Savings may get tougher as California rainy day fund fills

SACRAMENTO, Calif. (AP) — When California finally regained its economic footing following the Great Recession, Gov. Jerry Brown convinced voters to back a measure allowing lawmakers to set aside more money for the inevitable next downturn.

Four years later, the state’s rainy day fund is on the verge of being full.

That reality brings a strange dynamic: If good economic times continue the state can’t put substantially more money in a fund that, even when full, could easily be wiped out by one very bad year.

Lawmakers prepare to vote Thursday on a nearly $140 billion general fund budget that would boost total state savings to $16 billion, almost all in the rainy day fund that can’t be tapped unless there’s a fiscal emergency caused by a natural disaster or plummeting revenue.

Socking away money has been a top priority for Brown, who negotiated his 16th and final budget during an unusually long period of economic and budgetary strength.

When he took office for the second time eight years ago, it was a dramatically different situation — the Great Recession had struck and revenue was falling fast.

California saw a $40 billion deficit in 2009, a number that would dwarf the $16 billion Brown and lawmakers have amassed for the next recession. The state faced cumulative deficits of nearly $100 billion 2008 and 2011.

Lawmakers can continue setting aside money, but it won’t carry the same constitutional restrictions tied to the rainy day fund.

It also would be an enticing pot of money for legislators and their influential donors who couldn’t convince Brown to buy into their priorities but might hope for better fortunes under a new executive.

Proposition 2, approved by voters in 2014, boosted the savings cap to 10 percent of the general fund and put restrictions on tapping it.

In the first year of a budget emergency declared by the governor, only half the money can be pulled from the account and only enough to maintain spending levels.

Filling the fund also triggers a new constitutional mandate for infrastructure spending that the state has never encountered.