Overview

Proposition 1A:  State Budget.  Changes California Budget Process.  Limits State Spending.  Increases “Rainy Day” Budget Stabilization Fund.

Proposition 1A establishes a Supplemental Education Payment Account, which is the funding source for making payments to schools authorized by Proposition 1B.  It retains the current requirement that 3 percent of General Fund revenue each year be transferred to a rainy day fund, but establishes more restrictive conditions under which this requirement can be waived.  Half of the 3 percent (or 1.5 percent of General Fund revenue) would be used to provide the payment to schools and community colleges required by Proposition 1B, if that measure passes.  Once the school payments are completed, then that half could be used only for one-time capital outlay projects or for debt service on state general obligation bonds. 

Second, Proposition 1A defines “unanticipated revenue” and requires all of it to be transferred to the rainy day fund after outstanding Proposition 98 obligations are met.  The September 2008 version of the rainy day fund captured “April surprise” revenue for transfer to the fund (April surprise revenue is defined as revenue received during the fiscal year, usually around income tax time, that is in excess of revenue projections for that year).  After fulfilling any unpaid Proposition 98 obligations, the measure required revenue in excess of 105 percent of budgeted revenue to be transferred to the rainy day fund.

Proposition 1A, instead targets “unanticipated revenues,” which is defined as the lesser of:

• Estimated General Fund revenues for the current year minus the revenue forecast for the current year; or
• Estimated total General Fund resources (revenues plus transfers and prior year balances) minus the expenditure forecast for that year.
  

If either calculation is less than zero, then unanticipated revenue shall be zero.  Proposition 1A would require all unanticipated revenues, if any, to be transferred to the rainy day fund after outstanding Proposition 98 obligations are paid.