New Democrats Introduce Fiscally Responsible Savings Account

Wednesday, April 18, 2018

For Immediate Release: April 18, 2018
Contact: Taylor Giroux – (916) 319-2021


New Democrats Introduce Fiscally Responsible Savings Account


SACRAMENTO – Today, the California New Democrats introduced landmark legislation to create a new, more flexible state savings account to weather the state’s boom-and-bust revenue cycle and insulate Californians from the drastic cuts made during recessions. The measure, Assembly Bill 1740, will establish a complementary account to the state’s existing “Rainy Day Fund.” This proposal is consistent with the Assembly Democrats’ “Blueprint for a Responsible Budget,” released in January.

“If we don’t save during the good times, we will inevitability 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,” the New Democrats said in a statement.

In 2014, voters overwhelmingly approved Proposition 2, a measure which strengthened the state’s existing Budget Stabilization Account (BSA) by increasing the amount of money that the State can save when the state is in the green. In January, the governor 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.

Since the year 2000, 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 by the Governor at $13.5 billion, is a little more than half of what California would need for a mild recession. AB 1740 will help close the savings gap shortage, by providing another, optional savings account for the Legislature to utilize without tying up funds for infrastructure expenditures.

“Just as families throughout our state struggle to live within their means, so, too, should government,” The New Democrats’ statement said. “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 and offering healthcare services to our seniors. 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.”

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Assemblymember Adam C. Gray (D-Merced) is the Convener of the New Democrats. The Executive Committee of the New Democrats includes Assemblymembers Anna Caballero (D-Salinas), Jim Cooper (D-Elk Grove), Tom Daly (D-Anaheim), Jim Frazier (D-Discovery Bay), Tim Grayson (D-Concord), Blanca Rubio (D-Baldwin Park), and Rudy Salas (D-Bakersfield).


AB 1740 Introduction Release 4.18.18.pdf