeles News Group endorsement included the following affiliate publications: Daily Breeze, San Gabriel Valley Tribune, Pasadena Star News, Whittier Daily News, Daily Bulletin, San Bernardino Sun
• 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."
• 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."
• Victorville Daily Press: "They spend it all, and then some, every year. Force them to save. Vote Yes on 2."
• 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."
• 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."

Opposition

• East Bay Express endorsed a "no" vote.
• 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."
• Ventura County Star endorsed a "no" vote.

Polls

See also: Polls, 2014 ballot measures

California Proposition 2 (2014)
Poll	Support	Oppose	Undecided	Margin of error	Sample size
USC Dornsife/Los Angeles Times Poll 10/22/2014 - 10/29/2014	53.0%	27.0%	18.0%	+/-2.9	1,537
Public Policy Institute of California 10/12/2014 - 10/19/2014	49.0%	34.0%	17.0%	+/-3.5	1,704
Hoover Institute Golden State Poll 10/3/2014 - 10/17/2014	47.0%	19.0%	34.0%	+/-3.65	1,273
Public Policy Institute of California 9/8/2014 - 9/15/2014	43.0%	33.0%	24.0%	+/-3.6	1,702
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 editor@ballotpedia.org.

Background

History

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.

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. This replacement, which became known as ACA 1, was approved by the legislature and ultimately replaced the old measure on May 16, 2014.

Reserves

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

• 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 created a distinct budget stabilization fund known as the “Proposition 98 Reserve” or Public School System Stabilization Account (PSSSA). The PSSSA is funded by a transfer of capital gains-related tax revenues in excess of 8 percent of general fund revenues. Funds are 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.

Related measures

• California Proposition 58, Balanced Budget Act (March 2004) a

Path to the ballot

See also: Amending the California Constitution

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

• April 16, 2014: Gov. Brown calls for a special session to pass ACA 1
• April 24, 2014: Introduced into the California State Assembly
• April 28, 2014: Introduced by Assembly Budget Committee
• May 15, 2014: Passed the Assembly
• May 15, 2014: Passed the Senate
• May 16, 2014: Filed with California Secretary of State
• November 4, 2014: Approved

See also

2014 Measures

• 2014 Measures
• Budget stabilization funds on the ballot
• 2014 legislative sessions

California

• California ballot measures
• California ballot measure laws

News and analysis

• Ballot measure lawsuits
• Ballot measure readability
• Ballot measure polls

External links

Basic information

Suggest a link

• Assembly Constitutional Amendment 1
• Official State November 4, 2014 Election Guide
• Text of Proposition 2

Support

• Yes on Props 1 and 2
• Yes on Props 1 and 2 Twitter
• California Forward Action Fund - Yes on Proposition 2
• California Forward Action Fund- Yes on Proposition 2 Facebook
• California Forward Action Fund - Yes on Proposition 2 Twitter

Opposition

• 2 Bad for Kids
• 2 Bad for Kids Facebook
• Educate Our State
• Educate Our State Facebook
• Educate Our State Twitter