Perez seeks revision of Calif. 'rainy day' measure

SACRAMENTO, Calif. (AP) -- The state Assembly speaker on Wednesday proposed changing a rainy day fund measure on the November 2014 ballot that had been negotiated by former Gov. Arnold Schwarzenegger and Republican lawmakers three years ago to decrease budget volatility.

Speaker John Perez, D-Los Angeles, announced his plan for a replacement ballot measure that potentially makes it more favorable for the public employee unions that support Democratic lawmakers. His proposal calls for the rainy day fund to be built with extra capital gains taxes from the wealthy rather than from the state's general fund, which could take money away from state programs.

Senate Minority Leader Bob Huff, R-Diamond Bar, said Perez's plan would give Democrats "political cover" for increasing spending.

Republicans criticized Democrats last year for moving the rainy day fund ballot measure from the June 2012 primary to the November 2014 general election. They called it a power grab pushed by union interests seeking to postpone the measure.

"All the Democrats have done is kick it down the road and now they're trying to walk away from it," Huff said.

With two-thirds majorities in both houses of the Legislature, Democrats could change the ballot measure without Republican support.

Perez defended his plan, saying that altering the previously agreed-upon measure will better protect the state budget from future economic downturns.

"The idea is to fill our new rainy day fund with spikes in capital gains revenues," Perez said during a luncheon address before the Sacramento Press Club on Wednesday. "We all talk about the volatility of revenues for the state of California and the area of greatest volatility is tax revenues derived from high-wealth individuals."

The current measure would require the Legislature to set aside money in years when California has a budget surplus, a constraint opposed by public employee unions and most Democratic lawmakers. It would require the state to put 3 percent of general fund money into the reserve fund and gradually increase the reserve to equal 10 percent of the general fund.

Under Perez's plan, the rainy day fund would be filled using any capital gains taxes — mainly paid by the wealthy — that exceed 6.5 percent of general fund revenue. His staff said the state would have made deposits under that formula in about 10 of the last 20 years.

Assemblyman Jeff Gorell, R-Camarillo, vice chairman of the Assembly Budget Committee, said he saw an opportunity to work on a new bipartisan proposal. It would signal to voters that lawmakers are serious about dealing with peaks and troughs of the budget.

"I am offering myself to engage and be a part of shaping the speaker's proposal once that comes out to try to work to make that a bipartisan policy proposal as well," Gorell said Wednesday.

Gov. Jerry Brown told reporters Tuesday during a memorial service for California Highway Patrol officers that reserves are a good idea, but he didn't want to commit to any single plan. He previously said he wants to build a reserve to cushion against future downturns and make strides toward paying down the state's bond obligations.

"We need reserves," said the Democratic governor.

Peter Schaafsma, who served as fiscal staff director in the Assembly Republican Caucus and helped draft the current measure, said the Legislature has a history of spending everything it receives, rather than exercising fiscal discipline.

He said the first sign that the current rainy day fund proposal would be dismantled was when Democrats delayed the ballot measure.

"I didn't expect that what we had negotiated would see the light of day on the ballot," Schaafsma said.

California is on track to collect $4.5 billion more in personal income taxes than expected, according to the nonpartisan Legislative Analyst's Office.

Democratic lawmakers are pushing to restore adult dental care for the poor, expand mental health care and other safety-net programs. Health advocates are pushing to expand health care coverage to all Californians. And Perez's own plan calls for increasing spending for child care and college assistance.

Brown included additional revenue from Proposition 30, the tax initiative approved by voters last fall, in his proposed $97.6 billion general fund budget for the fiscal year that starts July 1. The governor will update his spending plan next week.

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Associated Press writer Don Thompson contributed to this report