 Alright, good evening everybody, welcome. Welcome this evening to our Saving California Community's Proposition Forum. We're here tonight to have a forum on both Proposition 1 and Proposition 2 in the upcoming November ballot. My name's Lucas Frerichs, I'm a member of the Saving California Community's Group. We are pretty much an informal group of folks. We have joined forces of Saving California Communities to advocate for structural reform at the state level. Founded back now in 2009, we have brought together folks from across the county, the city, school elected representatives, educators, parents, students, health professionals, educators, senior citizens, government employees, and business owners. Our primary mission is really to educate the public and to advocate for the resources necessary to support healthy California communities. We have been fortunate enough to have great community support and partners in both the local media, certainly in the Davis Enterprise, represented this evening by actually Elizabeth Case is here from the Davis Enterprise, and then also, of course, our other wonderful local partner in community media, Davis Media Access. I wanted to have a special thank you to Davis Media Access for being here and recording this broadcast this evening, and also put a plug in right now. We have a little tip jar that we are going to be passing around at some point. I'll show you right here. Here's a little bit of money. We're putting it in the donation jar for Davis Media Access. If you would all consider making a donation, albeit small or not so small, to Davis Media Access for the wonderful work that they do, we would greatly appreciate it. So let's see. First of all, this evening, we have, first up on the agenda, a discussion on Proposition 1, the upcoming water bond and the November ballot. And here this evening to lead us in the discussion is none other than State Senator Lois Wolk. If we could have a round of applause for Senator Wolk. Senator Lois Wolk is a leader in state water policy. She's chair of the Senate Select Committee on the Sacramento San Joaquin Delta and is also one of the lead authors of the Water Quality Supply and Infrastructure Improvement Act of 2014, otherwise known as the water bond. During her many years of public service at the state and local level, Senator Wolk has worked extensively on water policy issues, including water management, the crisis in the Sacramento San Joaquin Delta, flood management and climate change. Over her 11 years serving in the state legislature, including six in the state assembly, Senator Wolk has authored more than 100 new laws. Notably, Senator Wolk led efforts in 2007 to craft a package of laws to strengthen flood protection in California's Central Valley and Sacramento San Joaquin Delta region, offering two bills in that package. In addition to chairing the Senate Select Committee on the Sacramento San Joaquin Delta, Wolk also serves in the Senate Standing Committee on Natural Resources and is a liaison advisor to the Delta Conservancy Board. Senator Wolk represents the third Senate district, of course, which includes Davis, and includes all or part of four of the five counties in the Sacramento San Joaquin Delta, Contra Costa, Solano, Sacramento and Yolo counties. She also represents portions of Sonoma and Napa counties as well. Please welcome Senator Lois Wolk. Thank you. Thank you very much, Lucas, and I want to thank Saving California Communities for having this event for Prop 1 and Prop 2. And I want to also thank Susan Lovenberg for her organizing through the last five years on this issue. Before I start, there's some things that there's some homework you have to do in the next 15 minutes. No, I'm kidding. However, on your chairs, you have a description of the bond broken out by category, so something for you to take home and take a look at at your leisure. And I also brought along a description of the groundwater legislation, which was an important part of what we did this year in the legislature, also broken out so that you can see what it's requiring. And there are a couple handouts of water bond questions and answers. We'll have plenty of time for questions, but in case you can take this home in case you have others. And in case you still have questions after that, there is a website called yesonprops1and2.com. So I urge you to take a look at those. It's really good to be here. And it's really good to have a water bond proposition on the ballot that I think is a very good one. And I hope that you will agree with me. We have in California both surface water supplies and groundwater supplies. And in an era like this, in a drought era, and there's some thinking that we may be entering the fourth year of a drought, our water supplies are being stretched further than ever before. This year, 2014, is truly one of the driest in memory, in recent memory. Recent photos that I saw of Mount Shasta, which is one of our highest watersheds, instead of it being snow covered, which it always is. In fact, it's a dry, barren landscape. In addition, in the parts of the state where groundwater is extremely important, and that's about 75% of our