Assembly Budget Subcommittee No. 7 on Accountability and Oversight

Good morning, everybody, and welcome to the Assembly Budget Subcommitee on Accountability and Oversight. This is the fourth and last hearing we're planning to have before the May revision comes out next week. Today's hearing will consider proposals to change the Budget Stabilization act account, also known as the Rainy Day Fund.

This hearing continues a discussion started in the Subcommitee last year by my predecessor, who will soon present his own proposal later in this hearing for consideration. It's exciting to see tangible proposals already coming out of the important oversight work from this Committee, which has existed for less than two years.

We expect that the Legislature will adopt a budget stabilization account reform measure as part of the budget package this year with the intent of voters considering the measure as soon as 2026. We're holding this hearing during an important time in the legislative process.

Most of the Members appointed to today's Committee hearing are also serving on other committees, including me. I'm a Member of Appropriations and I may need to leave today's hearing to add on votes if that Committee concludes before us today.

Many Members have expressed interest in both issues today and have asked me to let them know that the hearing's available at some point so that they can get the important updates we will hear. The hearing today is broken into three issues with panels.

The first panel will hear from the LAO about how the current budget stabilization account works. Then we'll hear from stakeholders providing input on how reserves could be improved.

And finally, we'll hear two proposals to change the Rainy Day Fund and also consider other options for action in the June budget package will then take public comment after the third panel.

Today we will consider how to fix one of the most frustrating features of California's constitution, the limitation on our ability to save enough money in our reserves to help the state weather an economic downturn as we brace for another year of bad news in 2025.

May revision next week it's hard to forget that the state had a record surplus only three years ago. I joined the Legislature in December 2025 months after the Legislature had passed a budget with a historic $100 billion surplus. But that budget only increased the Rainy Day Fund by $3 billion in 22-23.

I remember asking a new Member orientation why we did not put more of the projected surplus aside in our reserves for future downturns. It seemed obvious to me that given the volatility we had experienced in the pandemic, that we needed to better prepare for the future.

I expected that I would get a clear and concise policy justification for why the Legislature made that choice but instead, I received a long answer that included a discussion of three different voter approved amendments to California's constitution, a mini lecture on the California economic activity, and a primer on tax collections and state revenues.

I expect we will discuss all of those complex issues at today's hearing. These factors have tied the hands of the Legislature and resulted in a rainy day Fund that is smaller than I and many of my colleagues want. With the budget challenges we expect over the next year, I definitely wish we had more reserves available right now.

Today's hearing explores how we can fix that in the future so that we can save more for the next time the economy booms.

We have options for how big the rainy day Fund can be, how it grows over time, what it can be used for, and what role future legislatures would have in determining the size and type of deposits.

We'll need help from the voters to make any change, so I'm very interested in what stakeholders and the public think as we discuss these options. With that, let's get started. We'll wait on a roll call till we have some more Members. And now I'd like to invite the first panel to come forward. We'll hear from all panelists.

First, before we go to Member questions, we have Ann Hollingshead from the Legislative Analyst Office and Lisa Mierczynski from the Department of Finance. I think I do. I got extras now. Thank you. Welcome. Thank you.

I'm here to start off with some background on the state's Reserve system, with a particular emphasis on Proposition 2, which was passed by voters in 2014, and it substantially changed the rules regarding the budget stabilization account, which is the state's main constitution Reserve.

I have a handout for you, which you should have a copy of in front of you. So just as a brief overview, this presentation is going to have three parts. I'm going to start with some background on how. Excuse me. Some background on how reserves work, in particular their importance to the state budget.

I'll then talk about a history of the state's Reserve with a particular emphasis on Proposition 2 and how that really changed the dynamic around state reserves. And then finally, I'll conclude with an overview of how the deposit rules under Proposition 2 work with respect to the BSA. So turning to the first page. This.

Graphic is meant to be a very illustrative figure, kind of underpinning the importance of why reserves are so important, particularly to the California State budget. So there are essentially two elements here that I want to draw your attention to. The first is revenue, which is in the darker line on the figure.

And then the second is spending, or core spending in particular, which is in the lighter line. So revenues for the state are quite volatile, meaning that they can grow very quickly in one year and then shrink very quickly in the next.

But by contrast, spending on core programs, so baseline spending, or spending that essentially is not the individual discretionary decisions that the Legislature is making each year, but the sort of underlying costs of state programs, that core spending tends to grow much steadier.

It can grow a little bit faster in some years in response to economic conditions or changes in federal funding, but for the most part, it's going to grow with inflation and population.

And so when you take these two factors together, what it means is that in some years the state collects much more in revenue than it has in core spending, which is budget surplus. And then in some years it collects much less, and that is a budget deficit.

And that's one of the reasons that the state budget condition can so quickly change, as the chair mentioned earlier. So reserves are essentially what allow the state to smooth the difference.

You can move money with reserves from the light shaded regions to the dark shaded regions, because unlike the Federal Government, which is allowed to borrow in response to budget deficits, the state government is prohibited from doing that in the Constitution.

If the state does not have enough reserves on hand to be able to cover the sort of dark shaded regions in this graphic, what it means is that either core spending has to be reduced or tax revenues have to be increased.

So turning to the next page, this figure gives a overview of the history of California's reserves, starting with the early 1950s. Excuse me, I'm sorry, I have a lot of allergies today. Starting with the early 1950s, the graphic is divided between 1950 to the late 1970s and then the early 1980s to today.

So as you can see on the left side of the figure, in the early 1950s or through the early 60s, the state had what was called the Revenue Deficiency Fund, which was the state's Reserve account at that time. And also the budget was enacted such that there were, what's called at the time, unbudgeted surpluses.

So this was essentially the money that was left over at the end of the budget process. Those unbudgeted surpluses varied quite widely throughout this period. As you can see, in the 50s and again in the 70s, they went above 20%.

In response, partially in response to the unbudgeted surpluses of the late 1970s, the voters passed Proposition 4, which is also called the Gan limit, after one of the CO authors of the measure.

Essentially what the GAN limit does is, is that it restricts the ability of state and local governments to spend tax revenues beyond a certain limit each year. That's called the state appropriations limit at the state level.

So because surpluses and reserves are counted as spending under the state appropriations limit, this really dramatically changed the state's revenue and Reserve picture post 1979. So as you can see, what used to be quote unquote year end surpluses became a special Fund for economic uncertainty, which is essentially akin to the same idea.

