YES. YES. YES. on Prop. 2 – “Increases State’s Rainy Day Fund”

Note: this post will be periodically updated! (10/07/2026)

VOTER GUIDE – QUICK LINKS:

The non-partison Legislative Analyst’s Office is worried!

They want California to start saving significantly more than the 10% our current rules require. Prop. 2 is on the ballot to raise that limit to 20%.They are worried. About not having a financial cushion to deal with the upcoming cuts to healthcare and food assistance coming from the Big Billionaire Bill’s tax cuts. About the next big fire. About whatever the heck will take place during these El Niño years. About parts of CA falling off into the sea. About the big earthquake that’s scheduled any day now.

And now they are very worried that our current AI-driven billionaire dot.com bubble will BURST!

  • WE WERE HERE ONCE BEFORE: Those of us who are older remember the time when computers filled huge air-conditioned rooms, used huge amounts of electricity, and depended on thousands of vacuum tubes just to perform basic calculations. Systems like eniac weighed over 25 tons, yet their computing power was far weaker than what a modern calculator or smartphone can handle in seconds.
  • IT WILL HAPPEN AGAIN! These guys in the videos below all think the end of data centers is approaching fast! And our non-partisan Legislative Analyst’s office wants a savings account that ready to handle the upcoming crash!

‘Truly staggering’: There’s a bigger problem with data centres than water or power, warn experts”

  • (BBCScienceFocus) THEY’RE DOING IT ALL ON BORROWED MONEY!: “The tech giants pouring money into data centres are betting that all this extra computing power will ultimately translate into much greater profits – whether by selling AI services, creating new products or making their existing businesses more productive.
    • Assuming investors expect a 15 per cent return, the Wachters calculated that these data centres would need to become 2.7 times as productive for the numbers to add up. If those gains fail to materialise, they warned, “[these] firms risk bankruptcy”.
    • If data centres sound like an incredibly risky bet, it gets worse. Tech companies aren’t simply paying for all these data centres with current profits, but increasingly they’re borrowing it. That means if AI fails to generate the returns they’re hoping for, “companies won’t just be left with expensive data centres that haven’t paid off – they’ll also have enormous debts to repay. And if enough companies find themselves in that position at once, the consequences could ripple through the wider economy.
    • There’s an uncomfortable historical precedent for this. Economic historian Liaquat Ahamed has compared the AI boom to the great US railroad bubble of the 19th century, when investors poured huge amounts of borrowed money into a building frenzy that doubled America’s rail network in just seven years after the Civil War.
    • When the railroad bubble burst in 1873, the damage spread far beyond the investors who had bet on it, helping plunge the entire US economy into the Long Depression. Yet railroad construction had averaged around 2.5 per cent of the US economy – less than the 2.8 per cent that spending on AI infrastructure is now expected to reach.
    • In short, there’s every chance the company behind that data centre down your road will go bust before a single brick is laid. But if that happens, an abandoned building site may be the least of your worries.”
  • TECH ALWAYS GETS SMALLER: “Much of the current building boom is designed to host the most powerful models, but smaller, cheaper ones will soon be able to handle most everyday tasks almost as well.
    • “Why pay such a premium for the most sophisticated model when you can, for 10 per cent of the cost, get 80 per cent of the performance?” he asks.
    • If enough people reach the same conclusion in future, Green concludes, many of today’s planned data centres could become ‘stranded assets’ – humming away, half-empty, long after the hype has died down.”
  • WHAT HAPPENS TO THE TOWNS LEFT BEHIND?:
    • Tax Revenue Drop: Tax assessments rely heavily on the internal server hardware; when servers are removed, taxable value plummets. (Decommissioning Data Centers: Avoiding Stranded Assets)
    • Budget Shortfalls: Towns counting on long-term property tax payments face sudden municipal budget gaps.
    • Stranded Costs: Early closures leave unpaid electrical and grid upgrade costs that can fall back onto local ratepayers. 
    • Hulking Empty Buildings: A modern data center is a paradox: its servers are obsolete in three years, but its concrete shell is built for fifty. What happens to the host town when these windowless bunkers go dark?
    • For the first ten to fifteen years, a data center survives through constant retrofitting. Racks are ripped and replaced. But eventually, the building’s core geometry becomes the bottleneck. When the technological requirements finally outpace the physical capacity, these structures become massive, stranded assets. Older facilities were built for servers drawing 5 to 10 kilowatts per rack. Today, high-density AI clusters demand up to 100 kilowatts per rack, requiring heavy liquid-cooling systems and reinforced floors that aging buildings cannot physically support. When retrofitting costs more than building new, the servers are cleared out, and the facility goes dark. What remains is a heavily fortified, windowless concrete bunker with industrial-grade security and massive power lines. Because they lack natural light and are incredibly expensive to modify, they cannot easily be turned into offices or housing.
    • Low Job Losses: Because data centers are highly automated, closures rarely trigger mass local layoffs (typically only affecting a skeleton crew of 30 to 50 workers).
    • Relief on Resources: Local water systems and power grids experience immediate relief from intense cooling and electricity demands. (https://stpp.fordschool.umich.edu/sites/stpp/files/2025-07/stpp-data-centers-2025.pdf)

Strengthen the Rainy Day Fund – Protect Schools, Health Care, & Public Safety!

