What is it?

Prop 2 doubles the cap on California's rainy day fund, the Budget Stabilization Account, from 10% to 20% of General Fund tax revenue.

Yearly deposits

The fund is fed by a base deposit of 1.5% of General Fund revenue plus a share of capital gains taxes, the most volatile money the state collects. Good years produce a surge the state can bank, and bad years produce almost nothing. Today, any capital gains revenue worth more than 8% of tax revenue goes to the fund. Starting in 2027-28, Prop 2 keeps that rule but counts the portion above 10% at one and a half times its value, so the bigger the windfall, the harder the state saves. Once the fund hits the 20% cap, money that would have gone in can only be spent on infrastructure.

The Gann limit

Starting in 2027-28, reserve deposits stop counting against the state's constitutional spending limit (the Gann limit) until the year the money is pulled back out and spent.

Taking money out

Taking money out still requires the Governor to declare a budget emergency, and the Legislature can withdraw no more than half of the fund's balance in one year, unless money was already withdrawn the year before.

Read the full annotated legal text →