But these balances dropped quite dramatically post 1979 and are now enacted between 1 and 5%. So over three decades, the state had very little in Reserve. Essentially, the SFEU was the state's only Reserve balance with very brief exceptions where the BSA was used essentially once before the Great Recession.

That meant that the state went into two recessions, the.com bust and the Great Recession, with essentially no reserves on hand. The picture changed again in 2014 when the voters passed Proposition 2, which changed the rules regarding the budget stabilization account and deposits into the account.

And as you can see on the very right side of the figure, Proposition two really led to the state again building much more in reserves. So this was a substantial improvement in the state's Reserve policy. Proposition 2 has three elements that are important for this discussion.

One is that it requires minimum deposits into the rainy day Fund each year. One is that it creates maximum on the constitutional share of the budget stabilization account to 10% of General Fund taxes.

And then the third is that it limits the Legislature's ability to either withdraw funds from the BSA or to suspend funds into the bsa, except if the Governor has declared a budget emergency. And that can only exist under two conditions.

So I'm going to turn to the next page to talk about how the deposit rules in Proposition 2 work. So there's essentially two kind of major components here. And before I talk about kind of the technical rules, I want to step back and make sure the intuition behind these rules are clear.

So the idea is that we have one component called the base amount and one component called excess capital gains, the base amount. The idea here is that the state is going to deposit a steady amount into the BSA each year. It is a 1.5% of General Fund tax revenues.

And it essentially exists regardless of whether the state chooses to suspend, as long as the state is not suspending deposits. So essentially every year the state is depositing this steady base amount. That 1.5% amount is split 5050 between BSA deposits and debt payments for certain eligible debts. The second component is excess capital gains.

This one is a bit more complicated. And the idea here, though, is that we want to acknowledge that the state has this very volatile source of revenue, which is taxes levied on the sale of assets like stocks, because the stock market can go up and down very dramatically, so can revenues from capital gains.

So the idea is that the state is going to set aside kind of peaks or surges in capital gains revenues and put those into Reserve. The specific way that it works is shown on the figure. So the state will tally up all of its capital gains revenues and compare that to 8% of General Fund taxes.

Everything that's above 8% of General Fund taxes is considered excess capital gains. But not all of that goes to the Prop 2 requirements. There's a second set of formulas that is very complicated. Happy to answer questions about it if we want to get into the details.

But essentially what it means is that the amount of excess capital gains can be reduced from year to year by anywhere from 0% to 100%. Most typically, what we've seen in history has been around 30 to 40%, but our model suggests that the number could be much bigger as well.

So then that share of the excess is split 5050 again between debts and BSA deposits. So with that, happy to take questions at the appropriate time.

Thank you very much for the excellent start. We're going to hold questions until everybody's done, so.

Good morning Lisa Mierczynski, the Department of Finance. I'm just here to answer questions for you for this panel.

I'm with our questions. Any questions?

Thank you, Mr. Chair, and good morning. Would appreciate you elaborating on the complexity of the formula used for the capital gains. I think that is an important component in this discussion.

Thank you. Yes, so I'm going to use the phrase Proposition 98, but it's important to note that this component of the formulas does not affect school spending in any way. So Proposition 98 are the set of formulas that provide for the minimum amount that goes to schools and community colleges each year.

And essentially there's an interaction between the Proposition 98 formulas and the Proposition 2 formulas in which the state compares the real world of what is actually going to schools and community colleges to the amount that the guarantee would be were it not for excess capital gains. And essentially what this means is because. So you're going to.

So you have these. These two different amounts, and then the difference between these two gets subtracted out of the Prop 2 requirements. The intuition here is that we don't want to sort of double purpose the money, right?

So that this idea that these excess capital gains are going to either Prop 2 or Prop 98, but in reality, because of the complexity of the formula and the very complicated ways that these two can interact, it's. It can end up being more like a random number generator than it is like a sensible formula.

Can you talk a little bit about the debt repayment options? What sorts of debts are eligible for use of the rainy day?

Yeah, when Proposition 2 was first passed, there was a broader array than is true today because most of those debts that were originally eligible were paid down. So in 2014 it included most notably special Fund loans that the state had made during the Great Recession to help balance the budget.

It also included certain payments that were owed to schools and community colleges from funding below the level of the minimum guarantee. Today though, the main debts that are eligible are pension liabilities.

So unfunded pension liabilities for state level pension systems, which is namely CalPERS and CalSTRS, as well as pre funding for the state's retiree health benefits, which in recent years essentially have been the purposes that the Prop 2 debt payments have been used for. I would also note though that after 2930, these requirements are going to expire.

And essentially what it means is that the Legislature will have the option to either use the requirements that would have gone to debt for reserves or to maintain those debt payments.

And then is the proposal, do you think that from the Governor that would extend that as well? Or is this going to be two different decisions for the Legislature to create that authority and the voters to provide the continuation potentially of the Budget Stabilization Reserve?

I don't understand the Administration to be proposing any changes to the debt payment. There's no extension in our proposal.

Okay, and then what are the rules for withdrawing funds from the bsa?

Yes, so the state can withdraw funds from the BSA essentially in two different circumstances. The first is in response to a natural disaster. So if there's been a natural disaster declaration statewide by the Governor that qualifies and the state can withdraw any amount from the BSA in that case.

The second is in response to what's called a fiscal emergency. So a fiscal emergency occurs when the enacted level of the budget from the last three fiscal years are higher than revenues that are anticipated to be collected from the current fiscal year or the upcoming fiscal year.

These rules are, I should say also the enacted level is adjusted for inflation and population, such that these rules are fairly Easy to trigger. But the important caveat is that the Governor has to declare a budget emergency first in order for the Legislature to use the funds.

And then how are the funds invested in the rainy day Fund? Is there a reasonable return for the state to sustain the General Fund?

The funds are invested like all other General funds, in what's called the pooled money investment account by the treasurer. It earns a return that generally tracks with returns on Treasury bills and other kinds of safe investment assets.

And it stays within the Reserve account or it goes to the General Fund. The interest.

All of this money is essentially pooled together into one account, but the interest payments are attributed to each of the subsets. So any of the interest payments that are the way that the pool money types of income works is the interest payments are essentially accrued to each of the Fund that's invested.

And for the BSA, specifically those funds, those interest payments do benefit the General Fund as a form of revenue.

How has the growth of the Fund been driven largely in the last 10 years? Has it been from the General Fund baseline contributions or has it been the excess capital?

