May 9 (Bloomberg) -- California should funnel surplus revenue from capital-gains taxes into a reserve fund to avert cuts when the economy sags, Assembly Speaker John Perez said.
The Los Angeles Democrat, speaking yesterday on KXJZ-FM in Sacramento, said he wants a referendum on setting aside excess funds when revenue from capital gains exceeds 6.5 percent of projections. Once the reserve tops 10 percent of general-fund spending, which pays for most basic services -- about $97.6 billion in this fiscal year -- the excess could be spent on one-time needs, such as reducing debt, he said.
Income-tax revenue covered 61 percent of general-fund spending last year. In January, Governor Jerry Brown, a Democrat, said he expects an $850 million budget surplus by the conclusion of fiscal 2014, reversing years of deficits that cumulatively exceeded $100 billion since 2007. So far this year, tax collections have topped Brown’s projections by $4.5 billion.
“We need reserves for fire, we need reserves for contingencies,” Brown told reporters May 7. “We also need to pay down debt, which is a form of reserve. It frees up money.”
Perez’s rainy-day fund proposal would replace one already on the ballot next year. That plan, favored by Republicans and opposed by public-employee unions, would fill the reserve whenever all tax revenue exceeds 3 percent of general-fund spending. Democrats, who control both chambers of the legislature, can alter the ballot measure by a two-thirds vote.
Brown persuaded Californians in November to impose the highest statewide sales tax in the U.S., at 7.5 percent, and to boost levies on annual income starting at $250,000 -- reaching 13.3 percent on those making $1 million or more, the nation’s highest rate.
Brown is scheduled to update his budget proposal May 14 to reflect the latest revenue figures.
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