California voters approve doubling state savings cap to 20% amid economic boom

California voters approved Proposition 2, which increases the cap on the state’s rainy day fund from 10% to 20% of general fund tax revenue, according to LAist reporting on the election results.

The measure passed with 60% of voters in favor and 40% opposed, as noted by CalMatters and the Associated Press. This change allows state leaders to save more during economic booms, particularly when tax revenue grows rapidly.

The state’s recent economic boom, driven by a strong stock market, has generated billions in unexpected tax revenue. Proposition 2 also requires higher savings when revenue grows faster and permits lawmakers to use some funds to pay down California’s $20 billion federal unemployment insurance debt.

Supporters argue that increasing savings will help California better manage future economic downturns. The state has historically experienced volatile budget cycles due to reliance on wealthy residents’ stock market earnings, and some economists warn the current boom may not last.

The law aims to stabilize California’s finances amid concerns about federal budget cuts and possible tax filing delays caused by natural disasters, according to CalMatters.