It's slightly more excess capital gains. I think our estimate is that it's 65% excess capital gains and 35% base amount.

Oh, and then the voluntary contributions, have those been significant as part of the.

It depends on your perspective. So the voluntary contributions have been very significant. If you look at it as what was contributed in the moment that it was contributed. Right. So the state essentially made two optional deposits into the Fund that were quite large. One was 2 billion in 2017-18 and one was 2.6 billion in 1819, I believe.

And however, those have been used for a part of the formulas that I did not talk about, which is true ups. So the state will revisit its estimates of excess capital gains in subsequent fiscal years through a true up process. And the optional deposits were essentially used to Fund those true ups.

And because the state had such large true ups in those years, much of what was an optional deposit ended up getting converted to a required deposit.

Because in the current budget year, you're projecting revenues that you then true up in the next budget year to see what the actual capital gains were. And that's what the voluntary contributions have priority primarily been about.

That's right.

Got it. So the system is more automatic than it is discretionary.

Yes

Thank you. Anything else you'd like to ask? Well, thank you very much. Appreciate this. It's great start. Now we're going to transition to the second panel and I think. And you're staying. And then Mr. Brennan and Mr. Graves.

Yeah, that's a great point. We'll revisit that. Welcome, everybody. Thank you. Who would like to start? Thank you.

Yes. Okay. Thank you. Ann Hollingshead again, Legislative Analyst Office. So I have a second handout for you with the title Rethinking California's Reserve Policy. This handout is based on a report that our office released a few weeks ago, which you should also have a copy of in front of you.

This report was prepared in response to a Governor's Budget proposal to make some changes to the budget stabilization account, which, if enacted by the Legislature, would go before voters in the next statewide election. So in this presentation, I'm going to again have three General topics.

The first is I'm going to walk through kind of an analytical process of how we went about answering the question, how much reserves should the state have? Second, using that analytical lens, I'm going to talk about how we would evaluate current policy, essentially Proposition 2 under current law, and how well it would perform under our models.

Third, then I'll look at the talk about the governor's proposal, how that performs under our analytical process, and then conclude with some of our own recommendations. So turning to the first page, so kind of stepping back, we wanted to start here with how we think about the evaluation of a Reserve policy.

And ultimately, designing a Reserve policy is not only about knowing that a revenue drop is going to happen in the future, because we absolutely know that they will, but knowing how big they are going to be, how frequent they are going to be and how close they're going to be together. Right.

Those are the things that we would ideally want to know, to be able to say with perfect certainty, what are these things going to happen? How are they going to happen in the future? And then we can design a Reserve policy to perfectly smooth the those down periods with those up periods.

But the reality is that, of course, we cannot predict the future with any kind of precision. But what we can do is use information about the past to say something about what is the potential range of possibilities for the future. And so in very illustrative terms, that is what the graphic on this page is trying to show.

So if you imagine sort of thousands of possibilities for the future, which we have constructed based on the economy in the past, you can imagine that at one end of the spectrum, we have a lot of unfavorable scenarios. Maybe recessions are very close together, maybe they're very frequent.

Maybe we face multiple great recessions over the next 50 years. By contrast, on the other end of the range, we could also have more favorable scenarios. Those recessions could be much smaller going forward. We could have then be extremely infrequent. And the state, then the question is, which of these futures are we going to prepare for?

Where do we benchmark, essentially our modeling to say how prepared we want to be for different futures? You might say, oh, the median scenario. Right. We want to prepare for what's exactly in the middle.

But if we prepare for what's exactly in the middle, then there's an equal likelihood that our policy will fail because we'll be on the downside. Then we'd be on the upside.

So what actuaries do when they're looking at problems like this, when they're in the insurance market or in the pension system, they will benchmark to an unfavorable scenario. That is not the worst possible case. In our particular case, we've used the 90th percentile.

And so going forward, essentially what this means is that when I talk about our model outputs, when I talk about our estimates, I'm talking about how much in funding shortfalls, how much in these red. Well, they would be red if they were in color.

But how much in these dark shaded regions can the state cover over the course of the next 50 years in an unfavorable scenario? So turning to the next page, that's what we're doing here. So in the top part of the figure, we're showing you that exact model estimate.

And we have estimated that under current policy, under Proposition 2 as it currently exists, reserves could cover about one third of funding shortfalls over 50 years in a benchmark scenario. This is, of course, much better than would be the case if Proposition 2 were to not exist at all.

And much better than would be the case if we were doing this analysis, you know, pre2014. But still, 30% is substantially below 100%. And so in our view, further improvements are certainly warranted. Another way to think about, you know, kind of where California sits with its Reserve policy is to compare California to other states.

And so that's the second figure on this page. On the left side of the figure, we have revenue volatility as measured by Pew researchers. They use 15 years of data and found that California is ranked fifth among 50 states in terms of revenue volatility. So one of the highest.

And then on the right side of the figure, we have reserves balances as a share of spending. California, a little bit difficult to see, but is below average, ranked 27th in terms of Reserve balances as sheriff spending in 2024. So that's another view that suggests to us that certainly more improvements could be warranted.

So turning to the last page, where do we go from here? So if we look at the governor's proposal, which would the main feature of the governor's proposal is that it would raise the cap in the BSA from 10% of General Fund taxes to 20% of General Fund taxes.

That is the main change that essentially affects the constitutional deposits into the bsa. That would raise the share of funding shortfalls that the state could cover from about a third to about half, as we show in that top figure. And a half is certainly a meaningful improvement, but again, somewhat a good amount less than 100%.

So we have some recommendations for the Legislature to consider if you are interested in pursuing broader reforms to the rainy day Fund that would further increase the preparedness of the state relative to the Governor's Budget level. So we have two recommendations. The first is to raise the cap to 50% by 2055.

We think this can be done in a phase, you know, in a phase in fashion where after the next statewide election, it would be raised to 20% immediately and then 5% each year thereafter, reaching 50% by 2055. Importantly, this is, in our modeling, the only way that the state can improve upon the Governor's Budget proposal.

By that I mean if the Governor's Budget proposal were coupled with, say, changes to deposits, it would not necessarily meaningfully improve that funding shortfall percentage that I've mentioned.

And the reason for that is because the 20% is such a binding constraint that putting more money into the Fund does not necessarily help because it just pushes you to the 20% a little bit faster.

But if the state were to raise the cap to 50% by 2055, we would then suggest that the Legislature also couple that with increases in deposits. And we have two different options that we've laid out for the Legislature to do so.