state, the ground is literally sinking because of the increased pumping on groundwater. And that groundwater generally accounts in a normal year, if we're ever going to have a normal year again for about 30% of our total water supply. But in fact, this year it's going to be close to 60, if not more, percent of our total water supply. So everything is being stressed. And what has happened is that the heightened awareness of the drought has made it possible for 2014 to be truly a year of historic breakthroughs on water policy. And I'm going to talk about Proposition 1, which is indeed a breakthrough. For the first time since 2006, Californians have a reasonable, broadly supported water bond on the ballot, and that's Proposition 1. Five years ago in 2009, there was a very contentious, very unpopular bond that was placed on the ballot. By the legislature and then Governor Schwarzenegger. I opposed that bond strongly, and so did many of my colleagues from Northern California, from the coastal areas, from the Bay Area, and of course from the Delta. Many California voters also had concerns about the bond. It was simply too big, too many earmarks, too bloated, and directly funded the controversial Delta Tunnels project, the two tunnels, and as part of the BDCP, which is the Bay Delta Conservation Plan. On the other hand, Proposition 1, which is before us in November, which I was very much involved in drafting, is a completely different bond, and I'm pleased about that. The bond includes the most significant investment in groundwater cleanup and treatment in California history. If it passes, there will be funding to support the development of sustainability plans in basins throughout the state of California. It provides funding for the public benefits of new storage, including the further expansion of Los Vicaros reservoir and surface storage at temperance, which is south of the Delta, and sites, which is north of the Delta. Proposition 1 provides critically needed funding for drinking, safe drinking water, and wastewater treatment projects in those communities that currently cannot drink water from their taps. In California, the eighth largest economy in the world, over one million people do not have access to safe drinking water, to primary sources of drinking water. That's unacceptable. It provides significant funding for regional water plans, and we all have them. Water recycling and reuse and storm water recapture projects, all investments in new, local, diversified water supplies that will help communities get through the drought and climate change. It funds watershed and water-related projects that are put forward by local conservancies. And importantly, especially for those who live in the Delta, Proposition 1 does not facilitate the tunnels or the BDCP. This bond helps all regions of the state and harms no one. It requires in the Delta that agencies consult with the local governments for all Delta projects, giving a voice to the Delta community for the first time. Willing partners are necessary for habitat projects. Here in Yolo County, that means that the state will need to work with Yolo County for any projects in the Yolo bypass. That's a concession that Yolo County has been fighting for over the past several years. Another important provision, especially here in Yolo and Solano counties, is that the bond allows funding to be used for water-related agricultural sustainability projects. In addition, the bond includes significant funding for Delta levies, over 300 million for Delta levies, and 100 million for multi-benefit flood projects elsewhere in the state. And Yolo County, again, with our unique Yolo bypass, should compete very well for these funds. 50 million is set aside for the Delta Conservancy, a fairly new organization, but one that we desperately need in the Delta. The Delta is in crisis, and the Delta Conservancy, which has a very strong local voice, will be able to put together projects that benefit the Delta. The bond includes protections to ensure that the funds cannot be used for design, construction, mitigation, operation, or maintenance of Delta conveyance facilities. That sentence is really important. We put it three places in the bond, just to make sure everyone understood. Design, construction, operation, maintenance, or mitigation of Delta conveyance facilities, none of the money in this bond can be used for that purpose. And that's important. Why is that important? Because people throughout the state are very willing to support projects that will improve their local water supplies, but they're not interested in harming the Delta at the same time. So it was important that this bond be what we call tunnel neutral. There's many other things that we agree on, and that's what we tried to put in this bond. The bond ensures that any bond funds that will be used for flow acquisition or for water acquisition will be long term for environmental purposes over and above compliance or regulatory requirements, and importantly, won't be used to support the tunnels or the permitting of the tunnels. There can be no back door using state bond funds to avoid compliance mitigations by the contractors in the Delta. This