Proposition 2, approved by voters in November 2014, replaces the Proposition 58 (2004) version of the Budget Stabilization Account (BSA) to build a stronger "rainy day" reserve while requiring accelerated debt pay down.
Beginning with the 2015-16 fiscal year, Proposition 2 requires a transfer from the General Fund to the BSA by October 1 of each year. This transfer includes fifty percent of the sum of 1.5 percent of estimated General Fund revenues and the amount of capital gains revenues over 8 percent of General Fund tax proceeds that is not required to fund Proposition 98. The remaining fifty percent will be used for supplemental debt payments and other specified long-term liabilities.
Prior to the passage of Proposition 2, Proposition 58, as approved by the voters in March of 2004, established the BSA, and required the State Controller to transfer a specified percentage of estimated General Fund revenues from the General Fund to the BSA. The Legislature could transfer, by statute, amounts in excess of the specified percentage to the BSA. In addition, the Governor, by executive order, could suspend the transfer to the BSA. Half of the funds transferred to the BSA were used to retire Economic Recovery Bonds authorized in Proposition 57 (March 2004).