One would be to create new, more robust and flexible rules around the budget stabilization account deposits that would capture more sources of volatility. So as opposed to focusing only on capital gains, which is of course one source of volatility, but not the only source of volatility for the state.

The state could use different rules that would capture other forms of volatility in the corporation tax and the personal income tax. Those specific rules are outlined in the report. Happy to get into them a bit more if there are questions.

And then the other alternative is to keep the existing rules in place, the existing structure of Proposition 2, but instead deposit all excess capital gains and essentially get rid of those fairly complicated formulas that I talked about earlier.

This would also allow the state to set aside more in its surge revenues and have those available for the future. So with that, happy to take questions at the end of the panel.

Let's move to our next panelist. Mr. Brennan, great.

Thank you. Chair, thank you for having me. Appreciate it. Brian Brennan, I'm with the 21st Century Alliance. We're a good governance organization that works with organizations up and down the state around good fiscal policy, economic policy, housing and education policy. So thank you for being here. And first, I really want to commend our colleagues at the LAO.

The analysis that they've done is unprecedented and really offers a guide for where we should go on this topic. I think first, I want to underscore, and this is something that you all know, because you've been on the business end of it, is that our budget volatility is real and it's not going away.

60% of our state's revenues come from personal income tax. Of that half come from about 1% of tax filers whose income is very volatile. So this is something that is a reality. The other thing that may be changing as we go forward, and we've seen this from the fires in LA, is external shocks.

Obviously, the Federal Government has been a piece of that as well. But that's sort of the other side of the ledger in terms of managing our overall fiscal volatility that may be increasing something I think that is worth keeping in mind. I'd like to offer five points for consideration as you consider this process.

First, we very much agree with the LAO that in addition to raising the threshold for mandatory deposits and addressing the Gann limit, that we do need to save more. We need to do that systematically.

We think that an emphasis on the most volatile sources of revenue, whether it be cap gains or a broader measure, is the way to do this and that those deposits really need to be mandatory.

We've seen over time that mandatory deposits is really where the rubber has hit the road in terms of helping to grow the rainy day Fund. Second, in terms of the Gann Limit, our understanding is that there are a couple of ways you can address this.

One is simply to say that deposits to the rainy day Fund are exempt from calculations for the state appropriations limit.

The other way that the Leo is highlighted at points is to say that we can simply shift the point at which funds in the rainy day Fund are counted toward the gain element from the year of deposit to the air of withdrawal. This is slightly closer to maybe the voter's intent in Prop 4.

It Functionally, I think, is the same, but maybe a little bit more true to that initiative from back in the day, then maybe worth your consideration. And it may sort of facilitate the process and maybe get a little bit less pushback, I think, from some of the groups that we've been talking about, pardon me, talking to.

Third, in terms of feeding the Reserve, this question of maintaining the current formulas or adjusting sort of some of the parameters for the current formulas versus trying a new approach. Generally speaking, we really like the idea of having a broader measure of volatility. We think it makes sense.

There are good examples from other states, and as the Elio has pointed out, our volatility derives not just from cap gains, but from corporate and some of the other sources. As we've talked with different groups about these different options. Change is hard. The devil we know is better than the devil we don't.

And so I think there'll be a lot of work in helping to explain what the outcomes will be. As Ms. Hollingsworth has said. Ms. Hollingshead, pardon me, has said there's a lot of complexity in these formulas.

And so these changes, I think, will have to be communicated very clearly as we consider that it was referenced before as well, the portion of the funds that come from excess capital gains that go to pay down liabilities. My understanding, and Ms. Hollingshead

said, correct me if I'm wrong, is that the LAO's analysis just assumes that those liability payments are going to go away. So they assume that Prop 2 remains intact in FY 2930. Those are no longer in place.

I think it's just important to recognize that may be part of the ongoing discussion, but that the assumptions about how much needs to be put away are based on those payments sunsetting. So that's just something to consider. Finally, in terms of measures that go before the public, as you all know, complexity always kills.

It's something that is a real concern. Prop 2 is very complex and it passed with 70% of the vote, and that's fantastic.

But as we think about the, I think what are some really exciting changes that could be made, I think there's a tension there between putting some new parameters and formulas in place on the one hand, and not having too much complexity, such that it makes it more difficult for people to really get their heads around what the changes mean.

So with that, thank you very much.

Thank you, Mr. Brennan. Next we'll go to Mr. Graves.

Mr. Chair and Members, good morning. My name is Scott Graves. I'm the Budget Director at the California Budget and Policy Center. We're a research and analysis nonprofit that uses our budget expertise to advance public policies to improve the lives of Californians.

We appreciate this opportunity to join this important conversation about the state's Reserve policies focused explicitly today on the budget stabilization Account, or bsa. My plan is to bring a bit of a different perspective, maybe to spark some conversation here. My remarks over the next couple of minutes are really going to lift up a couple of key concepts.

The first is balance. The second is diversification. And then I'm going to leave you with some of our thoughts about the governor's reform proposal as it was advanced in January. So let me take these one at a time, starting with balance. What needs to be balanced? Two things in our opinion need to be balanced.

The first is saving for future emergencies, budget emergencies, and second is addressing the critical unmet needs of Californians. The Budget center has long agreed that saving for a rainy day is a critical fiscal practice that helps to prevent cuts to vital public services and during revenue downturns, recessions, what have you.

But building reserves must be balanced with equitably generating and committing the resources that are needed to make progress toward a California for all and in our current scenario, to protect Californians from harmful federal budget and policy choices.

So we know that Californians are looking to state leaders, to you to address our housing crisis, the need for affordable health care, childcare, vital services, all of that's on the table.

We also know that federal policymakers right now are talking about ways to take away health care, take away food assistance, and make very deep cuts to vital public services.

So our first point is that improving the budget stabilization account needs to take this context into account and shouldn't come at the expense of addressing these challenges and helping Californians both now and in the future. So that's one point. Let me turn to my second point, diversification.

When it comes to solving a budget problem, as we've seen many times over the last several decades, a rainy day Fund, or in this case, the bsa, isn't the only game in town. So state leaders, as you well know, have multiple options for solving budget shortfalls. For example, you all can borrow from internal funds.

That's been done many times. As the LAO pointed out in their recent excellent report, state leaders can also raise revenue to close a budget gap, which is something that's been done many times over the last several decades, going back at least as far as Governor Ronald Reagan in the late 1960s.

