The Fraud That is California's "Rainy Day Fund" Proposition 2

Jerry Brown has been on the airwaves in California promoting California's Propositionss 1 and 2, more aggressively than his own re-election camapign, against Goldman Sachs flunky Neel Kaskari. Brown is a shoo-in for reelection.

Here is the spot that has been running regularly in California, including during the World Series:



An investment banker friend emails  to set the record straight on Proposition 2:

California proposition 2 is hilariously called the Rainy Day fund.  A little research will reveal something along the following (it has been a few weeks since I looked at this to help my son with a project):

Each year, the state will set aside 1.5% of general revenues and any capital gains revenues over 8% of total budget (you know, living in CA, the wild swings in this due to the mood of the market toward Silicon Valley).

Right off the bat, this is a laughable proposition: the concept of a rainy day fund when you don’t run a surplus.

This money will supposedly be set aside for the lean years – kind of like when Joseph interpreted the dream for Pharaoh.

The best part?  For fifteen years, half of this so-called fund will be used to cover other state obligations: the biggest corker is that “other state obligations” include state-funded pensions.

In other words, the entire thing is a scam to force-fund the underfunded pensions via even larger deficits.  Thus, when the state goes belly-up, those in the pensions will be even more secured.  This may be going on in other states – certainly, if it passes in California, they will try the same in other states.