Save for – Gov. Gavin Newsom and top Democratic leaders say a proposed California constitutional amendment would let the state save more money for a rainy day by exempting certain deposits into savings accounts from the Gann spending limit and expanding the cap on the ra
SACRAMENTO — Gavin Newsom is asking Californians to change the rules of how the state spends and saves, and this time, the pitch isn’t about cutting services. It’s about keeping money aside so the state can avoid drastic program cuts when the economy turns.
The governor and Democratic leaders of the California Legislature plan to push a proposed constitutional amendment this week that would ask voters to grant the state more flexibility over state spending. The measure would exempt certain deposits into state savings accounts from a spending limit adopted through ballot measures dating back to the late 1970s. and it would increase the share of tax revenue allowed to go into the state’s “rainy day fund.”.
Newsom framed the change as a matter of resilience. In a statement. he said. “Putting money aside to protect ourselves from future uncertainties isn’t just good government; it’s common sense. ” adding that “California is strong and resilient. but we’re not immune to economic headwinds.” He said essential services are under pressure and that the state has a responsibility to safeguard the programs and investments Californians rely on.
At the center of the proposal is Assembly Constitutional Amendment 20, which Democrats are calling the “Save for California’s Future Act.” If it clears the political hurdles, voters would weigh in on the November ballot.
The plan is expected to face resistance from taxpayer advocates. Under California’s existing state appropriations restraint. also known as the Gann limit. lawmakers cannot spend more than an amount determined by a formula that considers annual tax proceeds. along with changes to population and the cost of living. Any tax revenue that exceeds that limit must be split between schools and refunds to taxpayers.
The limit generally applies to most appropriations of tax revenue, including money lawmakers set aside in the rainy day fund and other reserves. California voters have also capped the rainy day fund at 10% of general fund proceeds in a given year.
Newsom has argued that savings should not count as spending under state law. He has said state budget revenue can swing dramatically from year to year due to stock market activity, and that the current law prevents the state from saving more in strong years to stave off cuts in weaker ones.
Assembly Constitutional Amendment 20 would change that approach. The proposal would exempt deposits into the rainy day fund and a short-term reserve called the “Projected Surplus Temporary Holding Account” from the state appropriations limit. It would also raise the cap on the rainy day fund from 10% of general fund tax revenue to 20%.
Assembly Speaker Robert Rivas, a Democrat from Hollister, defended the measure as a leadership choice. In a statement. he said. “Californians live by a simple. bipartisan truth: set money aside when times are good so you’re ready when they’re not.” Rivas added that the “Save For California’s Future Act is what responsible leadership looks like — and future taxpayers will thank us for it.”.
The amendment is scheduled for a vote Thursday. If it is approved by two-thirds of lawmakers, the question will go to voters in November.
The practical effect. Democrats say. would be to reduce the likelihood that funds stashed away for future needs would be treated as expenditures counted toward the spending limit. That, supporters argue, would make it easier to save more during periods when revenue is stronger. It could also allow the state to hold onto money that might otherwise be returned to taxpayers under current law.
Newsom’s office and Democratic leadership are betting that Californians will view the tradeoff as straightforward: fewer constraints on saving now. so the state can protect essential programs later. For opponents. the issue is likely to be whether more flexibility means less accountability to the spending-and-refund framework already embedded in California’s tax and budget system.
California Gavin Newsom Democrats constitutional amendment Gann limit rainy day fund Save for California’s Future Act Assembly Constitutional Amendment 20 taxpayer advocates Sacramento
So basically they want to save money instead of spend it? Sounds good I guess.
I don’t get it, the “Gann limit” is like that old cap right? But now they’re saying loosen it but also call it saving for a rainy day… seems like a loophole waiting to happen.
This is gonna make Cali pocket more money, right? Like if they exempt deposits into savings, then it won’t count, and they can just move funds around. Also isn’t a rainy day fund already a thing? I feel like they’re always asking for more exceptions.
Not to be dramatic but every time politicians say “resilient” it means they’ll dodge cuts until after they get elected. If the economy turns they’ll tap the rainy day fund, sure, but watch them refill it with taxes anyway. I’m guessing taxpayer advocates are gonna be like “no” but probably it’ll still pass because CA voters always vote for new amendments somehow.