bond is not perfect, however, for any one stakeholder group, but the bonds are a remarkable achievement, in my view. It helps many throughout the state, and again, it harms no one. Proposition 1 projects with its focus on strengthening and diversifying regional and local water supplies will help to reduce the reliance on the Delta water exports in the future. And importantly, Yolo County and the Delta counties coalition, both who were strongly opposed to the 2009 bond, have taken formal support positions on this water bond, which is a sign of how much different this bond is to the last version. An extraordinary thing happened in the legislature. All 40 senators voted for this bond to put this on the ballot, as did 78 of 80 assembly members. I can't recall the last time that we had a resolution of any sort that got every single vote. We don't agree even on the weather. And now it's up to you. Voters, you will have the opportunity to weigh in in November, whether this compromise is good enough for you. And you know, while it's tempting to focus on the legislative successes of this year in water, we really do have to recognize the stark reality of the continued drought. If the rainy season does not materialize, if we don't have average or a normal year, all the regions of the state will be going deeper into drought crisis. That would bring more fire, more heat, more fighting for the increasingly scarce resource of water. And it will be a challenge, our collective challenge, to continue to fund and capitalize on any opportunity to stretch our water supplies as much as we possibly can to find new ways to make more with less and to improve water management of our existing supplies in the future. And I believe that Proposition 1 will help us do that over the next 10 to 15 years. So I hope you will support it. Now, I'm sure you have a lot of questions. Yes, ma'am. Oh, I'm sorry. Thank you, Luke. Are there plans to build dams, or are you just improving once you've got, or what? The $2.7 billion that is set aside for water storage is specifically focused on surface and groundwater storage. In particular, three projects, the ones I mentioned, the expansion, further expansion, or raising of Los Vicarros, or Temperance, which is south of the delta, or Sites, which is north of the delta. Those are off-stream. They are regular, what you think of when you think of a dam. There may be other projects throughout the state. In fact, there are groundwater projects and others that may be eligible for the funding. The money will be set, if the voters approve the money, approve the authorization. It will go to the California Water Commission, which will then require a process, and go through a process to determine which project will yield, and there are several criteria, will yield the most water in the most cost-effective way. Sure. We have the opportunity to both ask questions via the microphone, and also there were index cards provided on your chairs, if folks want to write questions down as well, and we're happy to collect them. So does anyone else have a question? Jerry? I just haven't found it. It's probably very obvious, but how will this affect our current project here in Davis? Will it greatly assist it, or add more funds to what's already been allocated for it? Well, I think it's possible that there could be some funding for which the Davis Woodland or Woodland Davis project would be eligible. It would have to compete with other projects in the five Delta County region, and it probably could do that very well, but there are a lot of unmet needs, and there are a lot of projects within the Delta, and frankly, there's not enough money in the Delta section to do it all. So they will go through a process, and the Delta Conservancy will have a piece of that. There will be other projects through Department of Water Resources. So I think they'll be competitive. Is in large Shasta, it's not listed on here. Has that just been dropped out of this solution? Yes, it's not in the storage section because there's a state law that says we will not raise Shasta. Now, whether or not the federal government will change some of that, I don't know, but no, that's not one of those on the table. There were five Calfred projects, that was one of them. The three that are in there are still in there, and the other one was in Delta storage, which hasn't really materialized into anything. There were a few projects early on, but they didn't really pencil out or become real. They may yet, but so there were five projects, Shasta's off the table, and then the three that I mentioned, Temperance Sites and Los Viceros are the three that are possible. We have one question from the audience. Do you have any guidance for Yolo County to make the most of water bond proceeds and groundwater requirements? Yes. Yolo's always done a good job of positioning itself for funding. Yolo County is in a very, very important position in the Delta, and it has the Yolo bypass. It also has the Conaway property. It is really at the confluence of major rivers that are an extremely important part of the water system in California. The key is to develop consensus and coalitions around