Election 2026 · State of California

Proposition 2: Larger state rainy day fund

Published September 29, 2026 · Updated October 2, 2026

Proposition 2 would change the State Constitution so the state keeps saving in its main rainy day fund until the fund equals 20% of General Fund taxes, up from 10% today, and saves more in years when revenue from investment gains is very high. It would also extend required extra debt payments from 2030 to 2040 and stop counting rainy day fund deposits toward the state spending limit until the money is taken out.

Summary by CityHallPass, not the official text or legal advice. The official text controls: California Official Voter Information Guide: Proposition 2.

What would Proposition 2 cost?

The Legislative Analyst says state budget reserves would be higher, which would make it somewhat easier to balance the budget when revenue falls. The state might also make more debt payments than it would otherwise. The analysis gives no dollar figure.

What it means for the City of LA

Proposition 2 changes only state accounts. It does not change the City of Los Angeles's own reserve rules or spending limit, and the Legislative Analyst does not estimate any local effect. Its effect on the City would come through the state budget, which pays for programs the City relies on, such as state homelessness grants. A larger state reserve is meant to make state cuts less likely in a downturn, but the measure does not guarantee any program's funding.

The details

The question on your ballot

Increases California's Rainy Day Fund, approved by voters in 2014, to provide funding for education, health care, public safety, and other essential services during economic downturns. Fiscal Impact: State budget reserves would be higher. Supporters: CA Professional Firefighters; LA Chamber of Commerce; Gavin Newsom; Xavier Becerra; Assemblymember Jesse Gabriel Opponents: None submitted

This is not the Proposition 2 on the November 5, 2024 ballot, the bond for public school and college facilities, which passed with 58.7% of the vote (Secretary of State, November 2024 Statement of Vote).

What would change

What stays the same: the state can still cut deposits or withdraw money in a budget emergency, with the same definition of emergency. No more than half the fund can be withdrawn in the first year of an emergency. Required debt payments still cannot be suspended (Budget Center).

What it means for the City of Los Angeles

• No direct change for the City. Proposition 2 amends only Sections 20 and 22 of Article XVI of the State Constitution, which govern state reserves (ACA 20 status). The Legislative Analyst’s analysis covers only the state budget (LAO analysis).
• The City’s own reserves follow City policy. The City’s Reserve Fund must equal 5% of General Fund revenue, and the City’s goal is 10% across its Reserve Fund, Budget Stabilization Fund and unappropriated balance (City 2026-27 Proposed Budget, General Fund Reserves Policy). Proposition 2 does not change these.
• Indirect effect through the state budget. The City budgets state money for some programs, such as the state’s Homeless Housing, Assistance and Prevention (HHAP) grants (City 2026-27 Proposed Budget). The Analyst says higher reserves “would make balancing the budget somewhat easier when revenues decline” (LAO analysis). The measure does not set aside money for any local program. The Budget Center says money set aside in boom years would not be available then for needs such as “support for local governments to address homelessness” (Budget Center).
• The Los Angeles Area Chamber of Commerce is one of the signers of the argument in favor (arguments). We found no City Council position on Proposition 2 as of Sept. 30, 2026.

How it got on the ballot

ACA 20 needed a two-thirds vote of each house (ACA 20 status). It was filed with the Secretary of State without a Governor’s signature (ACA 20 history).

• June 22, 2026: ACA 20 was introduced. Its lead authors are Assemblymembers Jesse Gabriel and Valencia and Senators Hurtado and John Laird. The Assembly voted 51-16 to suspend two of its rules the same day (ACA 20 history; ACA 20 status).
• June 25, 2026: The Assembly tabled amendments offered by Assemblymember David Tangipa, 55-18, then adopted ACA 20, 59-8. The Senate withdrew it from committee and adopted it the same day, 29-2. It was filed as Resolution Chapter 130 (ACA 20 votes; ACA 20 history). The Assembly no votes were DeMaio, Dixon, Ellis, Hadwick, Macedo, Patterson, Sanchez and Tangipa. The Senate no votes were Choi and Grove (ACA 20 votes).
• The Governor’s office listed the amendment as part of the 2026-27 budget agreement announced June 26 (Governor’s office). The Assembly Budget Committee’s floor report says the rainy day fund changes were “completed in conjunction with legislative approval of ACA 20” (Assembly floor report, p. 6).

Why the vote threshold is a simple majority. The State Constitution says a proposed amendment “shall be submitted to the electors and, if approved by a majority of votes cast thereon, takes effect” (Cal. Const. art. XVIII, sec. 4).

Related past measures.

