9658 Budget Stabilization Account
Program Descriptions

7760 - Proposition 2 requires the Legislature, through the 2029-30 fiscal year, to annually set aside in the BSA for a "rainy day" fifty percent of the sum of 1.5 percent of estimated General Fund revenues and the amount of capital gains revenues over 8 percent of General Fund tax proceeds that is not required to fund Proposition 98, with the remaining fifty percent to pay down debt. Beginning in 2030-31, 100 percent of the above sum would be deposited in the BSA for a "rainy day', reduced by any funds that the Legislature may appropriate, up to fifty percent of the funds calculated for the BSA transfer, to pay down debt. The maximum balance in the BSA is limited to ten percent of General Fund proceeds of taxes. Any amounts in excess of ten percent will be used for specified infrastructure needs.

Proposition 2 includes a true up mechanism for the two preceding years, if applicable.

The Legislature may suspend or reduce the BSA transfer if the Governor declares a budget emergency. Withdrawal of funds from the BSA is limited to half of the fund's balance in the first year of the budget emergency.

Proposition 2 also establishes a Proposition 98 reserve whereby spikes in funding will be saved for future years. This will smooth school spending and thereby minimize future cuts. This reserve does not change Proposition 98 calculations, and it will not become operational until the existing maintenance factor is fully paid off.