So that is not an unknown fiscal practice in California. And let's not forget that the Legislature recently created a new account with a long name to better manage revenue surges and avoid self inflicted budget crises. This is the account you all created last year. It's untested and it's called the projected Surplus Temporary Holding Account.

And while it hasn't been used yet, the idea is to allow the state to to set aside some funds that we're worried may not materialize after we've committed them. So we haven't had a chance to use it yet. But it is sitting there as a tool ready for you all to use when the time comes.

So while the BSA is a critically important tool for closing budget shortfalls, we want to remind everyone that it is just one tool in the toolbox that can be used to close a budget shortfall or even to avoid a budget problem in the first place.

Okay, let me move toward closing now with these points in mind to give you our perspective on the Governor's January approach to BSA reform, which you're going to hear a little bit more about in the next panel.

So we think that the Governor's plan proposed a few months ago would facilitate greater savings without being overly rigid and hindering spending to meet Californians needs. The Governor's approach also would make the BSA significantly more effective.

As the LAO has pointed out, as they just noted, under their estimates, the BSA would cover about half of future funding shortfalls, which is up from less than one third under current rules. So that is definitely moving things in the right direction.

We also think it's important to keep in mind that this substantial improvement under the Governor's approach would result just from doubling the BSA cap from 10% to 20% of General Fund tax revenue and would not require setting aside additional annual revenue to go into the bsa.

So in short, we think the Governor's reform would allow California to save more for a rainy day without taking more money off the table for much needed investments now and in the future. Okay, so let me sum up with three points.

First, we agree that it's crucial to responsibly manage California's revenue ups and downs and save for a rainy day. Second, we strongly believe that any BSA reforms must be balanced with meeting Californians needs while also recognizing that policymakers have multiple tools for closing budget shortfalls.

And finally, we think the Governor's rainy day Fund reform as proposed in January strikes a good balance.

Thank you.

Thank you.

Any questions for the panelists? Assembly Member Valencia

Thank you. When the state is withdrawing from the Rainy Day Fund, should we limit the programs and services that can be paid for through those funds?

I'm sorry. So the question is, would a potential option be for the state to have a set of rules that essentially guide the use of the funds from the rainy day Fund? I think our office, you know, it's not. We don't have a formal view on that kind of question.

What I might say, though, is that, you know, in General, state budgeting is pretty fungible. And so even when rules are created like that, often what it means is that, you know, say that the funds are going to be earmarked for health and human services programs.

Sometimes what that will mean is that, you know, the funds go to pay for costs in health and human services. That would have happened anyway. And essentially it doesn't have a net difference, but of course, that's a, you know, a policy judgment for lawmakers.

Could I also note that the Legislature did create the safety net Reserve several years ago? It had $900 million in it. It was used last year.

But that's an example of a way in which, outside of the budget stabilization account, you all have the option to set aside dollars voluntarily for specific purposes like preserving CalWORKS and Medi Cal services during a recession.

Would appreciate more elaboration on the pros and cons of the two recommendations to reach the higher 50% threshold.

Yeah, so I think that on the creation of more flexible and flexible robust and deposit rules, the pros are that the current rules really are limited to volatility in capital gains revenues. And we have seen very significant growth in capital gains revenues that essentially almost coincided perfectly with the passage of Proposition 2.

There's a figure in the report that kind of shows that that may not continue to be the case forever. Right. It may not continue to be the case. Going over the next 50 years or even 10 years, the capital gains revenues are going to continue to surge in the way that they have over the last decade.

And it may be the case that other forms of volatility become much more important to the state budget. Mentioned the corporation tax, we've seen much more volatility in withholding in the personal income tax, which used to be kind of one of the sources of revenue that the state considered most stable.

And so creating more flexible, robust deposit rules would essentially allow the state to. To better ensure against the possibility for a paradigm shift where we see some shift away from capital gains revenues and towards something else. That's the main pro on that side.

The main pro on the keeping of the existing rules is just that it's simpler and it may be easier to reach agreement on them.

The differences in the proposals, the current law, the governor's proposal and the LAO's proposal, the 30, 50 and 65%, that's where this conversation about balance and competing interest and expenses now interchange.

So let's have a conversation about those elements and where you see those things is I think there's a consensus that the current limitation is too low and that I think, Mr. Graves, you kind of implied that maybe the Ledge analysts proposal is too penalizing for current expenditures is, if I'm hearing you right. And then, Mr. Graves, you'd weigh in on that, too.

Yeah. Well, first of all, I really appreciate the LAO's effort to lay out a very clear road map as an option for moving forward. I think the, the Budget Center's perspective, as I noted in my remarks, is that I think it's important for you all to, to take into account what the end goal here should be.

And from our point of view, the end goal is asking ourselves, what kind of California do we want to live in and what kinds of needs do we need to meet right now for Californians, both what we know and what we don't know in terms of what's coming from Washington, D.C. so, you know, two quick points here.

We know that about 1 in 5 Californians live in poverty. A lot of children who qualify for subsidized childcare can't receive it. Only one in seven kids is receiving child care for which their families are eligible. Half of renters have unaffordable housing costs. We're over 2 million short on housing in this state.

So there are a lot of needs out there. And we agree that we need to be careful and prudent and save money for a rainy day. The question is, and there's no right answer to this question, right. There's no scientific answer to how much should we save for a rainy day.

But that's where I think that the concept of balance is so crucial is when do you think you've reached a tipping point? And perhaps now you're growing your Reserve so large that the opportunity cost is. You've taken those dollars off the table to make the critical investments we know are needed today and in the years to come.

So that's sort of the tough choice that's left to all of you. But we do think as much as solving budget problems can be messy and, and it sure would be easier if we just had one gigantic Reserve to draw from 10 years from now to solve the problem, you can also muddle through.

Muddling through is not the worst thing in the world. And sometimes that kind of flexibility allows you to make better decisions down the road while also being able to make the kinds of investments that we know are needed today, tomorrow, and 10 years from now.

I do appreciate that perspective. And with that being said, I think we are well aware of the augmentation of California's budget investments in recent history. And at some point I think the question needs to be asked, are we yielding the returns intended with the investments that we're making?

If we're throwing money at challenges in California, yet California has not improved in the way that we would hope it has continuing down that path, is that insanity or a strategic approach? Right. And I think that is a question that has been raised by this Committee.

I think that's the fundamental intent of why this Subcommitee was created and something that I do think needs to be considered point and point again.

Yes. I mean, spending money wisely is something everyone can agree on and that, that those dollars should be justified on the spending side of the budget. And I'm not going to go too far down this road.

