Senate budget committee hears ACA 20 plan to expand rainy‑day fund, extend debt payments

An informational hearing of the California State Senate Committee on Budget and Fiscal Review on June 24 examined ACA 20, the "Save for California's Future Act," which would strengthen the state's rainy‑day fund and extend required debt payments. Chair Senator Laird said the committee would not vote on the measure but will consider it on the Senate floor the next day.

The Legislative Analyst's Office (LAO) provided the presentation. Carolyn Chu, Chief Deputy Legislative Analyst, said Proposition 2 currently requires the state to set aside 1.5% of general fund revenues plus a share of excess capital gains (when capital gains exceed roughly 8% of general fund revenues), splitting receipts between the Budget Stabilization Account (BSA) and supplemental debt payments. Under ACA 20, the LAO explained, the state would add a "super excess capital gains" component triggered when capital gains exceed 10% of general fund revenues, raise the BSA cap from 10% to 20% of general fund revenues (so required deposits continue for a longer period), and alter how deposits are treated for the state appropriations (Gann) limit. Chu described the changes as designed to save a larger share of windfall revenue during boom years and to extend mandatory debt payments.

The Department of Finance told the committee the Administration supports ACA 20. Lisa Murzinsky of the Department of Finance said the proposal "improves Proposition 2" and would help the state avoid committing boom‑year windfalls to ongoing spending.

Committee members pressed LAO and Finance officials on specifics. Chair Laird asked whether excluding deposits from the Gann limit would let the state "spend more" or simply reclassify spending; LAO replied that the change is primarily a treatment that can create an incentive to save in surge years but does not itself rewrite constitutional constraints, and noted the state currently has substantial room—LAO cited roughly $30,000,000,000—under the state appropriations limit in the present revenue environment. LAO also explained that withdrawals from the BSA still require a declared budget emergency and legislative approval under Proposition 2.

Several senators raised policy alternatives and use questions. Vice Chair Senator Nilo said he prefers a simpler rule he has long advocated: limit spending using a rolling five‑to‑seven year average of revenues to blunt feast‑and‑famine cycles. Senator Blake Spear called ACA 20 a "responsible fiscal measure" and asked whether its changes could be used to pay down the state's outstanding unemployment insurance (UI) loan; LAO said the bill would make the UI loan an allowable target for future debt payments but that the legislature would decide allocations. LAO told the committee that the legislature's annual debt payments under current rules typically have been on the order of $2,000,000,000 and that the outstanding UI loan was referenced in the hearing at about $20,000,000,000.

Committee members also asked about timing and the potential effect of anticipated large IPOs. LAO and Brian Mueller (LAO) said large tech IPOs can generate significant capital‑gains revenue but are difficult to predict in timing and magnitude; ACA 20's "super excess capital gains" and the statutory true‑up process would capture surges when they materialize, though tax receipts and reporting lags mean the state may not see the full effect immediately.

LAO clarified the treatment of debt payments: ACA 20 would extend required supplemental debt payments through 2040 (current required debt payments under the existing law expire in 2030), while reserve deposit rules under Proposition 2 remain in effect indefinitely. LAO and Finance staff told senators that discretionary deposits would still be possible in any year and that the 20% cap was a negotiated tradeoff between more mandated savings and near‑term budgetary flexibility.

Public comment included Erwin Nowick, who provided historical context on earlier propositions and urged use of reserve mechanisms to address long‑running budgetary liabilities.

The committee held an informational discussion only and did not take formal action. Chair Laird said ACA 20 was scheduled for floor consideration on June 25.

Ending: The hearing provided LAO and administration explanations of how ACA 20 would alter Proposition 2's formulas, extend some debt obligations, and change the Gann‑limit treatment of deposits; senators voiced both support for stronger reserves and preference for alternate spending constraints. The committee adjourned without a vote.