(SACRAMENTO) - Today Assemblymember Tim Grayson (D - Concord) and seven of his Democratic Assembly colleagues introduced landmark legislation to create a new, more flexible state savings account to insulate Californians from the potentially devastating impacts of future economic downturns. The measure, AB 1740, will establish a complementary account to the state's existing Budget Stabilization Account (BSA), commonly known as the Rainy Day Fund.
"If we don't save during the good times, we will inevitably be forced to make cuts to critical services during the bad. Education, public safety, and other important government services will all be on the chopping block without sufficient reserves to weather us through the next recession," Grayson and his colleagues said in a statement.
In 2014, voters overwhelmingly approved Proposition 2, a measure which strengthened the BSA by increasing the amount of money the state can save when it is in the green. In January, Governor Brown proposed fully funding the BSA to its constitutional cap of $13.5 billion, meaning that in future years the Legislature will not be able to save any additional money to protect against cuts to vital services that Californians depend on.
In the last twenty years the state has had two multi-year recessions: the Dot-Com bubble burst in the early 2000s, which cost the state approximately $80 billion over three years and, more recently, the Great Recession which cost the state approximately $115 billion over four years. California's chief non-partisan financial analyst believes that the state will need $20 billion in savings to battle a mild recession, or $40 billion in savings to battle a moderate recession.
The current BSA, even fully funded to its constitutional maximum, is a little a more than half of what California would need to weather a mild recession. AB 1740 will help close the savings gap by providing another, optional savings account for the Legislature to utilize during periods of reduced revenues.
"When times are good we save so that when times are bad we aren't forced to choose between a good education for our children or offering healthcare services to our seniors," the group of legislators behind AB 1740 said. "AB 1740 is a long-term reform that will help ensure that future generations are not saddled with our debt or forced to make severe cuts to education and other important programs. We look forward to working with our legislative colleagues and the Governor to put our state on a strong fiscal path and preserve the gains we have made over the past years."
Assemblymember Timothy S. Grayson represents the 14th Assembly District which includes the communities of Clayton, Concord, Martinez, Pittsburg, Pleasant Hill, Walnut Creek, Benicia, and Vallejo. For more information, please visit https://a14.asmdc.org/