But I also want to note you all have a shadow budget that's made up of tax breaks that are not examined from year to year and we don't know whether they're working or why some of them even still exist. And it's a big loss to the state treasury.

So I think if you're, it's, you know, it's great to talk in terms of let's make sure we're spending our dollars wisely. Let's look at it across the board.

Yeah, I think I'd offer a couple of points. One is in the economic downturn years, obviously it's vulnerable communities that take it on the chin when, when we have draconian cuts that affect programs and such.

So it's something that we want to be mindful of, that if we build up a stronger rainy day Fund, it helps to protect us against those types of cuts over time. I think the other interesting question to ask is currently, you know, we have the base amount and we have the excess capital gains.

The base amount is a regular amount sort of over time, other than when it's suspended for whatever reason. The excess capital gains really addresses this issue of volatility, which from my perspective, is what we're trying to solve. So I can certainly imagine a scenario where there's a different balance between the base amount and the excess capital gains.

Where a new formula might put a much stronger emphasis on capital gains, such that in those windfall years when it's frankly sometimes difficult to effectively allocate windfalls from tax revenues in an efficient and effective way, you know, if it's going to go away in a year or so, that really taking those funds and not disrupting any current programs or sort of the steady, steady program growth, but setting those monies aside as opposed to the base amount may be something to consider and where there's less of a, less of a trade off, maybe in the way that Scott is describing.

I don't want to put words in your mouth, but that's the way that I think about it.

What would have happened in the 100.0 million, excuse me, $100 billion surplus year if the limited was raised to the governor's proposal? How much additional revenue would we have saved during that time as an option?

I don't have the number off the top of my head, but I think it's in the couple $1.0 billion range.

Okay. So we made about a $3 billion contribution. Would have been five or six or something like that. It's not like it would have been 10 or anything like that.

And if you had your. So let's get to add on if at the time you had this untested projected surplus temporary holding account, that might have been another option at your disposal to say, huh, some of these revenues may not materialize a year from now. Let some set some of them aside and if they show up, great.

If they don't, we haven't committed them and don't have to, you know, roll them back a year or two later.

Yeah. The voluntary option was always available, so. Yes, except with the cap it wasn't available. So it ended up resulting in a refund to taxpayers. What was the total amount of that refund that was provided?

I believe it was 8.9 billion. But I might have a colleague who would know better.

That's a significant number. All right, any other questions for this panel? Thank you very much for your thank you. Participation. And now we'll go to the main event. We have Assembly Member Valencia as a panelist. You can do it your way, which. You prefer.

[Background]

And now we have Assembly Member Valencia and Ms. Mierczynski and Mr. Sisney. Appreciate you all being here. Let's start with Assembly Member Valencia.

Thank you, Mr. Chair and Muy bueno diaz to you and the Committee. Thank you for the opportunity to present ACA1. I want to start by emphasizing that this will be an evolving conversation and I'm committed to working with all my colleagues and the public to ensure that ACA1 reflects the best possible approach to strengthening California's financial future.

It is also a priority for me to do this work transparently. Voters will ultimately have the final say, and it is critical that Californians feel confident in how their government manages their financial services. I want to thank Speaker Rivas, Budget Sub Chair 7, .

Mr Hart, and then also the Budget Committee for bringing this issue forward in a public hearing. Your leadership ensures that discussions about fiscal stability happen openly and with public input. Additionally, I want to thank the strong coalition behind this proposal.

Thus far, ACA1 has 15 co authors and a special thank you to the Legislative Analyst Office who has been collaborating with our office to this point. And finally, thank you to the Governor for continuing to focus on this issue, as well as to former Governor Brown, whose leadership helped lay the groundwork for these discussions.

When times are good, we save. We set money aside because we know unexpected expenses will happen. That's just part of life. Now imagine being told that once your savings account reaches a certain amount, you have to stop. That's exactly what California does with its reserves, and it really doesn't make sense. ACA1 is an opportunity to change that.

It would allow us to build stronger financial reserves when the economy is thriving so we're better prepared when challenges arise. California's economy is extremely volatile, as we've discussed here today, and it directly impacts our General Fund and financial stability.

According to the Legislative Analyst Office, California ranks as the fifth most volatile state when it comes to revenue fluctuations. In 2022, tax revenue soared, boosted by strong market gains. In 2023, the state enjoyed a record breaking 97.5 billion surplus. And unfortunately, in 2024, a $45 billion deficit forced emergency cuts and created uncertainty for key programs.

Right now, our rainy day Fund is not enough to sustain the state's operations in a downturn. As currently structured, it covers only about 30% of our expenses when revenues drop. With the recommendations from the Legislative Analyst Office, as it was explained earlier, these increases could cover to up to as much as 75%.

Without strong savings, we would ultimately see cuts to social services or higher taxes. Neither of those are acceptable, in my opinion. Who will bear the ramifications? Ultimately, the California public emergencies are inevitable. It's not a question of if, but when.

Whether it's a wildfire, as we've recently experienced an earthquake or another crisis, we need to do better to be prepared. Studies show that 60% of Americans don't have enough savings to cover sudden expenses of just $1,000. While the state's General Fund operates on a much larger scale, the principle really does remain the same.

Without strong savings, we put our future at risk. I learned early on what it means to be prepared. My parents owned a grocery store, and I watched them manage their finances carefully. They saved when business was strong because they knew there would always be moments when things slowed down, like in 2008.

What experience shaped that experience shaped my view of financial planning. When you have the ability to save, you do it. And that is the same principle I believe Californians want from their leaders at this time. ACA1 offers three reforms to strengthen our Rainy Day Fund and put California in a more secure financial position.

One, it raises the cap on our Rainy Day Fund from 10% to 20%. And after further research and feedback from the Leo, our intent in this deliberation is to potentially increase it to 50% of the state's General Fund. Right now, our Rainy Day Fund is kept too low to provide meaningful protection during economic downturns.

The current 10% cap means that when revenues drop, our revenues run out quickly. Two, it increases the required contribution from the General Fund, ensuring that we save more when revenues are high. In 2023, our hands were tied and we were forced to spend funds to avoid reaching the state appropriations limit or the Gann limit.

Since we're increasing the cap, we need to set more aside. And three, it clarifies that deposits into the budget stabilization account do not count towards the Gann limit. California has grown and our priorities have changed significantly since the Gann limit was originally created. These outdated restrictions make it difficult to build real savings.

