What is Proposition 2 before California voters in the 2026 election?

Proposition 2, the “Save for California’s Future Act,” would increase the cap on the state’s rainy day fund from 10% to 20%.

Money for the state’s Budget Stabilization Account, known as the rainy day fund, comes from capital gains and income tax revenues.

About $15.1 billion was in California’s rainy day fund heading into the 2026-2027 fiscal year, according to the state budget. At the beginning of the previous fiscal year, it held about $11.2 billion.

Assembly Democrats touted the effort as a way for California to set aside more money when times are good, increasing the amount that can be saved during years when revenues from these tax sources reach especially high levels, so the state has more of a cushion when economic downturns hit.

Republican leaders, however, have said Proposition 2 does not rein in what they see as chronic overspending by legislative Democrats or require payments to address California’s outstanding federal loan balance.

According to Assembly Speaker Robert Rivas, D-Hollister, passing Proposition 2 would shore up funding for public schools across the state and expand the types of liabilities that can be paid down. Gov. Gavin Newsom’s office says Proposition 2 would reduce unemployment insurance trust fund liabilities to protect schools and businesses, proponents said.

But Sen. Tony Strickland, R-Huntington Beach, said passing Proposition 2 would be like taking out a credit card to pay off an old one “while continuing the same reckless spending habits that created the problem in the first place.” He said Democrats are asking taxpayers to bankroll their spending.

Introduced in the Assembly on June 25 as ACA 20, the bill passed the legislature, largely along party lines.

Proposition 2 would exclude deposits into the BSA from the Gann Limit, which is the amount of money that the state and local governments in California can legally spend.

In 1979, California voters approved what’s called the Gann Limit, an appropriations cap on the state to keep real, inflation-adjusted, per-person government spending under 1978-79 levels.