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Wednesday, October 8, 2014

Raining on the Prop 2 Parade

Proposition 2 on the November ballot is the governor's "rainy day" fund, essentially a reserve by formula that supplements the regular reserve in the general fund.  The governor is currently promoting Prop 1 (water bond) and Prop 2 in the same TV commercials - one of which we attach below for your edification.  The theme is saving water and saving money are the same idea.

Edsource today indicates that some in the educational establishment - essentially the K-12 component - are not endorsing Prop 2 because of limits it places on what school districts can put aside for rainy days under certain circumstances.  Prop 2 is in fact a complicated proposition and, as we have noted before, nothing prevents the legislature from saving whatever amount it wants by spending less than it takes in.  The rainy day fund in fact does not prevent the opposite: spending more than is being taken in.  As we have noted on this blog, if you look at the budget for the current fiscal year (which assumes voters pass Prop 2), the end of the year is projected to have less in the two reserves (rainy day plus regular reserve) than at the start of the year.  Whether that result will turn out to occur in fact we will know next July 1.  But even if more revenue comes in than projected, the fact that the budget can project a circumstance in which less comes in than goes out in the face of an assumed rainy day fund shows that such reserves by formula are less a Godsend than the governor suggests.

Readers of this blog can decide for themselves on whether to vote for Prop 2.  Some may see the rainy day idea as a symbol of good practice.  But you should know that there is less there than ads such as the one below suggest.  Certainly, the notion that UC and its budget will somehow be insulated from the next downturn is suspect.
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