Right now, deposits into the budget stabilization count as expenditures, which does not make sense. This needs to change. Implementing these reforms will position California to be better prepared to protect families, businesses, and communities during difficult times. These proposals should not only reflect our values, but the values of voters and residents as well.

ACA1 gives California the structure needs to be financially strong, to save when we have the opportunity and to protect the essential services our communities rely on. Again, I believe that we can move forward in a stable to a much more stable financial future.

And I truly do believe this is the best gift that we can give to future generations of Californians. Thank you.

Thank you, Assembly Member. That was great. Appreciate that. Ms. Mierczynski, good morning again.

Lisa Mierczynski from the Department of Finance. Our proposal, the governor's proposal for that we presented at Governor's Budget is very similar to what you've been hearing today, and I think you've heard it for the most part.

But it's basically trying to solve a few of the Proposition limits that we hit up against when we did have large reserves and we weren't able to put more away. The one is just Prop 2 the Cap.

So this the Governor proposal increases the cap or proposes to increase the cap from the 10% to the 20%, which we believe again, no one I can say knows exactly what that optimal number is, but it is a matter of balance and spending money on the taxpayers of California versus putting it away for the next taxpayers of California.

The second part is really to do with the state appropriation limit, which is really one of the biggest impediments we came up against when we had the hundreds of billions in reserves we were bumping up against the state appropriation limit.

So the state really couldn't put additional funds into the Reserve at that point because by doing so we would be going over the cap. And it was just so we did give money back to the taxpayers in different forms.

But changing the deposit and not having account towards that limit would have been very helpful in putting more money away during that time. So that is the second piece of the governor's proposal is to exclude those deposits into the Fund from counting against the state appropriations limit. So if there's anything else, it's pretty straightforward.

It's not expansive like we've been hearing today. But that that's the governor's proposal. So if you have any questions, I'd be happy to answer.

Thank you. It's very helpful. Mr. Sisney.

Yes. Jason Sisney from the Speaker's office. And just as I was on the panel last August with this Committee, I'm here today and offering a perspective as one who was around at the staff level when Speaker Perez authored the original Proposition to ACA1 in 2014, and also to present the perspective of the more recent considerations.

And I think that as a way of introduction, the discussions between the Assembly And Senate leaderships and the governor's Office began in 2021 as it became apparent that we were headed toward a big surplus in 2022. And bumping up against the Gann limit. Discussions about changing Proposition 2 and these rainy day Fund measures really began then.

And they've been continuing since 2021. The the Gann limit was the reason that we did not put more in reserves in 2022. In the 2022 budget, where we had a very large surplus. It was not as big as originally projected, but it was very large. The state spent a lot on infrastructure, including climate and transportation investments.

The state put a lot toward tax rebates and some toward reserves, but not nearly as much as the state's leaders wanted to because of the Gann limit. And so the Gann limit has been the focus of these discussions. How do we put together a package that prepares the state for the future.

And convinces the voters to allow more Reserve deposits under the Gann limit? One of the key discussions that has happened since 2021 in thinking about this. Is how do we convince the voters that loosening the Gann limit is something that they should support?

The Gann limit has not been very successful since 1979 at providing regular tax rebates to folks, which is something that I think that its authors may have expected in 1979. It's been very sporadic, really, directly and indirectly. Only two or three times has it resulted in tax rebates.

And so one thing to consider with taking the rainy day Fund back to voters Is whether or not there should be ways to improve the Gann limits ability to provide periodic tax rebates.

So one of the ideas that's been tossed around is for the funds that are now go to debt repayment, maybe some of those should be able to be built up to provide more regular tax rebates. Particularly when we are in economic boom times, as sometimes occurs in California.

One option would be to allow use of some of those debt repayment funds, for example, to pay down Unemployment Insurance Fund loans, which currently result in employers paying more in taxes to service those loans. The state really doesn't have a very easy way to pay down those loans.

And so using the debt repayment mechanism of Proposition 2 to set aside funds for that. Is another option that might better fulfill the goal of having the Gann limit relieve tax burdens for Californians.

And a key thing with the Gann limit, as it was amended in 1990, is that the Gann limit is designed to provide funding, supplemental funding to schools in some situations.

And so it's very important in thinking about Taking a rainy day Fund measure back to voters is how do you make sure you convince voters that school funding is going to be protected? And so all of those things have been a part of the discussions between the legislative leadership and the governor's office in recent years.

I think a key issue with taking the rainy day Fund measure to voters is thinking about, and I think this has come up a few different ways in the presentations today. How much of the bigger reserves and so it seems we have consensus we need to aim for bigger reserves.

How much of those should be hardwired into the Constitution versus something that the Legislature and the Governor have flexibility to decide on year to year. And so I think that Prop 2, its key success has been hardwiring deposits to reserves that previously didn't happen before.

And I think that seemingly everyone would agree we should stick with the deposits that are in the Constitution. And the question is do we grow them and how much do we grow them?

And I think a further question is how much of the effort to grow Reserve should be those mandatory deposits versus deposits to the state's discretionary statutory reserves.

And there are three principal statutory discretionary reserves today, the projected temporary surplus holding account that we've heard about, the Safety Net Reserve, and also the Budget Deficit Savings Account, which was a measure created by Assemblymember Tom Daly a few years ago here in the Assembly.

And so those are the three statutory reserves where we can put discretionary deposits in that the Gann limit doesn't make it easy for us to put deposits into those reserves either. And I think that allowing those to play a part in growing reserves is an important discussion as well.

I think a few other topics that have come up more recently. The Prop 2 doesn't explicitly allow use of the Rainy Day Fund to deal with big federal cuts. It wasn't really designed in an era contemplating the sort of federal cuts that representatives in D.C. are now contemplating. I think that that's something to think about.

Another thing is, as was brought up earlier, the original Prop 2 was designed to pay down what Governor Brown called the wall of debt that was accumulated during the Great Recession over the next few years in dealing with the deficits which are likely to be caused in large part by Washington DC's policies.

The state may also need to create similar debts, borrow, as Mr. Graves points out, from state funds. We may need to have a mechanism in the revised Prop 2 that makes that gives us a clear path to paying down those debts which we seem destined to be building up again largely in response to the federal policy changes.

And I think lastly, and going to some of Assemblymember Valencia's comments, how do you convince voters that their dollars are spending well? And so one thing that has been discussed, it was a bipartisan ACA in early 2020.

