Brown, a Democrat who has followed a path of fiscal restraint
since returning as governor in 2011 from two previous terms of
office in the 1970s and '80s, is widely credited with restoring
stability to California's battered budget after years of
"We simply must prevent the massive deficits of the last decade, and
we can only do that by paying down our debts and creating a solid
rainy day fund," Brown said.
On Wednesday, he called a special session of the Legislature for
next week to discuss his plan for requiring the state to set aside
money earned from volatile investments such as those in the stock
market in flush years for use later during lean times.
"The reason you have a rainy day fund is to put money away in good
times, so that in those bad times when they come — and we know they
will come — we'll have more money," Michael Cohen, Brown's chief
financial adviser, said in a briefing with reporters.
Cohen said pushing a state constitutional amendment for a rainy day
fund would be a top priority in advance of spending negotiations
with the Legislature for next year.
Brown's plan would require approval of two-thirds of state lawmakers
and ratification by voters in November. If passed by the Legislature
during the special session, it would knock a similar proposal,
backed by Republicans, off the ballot.
In a nod to concerns raised by more liberal Democrats, whose votes
he needs to reach a two-thirds majority, Brown's plan allows more
flexibility in spending than the Republican-backed measure already
on the ballot, and preserves a portion of the fund for spending on
Democrats in California control both houses of the Legislature as
well as all statewide offices. But a recent series of scandals has
cost the party its two-thirds majority in the state Senate, so Brown
will also have to reach out to Republicans if he wants his proposal
On Wednesday, Republicans in the Legislature applauded Brown's call
for the special session but said they were skeptical of provisions
giving lawmakers more flexibility to spend the money than their
proposal would allow.
"It's just common sense for California to put away money during the
'boom' years to avoid future tax increases and spending reductions
in the 'bust' years," said Senate Republican leader Bob Huff.
"However, we are mindful that legislative Democrats have undermined
similar efforts in the recent past."
[to top of second column]
Left on the sidelines when the Democrats held a two-thirds
super-majority that allowed new taxes and proposed constitutional
amendments to be passed without consulting them, Republican
lawmakers said they were pleased that Brown would have to work with
them to get his measure through.
"We are certainly open to talking about this with the governor,"
said Huff's spokesman, Peter DeMarco.
The Republican-backed plan, drawn up during the administration of
Arnold Schwarzenegger as part of a compromise with Democrats, would
require the state to set aside a portion of its overall revenues in
a fund that could only be touched during a natural disaster or
Brown's plan, by contrast, only requires the state to set aside
money for the fund during years when income spikes from investments — so-called capital gains — amounts to more than 6.5 percent of its
revenue. Such investments are projected to make up about 7.7 percent
of the state's general fund revenue this year.
California set up a rainy day fund in 2004, but contributions were
not enshrined in the constitution, and the state has not contributed
to it since 2007.
(Additional reporting by Robin Respaut;
editing by Steve Gorman and
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.