What’s the Background? California’s General Fund pays for most public services. About half of the General Fund’s annual expenditures goes to education – schools, colleges, and universities. Another third goes to health and human services including Medi-Cal. And the rest pays for prisons, courts, and other state services. The General Fund is mostly funded by income taxes which vary from one year to the next. This is because “high-wage earners” account for the largest percentage of income taxes in California, and much of their income comes from the sale of stocks – resulting in annual variability based on economic conditions

To offset the consequences of this variability and maintain essential services in economic downturns, the state has established a Budget Stabilization Account (known as the Rainy Day Fund). When the economy is strong, the state puts money into the Fund; and when the economy is struggling, the state uses the reserves in the Fund to maintain public programs without resorting to spending cuts, tax increases, or borrowing. To maintain the Fund’s solvency, the state sets aside 1.5% of General Fund tax revenues a year with half going to the Fund and the other half going to pay down debt. Once the Fund reaches 10% of General Fund taxes, the state is no longer required to make additional deposits. Instead, the state is required to use the excess funds for infrastructure investments.

The state has more than $250 billion in debts including debt for infrastructure and pension and retiree health benefits. The state also sometimes borrows money from state funds to help pay General Fund costs, and the state uses the Fund to make extra debt payments to pay down its debt for long-term pension and retiree health care debts as required by the State Constitution – saving the state money in the long run. The requirement to make extra debt payments currently ends in 2030.

What would Proposition 2 do?

  • Allow an increase in deposits into the Fund until it reaches 20% of General Fund taxes (vs. 10%) and make even larger deposits in years when revenues from taxes on investment gains are very high.
  • Extend the requirement to make extra debt payments to 2040 (vs. 2030).
  • Allow the amount set aside for extra debt payments to be used for other purposes, e.g., payments to schools and community colleges, repaying amounts borrowed from other state funds, and repaying loans from the federal government.
  • Deposits to the Fund would not count toward the state appropriations limit until the money is taken out.
  • Improve the state’s ability to balance the budget when there’s an economic downturn or other emergency.
MythsFacts
“Proposition 2 does not protect education, health care, or public safety.“These are exactly the programs paid for by the General Fund. Over half of the General Fund goes to fund education, a third to health care, and the remainder to public safety and other programs. In times of economic downturn, these are the programs that will be cut. Maintaining a strong Rainy Day Fund protects these essential programs from budget cuts in times of economic uncertainty. That’s why it’s supported by a mix of public safety, business, government leadership, and education sectors, all united in supporting the expansion of California’s Rainy Day Fund to enhance fiscal stability and protect essential services.
“The Rainy Day Fund is a Slush Fund.“Money in the Fund is saved, not spent – it can be used only for defined purposes like downturns emergencies, and debt paydown; and it counts against the spending limit once spent. Proposition 2 does not encourage spending but rather saving for unforeseen circumstances in the future in the same way families put aside funds for a Rainy Day.

Resources:

(Calbudgetcenter.org) Should Voters Approve Proposition 2? How California’s Rainy Day Fund Would Be Updated

CADEM
Los Angeles dem. Party
California Young Democrats
equality CA
Cause action fund
League of Women Voters CA

Read recommendation here.
GAVIN NEWSOM
State Asm. Avelino Valencia 
Central Coast Labor CouncilAFL-CIO Inland Empire Labor Council
Teamsters Joint Council 7Teamsters Joint Council 42
National Union of Healthcare Workers

  
State Asm. Joe Patterson (R)  

More Resources!

Note on the video below. We can’t believe the GOP, the supposed kitchen-table economics experts, are against saving more money for hard times. And it’s hilarious that they chose the odious State Senator Tony Strickland to argue against Proposition 2. In 2016, he had to pay $40,000 in fines to settle money-laundering charges for illegal campaign contributions. Couldn’t they find ANYONE with a clean financial record to help out here?

(https://youtu.be/wtPrOERJdPU?si=XTxhpoUKCNhsBMC1)