Increases State's Rainy Day Fund. Legislative Constitutional Amendment.

Proposition 2 requires the state to keep making deposits into its main rainy day fund, the Budget Stabilization Account, until the fund reaches 20 percent of General Fund taxes, instead of the current 10 percent.

Proposition 2 requires the state to make even larger rainy day fund deposits in years when revenues from taxes on investment gains are very high, such as when the stock market is booming.

Proposition 2 extends the requirement that the state make extra debt payments, equal to the amount initially deposited into the rainy day fund each year, through 2040 instead of 2030.

Proposition 2 lets the extra debt payments be used for more purposes: required payments to schools and community colleges, repaying borrowing from other state funds, and repaying certain loans from the federal government.

Proposition 2 stops rainy day fund deposits from counting toward the state appropriations limit, the constitutional cap on how much tax revenue the state can spend. The money would count toward the limit when it is taken out.

Proposition 2 also stops deposits into a separate account the state uses to set aside funds when revenues are surging from counting toward the state appropriations limit, up to 10 percent of General Fund taxes each year. The money would count toward the limit when it is taken out.

The Legislative Analyst estimated that state budget reserves would be higher under Proposition 2, which would make balancing the budget somewhat easier when revenues decline.

The Legislative Analyst estimated that, by requiring extra debt payments through 2040, Proposition 2 might lead the state to make more debt payments than it would without the measure.

"Proposition 2 strengthens that fund, so schools, healthcare, and public safety don't pay the price for Sacramento's boom-and-bust budgeting."

"DOUBLE THE STATE'S RESERVE REQUIREMENT—from 10 to 20 percent of General Fund revenues—so California has a real cushion, not a token one, when the next downturn hits."

"STOP SACRAMENTO POLITICIANS FROM OVERSPENDING—When tax revenues spike, this measure forces politicians to budget smarter by requiring the state to bank more of that windfall instead of committing it to new ongoing spending California can't sustain."

"GUARANTEE EDUCATION FUNDING IS PROTECTED IN THE STATE CONSTITUTION, even as reserves grow."

"INCREASE FINANCIAL SECURITY—As Washington moves to cut billions in health care and food assistance funding, this measure will ensure California is better prepared to absorb those losses without slashing the programs Californians depend on."

"California's own nonpartisan Legislative Analyst's Office has recommended that the state should be saving significantly more than current rules require."

"...Proposition 2 does not give Sacramento any new money to spend."

"Prop. 2 allows the politicians to gut the voter-imposed spending limit."

"Politicians can raid this new slush fund to feed their runaway spending habits."

"Prop. 2 creates loopholes and accounting gimmicks so politicians can eliminate any chance of you getting your tax rebate."

"Prop. 2 makes our budget more volatile—putting us at greater risk of a financial crisis."

"Within 24 hours of introducing this measure, many of the same politicians who praised it as a way to build reserves also supported legislation to suspend more than $5 billion in required deposits into the state's savings account."

"PROP. 2 DOES NOT GUARANTEE ANY NEW FUNDING FOR HEALTHCARE, EDUCATION OR PUBLIC SAFETY"