priorities and advocate for those. I believe Yolo does a good job with the Resources Association, with the Yolo flood control, with the Board of Supervisors and the cities. There is a tremendous amount of cooperation amongst them, and so I think Yolo is well positioned. There have been, for example, many of your electives, of your representatives have been involved in things. For example, Jim Provenza and Oscar Villegas, and before him, Mike McGowan have really shown a tremendous amount of leadership at the state level for Yolo, for the region, for the Delta and statewide in water issues. So they've positioned Yolo to take advantage of all of this. With respect to groundwater, I'm hopeful that Yolo will also be at the forefront of the groundwater efforts. We need to be. Groundwater is much more controversial. I urge you to take a look at the bill that was passed. It's an excellent bill. It requires sustainability plans. You have five years to do it. Everybody who overlays the basin, anybody that extracts water or puts water in into a basin gets around the table and figures out a way for a safe, sustainable yield that not more comes out than goes in over a period of time. So those plans have to be drawn up in the next five years, and I hope that Yolo will have one of the first to be drawn up and then move forward in implementing it quickly. And there is money in the bond. I forgot to say that. In Proposition One in the groundwater section, which is by far one of the largest sections in addition to storage, there is money set aside for doing these plans for communities that need it. Thank you. Thanks, Lois. I have two questions on wording that I'm just not sure I understand under storage. What does continuously appropriated mean? Thank you. The bane of my existence is continuously appropriated. Continuously appropriated in the legislature means that once money is authorized by the voters, that, and in this case, it is authorized to the California Water Commission that the legislature no longer has a role until that money is expended. That was one of the compromises that had to be reached in order to get two thirds vote at the legislature. I don't like continuous appropriation. I like the legislature to have oversight over billions of dollars. But nonetheless, this is about compromise and continuous appropriation is in the bond. And it's put there, I should give you the reasoning, even though I don't agree with it. The reasoning is that once you start these large projects that it's really important that the process be streamlined and smooth because they are enormous investments and they have to be put forward in their complex. So once you start, you really need, once you give the authorization, you should move forward. That's the argument for it. Thank you. A couple of words beyond that seems like very careful wording appropriated for public benefits associated with. Doesn't say anything about construction or design or operation. No, because it's not. It's for public benefits and those can be related to the environment. Those can be related to recreation, which certainly applies to above ground storage. Reservoirs are often used for recreational purposes. We all know Berryessa. So the 2.7 is focused on the public benefits of these storage projects. Make no mistake about it. That's not enough to build these projects. They are multi-billion dollar projects. And by and large, they will need rate payers in the region to step forward and say they're willing to, local rate payers, willing to fund the dam. So we still have a long way to go. Thank you. That's helpful and stepping back a little bit. We've heard a lot that is attractive for those of us living here. What is in here for people in Southern California? There's a tremendous amount in Southern California. Los Angeles, San Diego, the coast, they're never shy about what they want. And they often get what they want. And actually they were asking for good things. The groundwater cleanup was an issue that was pushed very strongly by Southern California and Los Angeles. What's happening in Southern California is the price of water is increasing and its availability and reliability has become less certain over time. That's part of the reason they're looking for tunnels. But the fact is, there are other things that they're interested in, that their water managers are interested in, that we also support strongly, which we think will give them more water without coming north for the tunnels or will reduce the reliance on the delta. For example, recycling, water reuse, cleaning up the dirty groundwater. The San Gabriel aquifer, for those of you that are familiar with Los Angeles, has million acre feet of water, which is very exercise, that is polluted. So they can't use it. So they have to import water, which is very expensive. It would be cheaper in my view and in many of the water managers' view to clean up the groundwater, clean up the aquifer, clean up all the pollution. It's expensive, but they could do it. Using some of this groundwater cleanup money, and in my view, don't come north. Or come north, or come north for less. And actually their communities, like Santa