Budget experts warned early on that any new rainy-day reserve reliant on volatile capital gains revenue would be difficult to manage. They were right.
Less than six months after Gov. Jerry Brown and lawmakers approved the first deposit into the reserve approved by voters last November, the Legislature’s nonpartisan fiscal analyst estimated this week they were short by about $2.2 billion.
That will lead to the first “true-up,” a key feature of last year’s Proposition 2 and money the Legislature would otherwise have available for different priorities next year.
The actual true-up amount could change yet again. That’s because officials always have a hard time predicting capital gains collections, which can change significantly from year to year. Officials only now have a firm handle on capital gains revenue totals through 2013.
69.1 Percentage of California voters last November who supported Proposition 2.
Championed by Brown and legislative leaders, Proposition 2 puts 1.5 percent of general fund revenue, as well as capital gains revenue that exceeds 8 percent of general fund taxes, into a new account. Half of the money goes to the rainy-day reserve. The other half goes to pay off debt, including retirement and health obligations.
The 2015-16 budget approved in June included $3.7 billion in Proposition 2 payments. Under the the latest estimates from the analyst’s office, the Proposition 2 requirement for 2015-16 is $5.9 billion.
Under an alternate reading of Proposition 2, though, the true-up would be about $5 billion, the analyst’s office said.
Overall, the state budget should run large surpluses over the next few years, the analyst’s office projected.