SACRAMENTO -- Gov. Jerry Brown will join the push for a new ballot measure to help California stockpile cash as a buffer against future recessions, according to two Capitol officials.
The proposed measure, which would need approval from two-thirds of the Legislature before it could be presented to voters in November, would siphon off some tax revenue and channel it into a special savings account.
If successful, the account could mitigate the need for deep spending cuts during economic downturns and help California shed its reputation as a financial roller coaster.
The plan, put forward by Assembly Speaker John A. Pérez (D-Los Angeles) last May, will be included in Brown’s upcoming budget proposal, the officials said. They declined to speak publicly before the governor’s announcement, scheduled for Friday.
H.D. Palmer, spokesman for Brown’s Department of Finance, declined to say whether support for a ballot measure would be part of Brown’s budget blueprint.
But Brown said in a November speech at the Milken Institute, a think tank in Santa Monica, that he wanted to start saving.
Although “there will be a great effort to spend [surpluses] as quickly as possible,” the governor said, it’s important to be careful. California’s budget depends heavily on taxing the rich, and revenue can be unreliable.
“The only way to avoid that,” he said, is to put some capital gains revenue “in a rainy day fund,” Brown said.
A ballot measure aimed at shoring up California’s financial health could bolster Brown’s effort to burnish his fiscally cautious image while he seeks a fourth term in the governor’s office. Brown has raised millions of dollars for a likely reelection campaign.
Such a measure could also benefit Pérez, who is running for controller, a statewide position with responsibility for managing California’s cash.
It’s unclear when the governor and lawmakers would start putting money into a rainy day fund.
Brown has said he wants to repay debts the state incurred while it was papering over gaping budget deficits. Some Democratic lawmakers and activists are clamoring to restore funding for healthcare programs and social services cut deeply during the recession.
“We have a heavy emphasis on building for a rainy day when it’s still raining for some folks,” said Chris Hoene, who advocates for low-income families as executive director of the California Budget Project.
California already has a reserve fund, created by voters in 2004. But it has largely sat empty, and Brown has declined to put any money in it. There’s no firm requirement to fill the fund, and there was little appetite to do so during California’s budget crises.
But now administration officials and legislative analysts are expecting surpluses in the coming years, providing the state’s leaders with some flexibility to start saving. The surplus could hit $2.2 billion by June and swell to $9.6 billion in 2018, according to a November report from the nonpartisan Legislative Analyst’s Office.
“We need to finally build a reserve,” said Steve Levy, director of the Center for Continuing Study of the California Economy in Palo Alto, “so the next time there is a recession, we don’t need to use gimmicks.”
During the last downturn, California resorted to borrowing and shifting money between accounts when reduced spending wasn’t sufficient to balance the budget. Critics of such moves called them “smoke and mirrors” and said the budget was not truly balanced as required by state law.
The measure proposed by Pérez would replace a plan supported by Republicans and passed by the Legislature in 2010 but delayed until next November’s ballot.
Although that plan passed with bipartisan support three years ago, Democrats now say it is flawed because it would function as a spending cap, something they have opposed.
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