SACRAMENTO – The Senate Budget Subcommittee on State Administration and General Government today evaluated Governor Brown’s proposal to add $2 billion to the state’s Rainy Day Fund. Senator Janet Nguyen (R-Garden Grove) stood with Governor Brown on the need to build a strong reserve and spoke in support of the proposal.
“It is likely that the state will face an economic recession in the near future,” said Senator Nguyen during today’s hearing. “That is why it is essential we build up the reserve quickly.”
As Governor Brown indicated in his January budget release, California is now in its seventh year of economic recovery. Increased levels of economic activity typically last around five years.
California voters approved Proposition 2, to create the Rainy Day Fund, in 2014. The measure included the goal of reaching a 10 percent reserve. Without the Governor’s proposed $2 billion supplemental deposit, the state reserve will only grow to about $6 billion by the end of 2016-17 (approximately 4.8 percent of General Fund revenue). This additional deposit would increase the Rainy Day Fund to about $8 billion, boosting the reserve to 6.5 percent of General Fund revenue.
“As a Supervisor, I saw directly the devastating impact of budget cuts during the Great Recession to seniors, children and working families,” said Senator Nguyen. “In the 2009-10 budget, the state cut over $9 billion in programs. Those cuts included massive cuts to child care and vital education programs. Having 10 percent in a reserve will help save important programs from deep cuts during the next recession.”
“Just because we’re experiencing record-high revenues today doesn’t mean we shouldn’t protect against a future downturn,” said Senate Republican Leader Jean Fuller (R-Bakersfield). “This is a common sense solution to build up California’s ‘savings account’ and I appreciate Senator Nguyen’s leadership on the issue.”