Proposition 2: 'Rainy day' fund, new state budget reserve rules

LOS ANGELES (KABC) -- Proposition 2 is one of the eight statewide propositions on next week's California ballot. It focuses on the "rainy day" budget.

If passed, it means existing state debts would likely be paid faster, and there would be new rules for state budget reserves.

During the recession, California certainly saw some bad times. Proposition 2 proponents say we need to prepare in case it happens again.

If passed, 1.5 percent of General Fund revenues would automatically go into a "rainy day" fund.

"Prop. 2 really does what you and I do every day, which is to save our money and also pay down our debt," said Ed Coghlan, California Forward Action Fund.

Coghlan, from the California Forward Action Fund, which launched the "Yes on Proposition 2" campaign, says the state will inevitably go through boom times when it gets a lot of tax revenue, and busts like the recent recession when that money dries up.

Coghlan says by putting money away during the good times it will be there when we need it.

"Historically we've spent up to the money we've been bringing in, and then what happens is when the money starts to not come in at those paces, we have to cut programs," said Coghlan. "That doesn't seem to be a very good idea."

But some say what is not a good idea is that money could be taken away from schools and put in this rainy-day fund.

"In the era of local control funding and this idea of local accountability, it doesn't make a lot of sense to me to have school districts' reserves held at the state level," said Cushon Bell, Educate Our State.

Bell is against Prop. 2. She says during the recession, school money was cut and school districts had to use local reserves to get by. They worry about politicians in Sacramento having this much control.

"I don't want to say that I don't trust them, I just feel like if we're saying that local communities are accountable, let our local elected officials handle it," said Bell. "That's why we have school boards."

"Prop. 2 does set aside money for education from kindergarten through the community colleges, so that's one thing. The other is that the local district issue, which is what she is talking about, is something that is easily remedied in the Legislature," said Coghlan.

Proponents say the money in the fund would be locked away and legislators in Sacramento couldn't touch it unless there's a budget crisis.

Bell agrees that's a good idea but she worries there could be unintended consequences.

"It's one of those things where it sounds great now, but 10 years from now what's it going to mean?" said Bell.

Governor Brown has been campaigning very little for his own re-election, but he is pushing very strongly for Proposition 2.