Please ensure Javascript is enabled for purposes of website accessibility
California's Rainy Day Fund Is Ready For Its Coronavirus Close-Up
Joe-Mathews
By Joe Mathews
Published 5 years ago on
March 14, 2020

Share

By THE RAINY DAY FUND, as told to JOE MATHEWS
I’m ready for my close-up, Ms. Gerwig!
OK, as a budget fund without acting credits, I shouldn’t expect Greta Gerwig to put me in her next film—even if both she and I are Sacramento natives. But the time is coming—quite quickly—when I, California’s humble Rainy Day Fund, will stand at the center of our state’s civic stage, and my fellow Californians will finally have to pay me the attention I deserve.

portrait of columnist Joe Mathews
Joe Mathews
Opinion
I’ve had to stand on the sidelines for the past decade while Californians enjoyed a long economic expansion. Sure, this expansion made me a billionaire many times over—if I were human, I’d rank right between Elon Musk and Laurene Powell Jobs on those billionaire lists. But my real time is the bad times.
Oh, and look, what do we have here? The coronavirus and a monster stock market crash! Do I smell recession and huge drops in state revenues? Because that’s my cue!
My role is to be the adult fund in the room, holding onto my cash instead of spending it constantly. I have to be stable because you Californians are so volatile. Your incomes, your business receipts, and your investment earnings go up like rockets and down like, mmm, bad rockets, which then open up giant holes in the state budget. It’s my job to plug those holes.
But I must confess to being nervous about the hole-plugging, because I’ve never done this before.

Like so Much Else in California, I’m Governed by Formulas

Yes, Prop 58 created me in 2004, but in that decade,  I was so empty that the state couldn’t tap me when the Great Recession hit. In 2014, voters enhanced me via Prop 2, and ever since, I’ve been filling up with money.
But I’ve never had my funds drawn down in an economic downturn. I’ve been sitting on the shelf so long—like an old soup can or a two-term vice president—that no one knows if I can prevent teacher layoffs, shore up Medi-Cal, or fund pandemic response when I’m really needed.
In fact, few people really know how I really work. For one thing, while I’m called the Rainy Day Fund, I actually encompass more than one account. Most of my billions are the Budget Stabilization Account, but I also have a few billion in the Special Fund for Economic Uncertainties, the Safety Net Reserve, and the Public School System Stabilization Account.
Like so much else in California, I’m governed by formulas. The gist: I get 1.5 percent of the state’s general revenues each year, as well as some extra capital gains taxes.
My success at storing money has really surprised the state. The original estimate was that I would be small, gathering maybe $1 billion a year. But I’ve grown at three times that rate, making me as swole and buff as Schwarzenegger was before he went into politics. Today I’m worth around $20 billion.

I Am Not Going to Be Ignored

How’d I get so big? Governor Brown and Governor Newsom put more money into me than required. They had their reasons. First, when you make a deposit into me, it’s easier to balance the budget, because of the way the budget formulas are written. Second, governors love the fact that the legislature has little power to access my funds. For the state to get my money, the governor has to declare an emergency. So the bigger I am, the more leverage a governor has over the legislature!

One reason I’m writing this is to manage expectations, and warn you that I can’t handle an economic crisis alone. I need the help of Californians, who should start making recession plans right now right now. 
In recent years, the biggest controversy about me has been whether I’m too big—and whether I should be tapped to handle urgent needs like homelessness. But, as the economy takes a bad turn, I’m steeling myself for fights. I fear that, as huge as I am, I won’t be able to handle a bigger recession, which could cost $100 billion-plus in revenue over four years.
Even if the recession is tiny, the rules for tapping my dollars are arcane and untested. If revenues collapse $20 billion over a coronavirus cliff this year, my rules suggest that only half my money—$10 billion maybe—could be tapped to fill the hole right away.
One reason I’m writing this is to manage expectations, and warn you that I can’t handle an economic crisis alone. I need the help of Californians, who should start making recession plans right now right now. My presence, I hope, will remind you of obligations from which California can’t run.
To quote my favorite movie, Fatal Attraction, I am not going to be ignored.
About the Author 
Joe Mathews writes the Connecting California column for Zócalo Public Square.

DON'T MISS

Automakers to Trump: Please Require Us to Sell Electric Vehicles

DON'T MISS

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

DON'T MISS

Ohtani Makes History With 3rd MVP, Judge Claims 2nd AL Honor

DON'T MISS

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

DON'T MISS

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

DON'T MISS

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

DON'T MISS

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

DON'T MISS

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

DON'T MISS

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

DON'T MISS

Fresno Council Lowers Speed Limits on Friant and Audubon

UP NEXT

Is Fresno Mobile Home Park Controversy Over? Tenants Applaud Federal Judge’s Ruling

UP NEXT

Conservative Professors and Students Are Beating CA Community Colleges in Court

UP NEXT

How Trump Can Earn a Place in History That He Did Not Expect

UP NEXT

Demography Drives Destiny and Right Now California Is Losing

UP NEXT

Defining Deviancy Down. And Down. And Down.

UP NEXT

Former Bitwise Employees Settle for $20 Million: Fresno Attorney

UP NEXT

Fresno County Sent Out Wrong Ballots. Will Errors Affect Close Races?

UP NEXT

Fresno Officials, Local Groups Prepare for Trump’s Promised Mass Deportations

UP NEXT

How Three Trump Policy Decrees Could Affect California Farmers

UP NEXT

Fresno Based Nonprofit, Mell’s Mutts, Gives Dogs a Second Chance at Life

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

1 hour ago

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

1 hour ago

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

2 hours ago

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

2 hours ago

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

2 hours ago

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

2 hours ago

Fresno Council Lowers Speed Limits on Friant and Audubon

2 hours ago

How About an Honest Conversation About the Range of Light Monument Proposal?

4 hours ago

UConn Coach Geno Auriemma Breaks NCAA Wins Record With 1,217th Victory

4 hours ago

Fresno Doctors Will Pay $2.4 Million to Settle Kickback Allegations, DOJ Says

4 hours ago

Automakers to Trump: Please Require Us to Sell Electric Vehicles

Three of the nation’s largest automakers, Ford, General Motors and Stellantis, are strategizing with other car manufacturers on how to make ...

18 minutes ago

President Joe Biden with Mary Barra, the chief executive of General Motors, at the Detroit Auto Show, Sept. 14, 2022. President-elect Donald Trump has promised to erase the Biden administration’s tailpipe rules designed to get carmakers to produce electric vehicles, but most U.S. automakers want to keep them. (Doug Mills/The New York Times)
18 minutes ago

Automakers to Trump: Please Require Us to Sell Electric Vehicles

22 minutes ago

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

42 minutes ago

Ohtani Makes History With 3rd MVP, Judge Claims 2nd AL Honor

Former Florida Attorney General Pam Bondi, speaks before Republican presidential nominee former President Donald Trump arrives to speak at a campaign rally at First Horizon Coliseum, Saturday, Nov. 2, 2024, in Greensboro, NC. (AP/Alex Brandon)
1 hour ago

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

1 hour ago

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

2 hours ago

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

2 hours ago

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

2 hours ago

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

Help continue the work that gets you the news that matters most.

Search

Send this to a friend