Monica, was they polluted their groundwater completely and had to import water. This was in 1990 with, I think, the PCBs, whatever, MTBE, whatever was put into, whatever was put into the gas additive, into the gas tank. Well, they couldn't use it for 20 years. Well, they've cleaned it up and now they have their supply back again and they don't have to import water from metropolitan. Happy day. I'm a little confused. I'm from the Northwest and I've only lived in California for a couple of years and it hasn't rained hardly at all, as you probably know. Welcome to California. Yeah, in Northern California. And so my question is, I mean, all of these things sound really good, but what are we going to do if it doesn't rain? And the aquifers, the groundwater keeps diminishing. The water coming down to the mountains is diminishing because of the lower snowpack. Is there, are there any plans for what we're going to do if it does not rain? Actually, there are. Water managers and both the state and the local level have been focused on this not just this year because this is the third year of a drought and also because of their knowledge of the history of California. We are, we are a civilization of drought and flood, actually. So there are flood plans. There have been monies in addition to what we hope the voters will support. The governor appropriated early on this year money for drought relief for certain kinds of projects, even for taking water into certain areas in the south part of the Central Valley where they can't drink the water and there is none left. So there are plans being drawn up. I hope it doesn't come to that, but the fact is you have to plan for that. I just came back from a conference in which there were people from Australia there, water managers from Australia, and they came within one or two days, Melbourne and other major cities of running out of water, and what they did was they absolutely changed their entire water system overnight. They took the rights away from people and they controlled the water supply and they reduced the amount of water that people were gonna get. I mean, it was really draconian and I hope we don't get to that, which is why we need to move forward with groundwater management, with figuring out what's in our groundwater, with protecting it, and with coming up with recycling, using every drop of water 10 times between the time it drops in the mountains and goes out to the sea. We have to use it and reuse it and reuse it and recognize that it's a precious resource. It can't be wasted. This helps, this helps. It's not the silver bullet, no. But it's a start. So we have time for two more questions for Senator Wolk. I've got one that was submitted from the audience, so one more question from the audience and I'll read the final one. I realized it's a separate issue, but when I think about fracking and I think about that polluted water that it has to be either stored or something done to it, it seems to me we almost need a couple or thinking about this with how to keep us from doing any more shale oil discovery than we've already done because we've already done a lot in Southern California and we're not exempt from them moving north, Monterey area, et cetera. I think one of the benefits of the groundwater legislation that was passed is that those who overlie a basin will have to get together and many of them have not and really figure out what the status of their groundwater aquifer is. And I think we're gonna, that plus the legislation that the legislature did pass on fracking, which is trying to find out what's going on underneath the ground when these efforts happen. I think that will lead us further along and that's the way the governor wants to proceed. Some of us wanted a moratorium or like this, that didn't happen. So he's proceeding the way, deliberately the way he is and I'm hopeful that we'll have more information and research and we can persuade, I mean, depending on what we find, we do the right thing to protect the aquifer. Great, and our final question comes from the audience. With the Delta tunnels out of this bond process, what about future efforts to approve the tunnels? Well actually the tunnels are running into a lot of trouble on their own. For those of you that are following this, again the tunnels or the BDCP is called the Bay Delta Conservation Plan is becoming unmanageable. It is, it's 40,000 pages of its EIR have been showing that in fact, the fish that you hope to save and the environment that you hope to save in fact get worse, not better. And you lose some iconic salmon runs, which is crazy. So we have to figure out a way, we have to figure out a plan B on the tunnels. I don't believe it's going to be cost effective for the contractors to move forward with these two tunnels. We need fresh water in a Delta and that's what science is showing. So ultimately, I think that this project will fail in of itself, but I think it's important after November, I think this is important to pass, after November it's important that we articulate a plan B that will reach, that will give security to Southern California and the Bay Area and restore the Delta and that the local