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Move to change 'rainy day' measure

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POSTED May 8, 2013 9:04 p.m.


 

SACRAMENTO  (AP) — The state Assembly speaker wants to replace a rainy day fund measure on the November 2014 ballot that was pushed by former Gov. Arnold Schwarzenegger and Republican lawmakers three years ago.

Speaker John Perez, D-Los Angeles, plans to announce a new ballot measure Wednesday, potentially making it more favorable for the public employee unions that support Democratic lawmakers. It calls for the rainy day fund to be built with extra capital gains taxes from the wealthy rather than from the state's general fund, which could take money away from state programs.

With two-thirds majorities in both houses of the Legislature, Democrats could change the ballot measure without Republican support.

Assemblyman Jeff Gorell, R-Camarillo, vice chairman of the Assembly Budget Committee, said it is "terribly disappointing" that the rainy day fund measure isn't in place now, but he hopes Perez is willing to work on a new bipartisan proposal. That would signal to voters that lawmakers are serious about dealing with peaks and troughs of the budget.

"I am offering myself to engage and be a part of shaping the speaker's proposal once that comes out to try to work to make that a bipartisan policy proposal as well," Gorell said Wednesday.

Perez said altering the previously agreed-upon measure will better protect the state budget from future economic downturns.

"This is about responsibility; It's not about walking away from our obligations," Perez said Tuesday ahead of the announcement he planned to make during a luncheon address before the Sacramento Press Club.

Republicans already criticized Democrats last year for moving the rainy day fund ballot measure from the June 2012 primary to the November 2014 general election. They called it a power grab pushed by union interests seeking to postpone the measure.

Peter Schaafsma, who served as fiscal staff director in the Assembly Republican Caucus and helped draft the measure, said the first sign that the current rainy day fund proposal would be dismantled was when Democrats delayed the ballot measure.

"I didn't expect that what we had negotiated would see the light of day on the ballot," Schaafsma said Wednesday.

The current measure would require the Legislature to set aside money in years when California has a budget surplus, a constraint opposed by public employee unions and most Democratic lawmakers. It would require the state to put 3 percent of general fund money into the reserve fund and gradually increase the reserve to equal 10 percent of the general fund.

Under Perez's plan, the rainy day fund would be filled using any capital gains taxes — mainly paid by the wealthy — that exceed 6.5 percent of general fund revenue. His staff said the state would have made deposits under that formula in about 10 of the last 20 years.

Perez said the change is needed because his plan would reduce budget volatility.

"This is one of the greatest examples of us building on the fiscal responsibility that we've shown over the last couple of years," the speaker said.

Brown told reporters Tuesday during a memorial service for California Highway Patrol officers that reserves are a good idea, but he didn't want to commit to any single plan. He previously said he wants to build a reserve to cushion against future downturns and make strides toward paying down the state's bond obligations.

"We need reserves," the governor said Tuesday. "We need reserves for fire, we need reserves for contingencies. We also need to pay down debt, which is a form of reserve. It frees up money."

With more tax revenue pouring in after years of budget cuts, Perez also sought to downplay his party's tax-and-spend reputation. California is on track to collect $4.5 billion more in personal income taxes than expected, according to the nonpartisan Legislative Analyst's Office.

"We're not proposing a single tax," Perez said. "We're talking about only spending within that which is sustainable and actually taking that which is volatile and moving it into a rainy day fund and paying down debt."

Democratic lawmakers are pushing to restore adult dental care for the poor, expand mental health care and other safety-net programs. Health advocates are pushing to expand health care coverage to all Californians. And Perez's own plan calls for increasing spending for child care and college assistance.

Perez also is resurrecting his proposal to use revenue from Proposition 39, which closed a corporate tax loophole, to fund a scholarship program for college students whose families earn less than $150,000. The proposal failed in the Legislature last year.

Schaafsma said the Legislature has a history of spending everything it receives, rather than exercising fiscal discipline.

"What we need is a mechanism for capturing it, putting it offline so ... it can't make those long-term commitments with temporary money," he said about the need for some kind of rainy day fund.

In January, Brown included additional revenue from Proposition 30, the tax initiative approved by voters last fall, in his proposed $97.6 billion general fund budget for the fiscal year that starts July 1. The governor has pledged to keep his Democratic colleagues from overspending.

Lawmakers have until June 15 to adopt a balanced budget.

 

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