Gov. Jerry Brown and legislative leaders have agreed to replace the rainy day fund measure on the November ballot with a bipartisan plan that would set aside revenue equal to 10 percent of California's general fund, the Associated Press reported.
The Legislature is expected to vote on the replacement measure next week. It would then supersede the rainy day fund already slated to go before voters in the general election, according to AP.
The governor's office announced the deal Thursday, including statements of support from all four Democratic and Republican legislative leaders.
Senate President pro Tem Darrell Steinberg said the following in a release from the Governor's office:
This agreement strikes an appropriate balance between economic stability and economic growth. While we certainly don't wish to return to the past, we cannot stagnate in the present either. Instead of stockpiling money while ignoring looming debt, this smarter approach locks the state into saving and attacks our wall of debt and unfunded liabilities. The result is a healthy, prudent ‘three-thirds’ balance that repays debt aggressively, leaves room for reinvestment in infrastructure and people, and protects vital services from further cuts in future economic downturns.
The Rainy Day Fund agreement aims to:
- Increase deposits when the state experiences spikes in capital gains revenues, the state's most volatile tax revenue, and require annual deposits.
- Require supplemental payments to accelerate payoffs of the state’s debts and liabilities (estimated at $340 billion, according to AP)
- Raise the maximum size of the Rainy Day Fund to 10 percent of General Fund revenues.
- Allow transfers to be suspended and withdrawals to be made from the Rainy Day Fund when needed during recessions within prescribed limits.
- Create a Proposition 98 reserve to smooth school spending and avoid future cuts. This reserve for schools makes no changes to the guaranteed level of funding dedicated to schools under Proposition 98. In addition, the Proposition 98 reserve would not begin until school funding is fully restored following cuts made during the Great Recession.