Legislative leaders reach deal on Brown’s rainy-day fund plan

California legislative leaders have reached a deal on Gov. Jerry Brown’s proposal to stockpile cash to cushion the state from future economic downturns and to pay off debt, according to Capitol sources close to the negotiations.

The bipartisan accord would ensure more dependable deposits into the state’s rainy-day fund, require some money be used to reduce debt and place stricter rules on when cash can be withdrawn from the reserve.

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FOR THE RECORD

An earlier version of this post incorrectly said the governor needed to sign a proposed constitutional amendment before it’s placed on the ballot. Such measures do not require the governor’s signature.

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The sources requested anonymity because they are not authorized to speak publicly about the negotiations. Top lawmakers were briefing their caucuses on the plan Thursday morning.

Under the proposed agreement, the sources said, 1.5% of general-fund revenues would be set aside every year. Half the money would be deposited into the reserve fund and the other half would be used to pay off debt and cover long-term costs such as public pensions.

More money would be set aside if there are jumps in revenue from taxes on capital gains.

In addition, the compromise would create new criteria for when money can be withdrawn from the reserve to prevent budget cuts -- revenues would have to dip lower than spending in the previous three years, meaning the state was struggling to meet its obligations.

Some revisions to Brown’s original proposal are aimed at satisfying Republicans, who were concerned that there wouldn’t be enough money deposited into the fund and that it would be too easy to pull money out.

Brown needs Republican support in the Senate because his measure, a constitutional amendment, would require two-thirds support and Democrats no longer have a supermajority.

Another change to the proposal -- requiring some money is used to pay off debt -- is geared toward pleasing Senate leader Darrell Steinberg (D-Sacramento).

If approved by the Legislature, the measure would be placed on the November ballot.

California has had a rainy-day fund since 2004, but it’s mostly sat empty amid persistent budget crises. Assembly Speaker John A. Pérez (D-Los Angeles) suggested strengthening the state’s savings last year, and Brown included his own version of the proposal in his January budget plan.

Last month, he called a special legislative session to focus attention on the issue, saying, “We simply must prevent the massive deficits of the last decade, and we can only do that by paying down our debts and creating a solid rainy-day fund.”