• Proposition 58 (2004) created the rainy day fund, the Budget Stabilization Account (Budget Center).
• Proposition 2 (November 2014) set the current deposit, debt payment and 10% cap rules (LAO analysis). It passed with 69.1% statewide and 69.8% in Los Angeles County (Statement of Vote, 2014).
• Proposition 4 (1979) created the state spending limit, known as the Gann limit (Budget Center).

What each side says

In the state voter guide. Arguments are the authors’ opinions and are not checked for accuracy by any official agency (arguments).

Argument in favor, signed by Darrell Roberts of California Professional Firefighters, Assemblymember Jesse Gabriel and Maria S. Salinas of the Los Angeles Area Chamber of Commerce (argument in favor):

• The state budget swung “from a $100 billion surplus to a $50 billion deficit in just a few years.”
• It doubles the reserve requirement “so California has a real cushion.”
• It makes the state bank more of a revenue spike “instead of committing it to new ongoing spending.”
• The Legislative Analyst “has recommended that the state should be saving significantly more than current rules require.”

Their rebuttal, signed by Linda Darling-Hammond of the State Board of Education, Carmela Coyle of the California Hospital Association and Francisco J. Silva of the California Primary Care Association, calls the taxpayer rebate “a 50-year-old accounting gimmick that rewards spending instead of saving” (rebuttal).

Argument against, signed by Assemblymember David Tangipa, Sen. Steven Choi and Carl DeMaio of Reform California (argument against):

• It lets politicians “gut the voter-imposed spending limit” and creates a “SLUSH FUND.”
• It “cancels your tax rebate,” which the Constitution requires when revenue exceeds the spending limit.
• The state budget “has grown by 76% since 2018.”
• “Within 24 hours” of putting it on the ballot, the same politicians “voted to suspend more than $5 billion in required deposits.”

Outside the guide.

• The Howard Jarvis Taxpayers Association recommends a no vote. Its guide says the measure’s reserve changes make sense “from the perspective of addressing revenue volatility” but calls it “little more than a Band-Aid on a severed limb” because it does not undo earlier changes to the Gann limit (HJTA 2026 voting guide).
• Senate President pro Tempore Monique Limón said the budget deal addresses “our short and long-term financial future by building up our rainy day fund” (Governor’s office).

Checking the main factual claims against official records.

We did not check the “$100 billion surplus to $50 billion deficit” or “76% since 2018” figures against official budget records.

Who supports and opposes it

Supporters

• On the ballot label: California Professional Firefighters, Los Angeles Area Chamber of Commerce, Gov. Gavin Newsom, Xavier Becerra and Assemblymember Jesse Gabriel (ballot label).
• The campaign’s coalition list adds Speaker Robert Rivas, Senate President pro Tempore Monique Limón, SEIU California, the California Hospital Association, California Primary Care Association, Planned Parenthood Affiliates of California, State Board of Education President Linda Darling-Hammond, 21st Century Alliance and California Environmental Voters (Yes on Prop 2).
• California Democratic Party (CDP positions, Aug. 2, 2026).
• League of Women Voters of California (LWVC recommendations).
• California State PTA, which voted to support on Aug. 8, 2026 (CAPTA).

Opponents

• Reform California and its chairman, Assemblymember Carl DeMaio; Assemblymember David Tangipa; Sen. Steven Choi. The argument against also names the Transparency Foundation (argument against).
• Howard Jarvis Taxpayers Association (HJTA 2026 voting guide).
• The legislators who voted no, listed above (ACA 20 votes).

Editorial boards and others. We found no LA Times or Daily News editorial board position as of Sept. 30, 2026, and no published position from the California Republican Party. The California Budget & Policy Center analyzed the measure without taking a position (Budget Center).

Money for and against

Source: the committee’s campaign statements (July 1-Sept. 19; 2025) and late contribution reports through Sept. 28, from the Cal-Access raw data export of Sept. 30, analyzed by CityHallPass. The Secretary of State’s contribution totals page still listed no committees, as of its Aug. 2 update, when checked on Sept. 30.

The committee was called “United for Justice, A Ballot Measure Committee Controlled by Jesse Gabriel” until June 30, 2026, and took its Proposition 2 name with the July-September statement. Before July it raised $67,075.09, mostly a $48,950 transfer from another Gabriel committee, Californians for Justice, in December 2025 (Cal-Access raw data export; 2025 statement).

Who is giving

Method: every itemized contribution to committee 1485332 from Jan. 1, 2025 through the late reports of Sept. 28, 2026, from the Cal-Access raw data export, analyzed by CityHallPass.

