{"id":2884,"date":"2026-06-23T19:36:51","date_gmt":"2026-06-23T19:36:51","guid":{"rendered":"https:\/\/nextcitydigest.com\/?p=2884"},"modified":"2026-06-23T19:36:51","modified_gmt":"2026-06-23T19:36:51","slug":"opinion-california-is-about-to-get-a-windfall-lets-not-blow-it","status":"publish","type":"post","link":"https:\/\/nextcitydigest.com\/?p=2884","title":{"rendered":"Opinion: California is about to get a windfall. Let’s not blow it."},"content":{"rendered":"
\n
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The IPOs of SpaceX, OpenAI and Anthropic could deliver billions of dollars to California\u2019s coffers.<\/p>\n

Read more US eases restriction on Iran\u2019s World Cup team, allowing travel 2 days before next match<\/a><\/p>\n

We\u2019ve seen this movie before.<\/p>\n

In 2022, California recorded a nearly $100 billion surplus, saved just $10 billion in its rainy day fund and then spent the rest. Two years later, a $56 billion deficit loomed.<\/p>\n

Now, with the state facing ongoing operating deficits of more than $10 billion, we\u2019re back in familiar territory.<\/p>\n

The coming IPO windfall is a rare second chance. But we\u2019ll only benefit from it if we first fix the structural flaw that\u2019s caused us to squander every previous boom \u2014 a budget reserve that isn\u2019t built to hold what we put in it.<\/p>\n

The stakes this time are higher than ever. The war in Iran raised recession risk, and the federal government is systematically dismantling the funding streams California has depended on for decades.<\/p>\n

When Washington retreats, Sacramento has to choose: cut services, raise taxes or have enough saved to bridge the gap. Right now, we don\u2019t have enough saved.<\/p>\n

We\u2019re not outside observers wringing our hands. We helped shape the fiscal architecture the state is now straining against, and we\u2019re here to say: It needs to be rebuilt.<\/p>\n

\n<\/div>\n

As California state controller, one of us campaigned alongside Gov. Arnold Schwarzenegger to pass Proposition 58 in 2004 \u2014 creating California\u2019s first Budget Stabilization Account. The other authored the Assembly Constitutional Amendment that became Proposition 2 in 2014 \u2014 the stronger, harder-to-raid replacement that voters approved with 69% support.<\/p>\n

California\u2019s tax system is the envy of progressive states and the nightmare of budget directors. We tax the wealthy at high rates, capture enormous capital gains revenue in boom years and then discover \u2014 every single time \u2014 that the peak doesn\u2019t last.<\/p>\n

If California treats the IPO windfall from SpaceX, Anthropic and OpenAI as permanent revenue, our state would repeat exactly the mistake we made four years ago.<\/p>\n

Read more Music icon has just sold her Lafayette home for $2 million over asking: report<\/a><\/p>\n

Gov. Gavin Newsom and Assemblymember Avelino Valencia have each proposed important reforms to strengthen the fund. First, they call for requiring the state to make deposits until the fund reaches 20% of the general fund total, rather than the current 10%. Second, they propose changing an arcane accounting rule that treats saving for future downturns as spending.<\/p>\n

\n<\/div>\n

We see one additional opportunity to make the rainy day fund even stronger.<\/p>\n

If we want a larger budget reserve, we have to do more than merely allow it \u2014 we need to require it. Proposition 58 taught us everything we need to know on this front: Between 2004 and 2014, with that proposition fund in place, only two deposits were made. If we want consistent deposits during the boom times, they can\u2019t be optional.<\/p>\n

These reforms should be a win-win for the California Legislature. A larger reserve is the most durable protection that public sector workers, social service recipients and education advocates have against the kind of emergency cuts that have repeatedly gutted programs during downturns.<\/p>\n

It\u2019s also the strongest argument against tax increases in a recession because you don\u2019t need to raise taxes if you actually save during the booms.<\/p>\n

Building a stronger rainy day fund isn\u2019t the cautious choice. It\u2019s the visionary one \u2014 the closest thing we have to investing in the next generation of Californians.<\/p>\n

We built the last rainy day fund because we\u2019d lived through the consequences of not having one. We\u2019re making the same argument again, for the same reason except now the stakes are higher. This time, the federal backstop is weaker, and the next storm is closer than it looks.<\/p>\n

Fix the fund this year. The next generation of Californians will thank us for it.<\/p>\n

Mike Gatto served in the state Assembly between 2010 and 2016, and he authored the measure that created California\u2019s current rainy day fund. Steve Westly served as state controller between 2003 and 2007, and he co-championed Proposition 58, California\u2019s original rainy day fund. Westly chairs the 21st Century Alliance, a nonpartisan organization focused on solutions to the state\u2019s most pressing challenges.<\/em><\/p>\n

Read more California judge rules actor James Handy\u2019s accused killer not competent to stand trial<\/a><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

‘The coming IPO windfall is a rare second chance. But we’ll only benefit from it if we first fix the structural flaw that’s caused us to squander every previous boom.’<\/p>\n","protected":false},"author":1,"featured_media":2026,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-2884","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"yoast_head":"\nOpinion: California is about to get a windfall. Let’s not blow it. - Next City Digest<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/nextcitydigest.com\/?p=2884\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Opinion: California is about to get a windfall. 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