But whether or not this Rainy Day Fund measure should include more funding for the Legislative Analyst's Office to provide more transparency and oversight of state spending, all of these things could make the measure going to voters more complicated. And that is always a trade off that policymakers want to consider.

But I think that I wanted to put those ideas out there today for people to hear, because in thinking about the Rainy Day Fund, you have to think about how you're going to go to voters. How are you going to convince them to change the Gann limit for the reserves and to make these other changes with that? Happy to move to questions.

Well, I think those are absolutely right on point, valid questions for us to be talking about. And of course, in our legislatively complicated world, they are calling for me to go to Appropriations to present a Bill. And so the timing couldn't be worse. But I'm going to ask that we quickly call the roll.

So get that aye or here. and I'm going to ask my colleague to take over with handling the questions and I'll rush over there and then come on back and we'll have public comment. And I just really appreciate all the, the panelists. You've added a lot to this discussion.

This is an important topic and I'm really hopeful that I can be back for the end of it.

Okay. We're going to open up for questions. Anyone with any questions? Oh, myself. Yes. Okay. Well, then I guess I am the only one here. Okay. Well, so actually this was a question for the Department of Finance. I was curious.

We have a cap of a 20% increase, but then it doesn't seem like there's an increase in monetary baseline payments. So I was curious to how we actually increase.

I don't, I apologize. I don't quite understand the question.

How will the Bill actually increase our reserves if there's no requirement to do so?

Oh, I believe what happened, has happened in the past is that we have hit the cap in 2000. So there's several times we have hit the cap and we could have gone over. So we do believe that eventually we would start going over that 10% cap and be able to deposit it into the Reserve.

Say that one more time.

So the 10% cap has been reached. And so you're asking how are we going to get more money into the Reserve to reach the 20% or at least go up.

That is that we do believe that the current system and the formula in place will allow for more than the 10%, the reserves to go in and then plus the addition if we are able to do discretionary reserves.

Okay. Any more questions from any Members? I'm the only one here. Okay. What's next? Yes, sir. Yeah. Public comment.

Good morning, Mr. Chair and Members. John Doherty from Public KP Public affairs on behalf of the New California Coalition. The coalition is the nonpartisan political home of 9.7 million common sense voters and we're here to talk about budget stabilization which is extremely important for all of our Members.

As you've heard today, the very well documented LAO report makes the point that the current system and even the current proposals are are not enough to move us forward productively to create a stable financial environment for the state. We've heard it a couple times. Fundamentally, California has a revenue volatility problem.

Just as an example, from 2022 to 2023, there's a $155 billion swing in what's happening with the revenue. And the existing constitutional cap on savings is a core problem that we think policymakers need to address. Unless changes are made, the Legislature and the Governor are prohibited from extending beyond the 10% General Fund tax revenue.

And that's ultimately tying both of your fiscal arms behind your back in solving our problems. We think ACA1 by Assembly Valencia is a bold and important step forward and we would endorse changes that align with the proposals by Lao that actually would protect us in 75% of the fiscal scenarios that we're looking for going forward.

So appreciate the time. Very important topic and we're here to assist in any way we can. Thank you. Assembly Member.

Good morning. Yesenia Jimenez, Senior Policy Associate with End Child Poverty in California. We're a statewide anti poverty organization fighting to ensure that our children and families have the resources they need to strive in the state.

I want to commend the Administration for proposing to exclude transfers to the budget stabilization account from the Gann limit while maintaining the current exclusion for transfers from the BSA. We respectfully urge that this exclusion apply to both mandatory and optional deposits.

We also support the proposal to double the BSA's cap to 20% of General Fund revenues while preserving the annual 1.5% set aside. It's a smart and responsible move. To further strengthen our fiscal resilience, we urge you to exclude deposits into discretionary General Fund reserves from the Gann limit.

The governor's proposal, as mentioned, we believe also strikes a balanced approach, allowing us to save without tying our hands in terms of the rainy day Fund. But saving alone is not enough. In AD 37, I know some of the Member Hart stepped out. 73,000 people live in poverty.

In AD 68, nearly one in three children lives in poverty. In 8032, poverty would increase by over 13% without safety net programs. These figures are not just numbers, they are families. To truly protect Californians, we must raise the revenues needed to meet urgent needs now ensuring families can thrive, not just survive, in the State of California. Thank you.

Mr. Chair. Member Sara Flocks from the California Federation of Labor Unions. And I'm here to talk about a very narrow piece of this hearing. Excellent hearing. Which is the proposal around or the issue raised by Mr. Sisney around paying down the federal debt for the UI Fund?

Any conversation, any discussion of the UI Fund needs to be paired with a serious proposal for reform of the entire Fund. The UI Fund insolvency and our debt to the Federal Government. The second time it is and was completely unavoidable and we know how to fix the system.

One of the reasons that the Fund becomes insolvent anytime there's a downturn in the economy is because we have one of the lowest taxable wage bases in the entire country. It is currently $7,000. It has not been raised since 1983. And as a comparison, in Washington State, their taxable wage base is over $60,000.

As a result, during the pandemic, they were able to reduce the tax rate for employers.

Our system also is a pay as you go rather than a forward funding model which Assemblymember Valencia raised in his testimony, which was during boom times, you put some money aside so that when times are hard, you are able to pay out the benefits and we don't have to go into debt to the feds.

That is something we need to consider for our system. Along with that, if you're on UI, you are capped at $450 a week. That is basically, you cannot survive on that in the State of California. We also, in California, one of the most expensive states in the country, have the lowest UI benefits.

So we need to urgently reform the system. And so before we put more money towards the debt, we have to pair it with serious reform. So thank you.

Scott Kaufman, Howard Jarvis Taxpayers Association we are currently neutral on ACA1 and have had conversation with the author and certainly support his intent to save more.

We are, however, concerned about exempting money going into the bsa, while also others are having conversations about potentially widening the uses of money that can come out of the bsa, which is currently already exempt.

Our fear is that has the potential of just turning the BSA into something like a pass through account to avoid the constitutional guarantees of the GAN limit and something that we would likely oppose vigorously should it be on the ballot. Thank you.

Thank you, everyone. Are there any more comments? Okay. I'd like to certainly thank the chair for bringing this forward. And I also, as a I think we all know that we all want a rainy day Fund.

And how we get there is, from what I'm understanding, just being new here, there are a lot of complications and a lot of propositions. So I want to thank everyone, attention to this matter and the chair, and we're going to go ahead and adjourn. But thank you very much.