Source: Cal-Access raw data export and the committee’s July-Sept. statement, analyzed by CityHallPass.

All six donors have California addresses. Since the committee took its Proposition 2 name, the money has come from a labor union committee (SEIU), a business-backed group (21st Century Alliance), the Democratic Party and one individual. The committee did not reach the $1 million level that triggers an FPPC top-10 list (FPPC top-10 list).

How the money was spent. Of $135,419.66 in spending reported for July 1 to Sept. 19, $121,263.50 was bills not yet paid and $9,117.26 was paid out, including $7,500 to LAFC StadiumCo for fundraising events (July-Sept. statement). The statement data we used do not name the vendors owed the unpaid bills.

Outside spending

Independent expenditures reported through Sept. 28, 2026 (Cal-Access raw data export):

• Against: Reform California with Carl DeMaio (ID 1268914) reported $37,500 for slate mailers, door hangers and campaign management on July 1 and Aug. 27. The same payments are listed against several other propositions, so the Proposition 2 share cannot be separated.
• For: the California Democratic Party reported $1,493.45 for walk pieces and door hangers, and United Domestic Workers of America Issues PAC reported $360.53, also shared with other props.

Independent analysis

• Legislative Analyst. Besides the official analysis (LAO analysis), the Analyst says revenue declines over a bad recession “can equal 50 percent or more of annual General Fund revenues.” In a February presentation to the Senate Budget Committee, its simulations found current rules would cover about 30% of funding shortfalls over 50 years; raising the cap to 50% by 2055 with stronger deposit rules would cover about 75% (LAO handout, pp. 6-7). The handout does not model Proposition 2 as written.
• Budget Center. The California Budget & Policy Center says that if Prop 2’s capital gains rules had applied from 2010-11 to 2023-24, the state would have set aside more in six of those 14 years, less than 1% to 2% of General Fund revenue each time. It says the change could take hundreds of millions of dollars, or more than $1 billion, off the table in some years. It also says a higher cap means less “spillover” money for infrastructure, and that using debt payments on federal unemployment insurance loans would shift a cost from businesses to the state (Budget Center).
• Current reserves. The 2026-27 budget projects $28.8 billion in reserves: $15.1 billion in the rainy day fund, $9.2 billion in the school reserve and $4.5 billion in the operating reserve, plus $6.4 billion in the temporary holding account (Assembly floor report, p. 10).

Interaction with other measures on this ballot

• The Legislative Analyst’s analysis names no conflict between Proposition 2 and other measures on this ballot (LAO analysis).
• Proposition 41 also deals with the state spending limit, in a different way: it would stop new state taxes from being excluded from the limit (LAO analysis of Prop 41). Proposition 2 concerns reserve deposits, not taxes. See our Proposition 41 page.
• Proposition 3 would keep higher income tax rates on high earners after 2031 (Prop 3 analysis). Rainy day fund deposits are set as shares of General Fund revenue, so more revenue means larger required deposits under either current rules or Proposition 2 (LAO analysis). See our Proposition 3 page.

If it passes

• When it takes effect. A constitutional amendment takes effect on the fifth day after the Secretary of State files the statement of the vote (Cal. Const. art. XVIII, sec. 4). The spending limit changes apply starting in the 2027-28 fiscal year (text, Sec. 20(i)).
• Budget emergencies. The Governor could use the May budget revision as the emergency proclamation (text, Sec. 22(c)).
• Debt payments. The Assembly Budget Committee says the new debt payment rules would give the state another way to pay an estimated $3.9 billion owed to schools and community colleges for 2025-26 (Assembly floor report, p. 6).
• Legal challenges. We found no reported legal challenge as of Sept. 30, 2026.

Key moments

We found no debate focused on Proposition 2 in news coverage as of Sept. 30, 2026.

• LAO reserve recommendations (Feb. 18, 2026). The Analyst recommended raising the rainy day fund cap to 50% by 2055 (LAO handout).
• Budget deal and three-day passage (June 22-25, 2026). ACA 20 was introduced June 22 and adopted by both houses June 25, alongside the 2026-27 budget (ACA 20 history; Governor’s office).
• Committee renamed (July 2026). Gabriel’s ballot committee took the Yes on Proposition 2 name (July-Sept. statement).

Polls

Source: PPIC, September 2026, pp. 6-7, 22 and 29. Respondents read the ballot title and label. Support was 82% among Democrats, 22% among Republicans and 60% among independents. One percent of likely voters named Proposition 2 as the measure they were most interested in. We found no other public poll on Proposition 2.