communities are involved in and at the table. I would hope so, we better, we better. I'm not gonna give up. The question was, can we do both? Yeah, we have to, we have to. Let's have a warm round of applause for Senator- Thank you very much. Thank you very much, Senator. While we're switching gears to our next item, if we could get someone to hold up the donation jar or circulate the donation jar to Davis Media Access, if there's anybody that's interested in adding to that said jar, there it is, it's being passed around. And we will get going with our next topic, which is Proposition Two, the state's budget reserve fund, the Rainy Day Fund. We have our speaker this evening is the executive director of California Forward, Jim Mayer. Jim Mayer is president and CEO of California Forward, a bipartisan public interest effort to bolster democracy and improve the performance of government here in California. Jim was part of the team that developed and launched California Forward in 2008. Previously, Jim was the founding executive director of the new California Network, a nonpartisan project to improve the state's fiscal decision-making. Prior to joining new California Network, Jim was the executive director of the Little Hoover Commission, an independent and bipartisan state panel that reviews state programs and policies for efficiency and effectiveness. Jim joined the commission staff in 1994 as a project manager and served as deputy executive director prior to being appointed executive director in 1999. And before that, for more than a dozen years, Jim was a daily newspaper journalist. He was a senior writer with the Sacramento Bee and was also a staff writer for the Bakersfield Californian and the Press Tribune in Placer County. During his career as a journalist, Jim was recognized statewide for his coverage of education and public resources issues. And a Yolo County resident, Jim also serves on the board of Yolo County Flood Control and Water Conservation District and is also an associate director of the Yolo County Resource Conservation District. Let's welcome Jim Mayer. Well, good evening, everybody. I'm glad that we proceeded this conversation with the Rainy Day Fund for Davis Media Access. It's a little like how we do it in Sacramento. And I'm sure you were really here to hear about the water bond. So maybe this part of the conversation will be a little bit shorter. And of course, it's just beyond ironic to me that we keep talking about Prop 2 as the Rainy Day Fund because of course we want it to rain like crazy here in California. It's not something we're saving for, it's something we're hoping for. But that's actually part of the name you see in all of the public discussions is that this is really about a Rainy Day Fund. So there's two measures that are on the ballot that were placed on the ballot by the legislature. Prop 1, that Senator Wolk just told us about. And Prop 2, which is this Rainy Day Fund or this reserve. And the senator said, wasn't it amazing that for an issue as controversial as water, they got within two votes of unanimous in the Senate and two no votes in the assembly? Well, I'm here to tell you that Prop 2 in the legislature placed it on the ballot actually moved with unanimous votes, both parties, both houses. And so it's really kind of an interesting dynamic I think that speaks a lot to the kind of renewed interest in bipartisan functioning of the legislature as well as their ability to solve what I think are pretty two substantial problems. So here's the headline going back to my journalistic days. This is if you were only gonna read the first paragraph, here's what I would tell you about Prop 2. The first is the problem is we need a reserve account that helps us to manage through the business cycle. And the second is that Prop 2 would provide a two part or a hybrid answer as we like to say here in Davis where we put a little bit of money aside in normal years and in really good years, we put a little bit more aside. It's really that hybrid approach that is gonna work. So as I said, Prop 2, while it moved unanimously out of the legislature, it was a compromise. If you talk to folks that are far on the left, this isn't how they would solve this problem. And if you talk to folks far on the right, this wasn't how they would solve a problem. But it was after lots of experience from lawmakers having to make incredibly difficult, painful decisions, however they may have categorized them, that they realized they actually wanted to come up with some rules for running the budget that minimized or reduced the need for them to make these very, very difficult decisions. So first to caveat, California Forward helped to work on Prop 2. We've been around since 08. We've been working on budget process as part of our work. We identified volatile revenue as one of the state's critical fiscal management problems, and we've been working on solutions since. And the Action Fund, the California Forward Action Fund, which is our sister political agency, is in support of this. So I'm not here as a completely unbiased person, but I'd be happy. I'm gonna try to tell you what both sides have to say about this as well. I'll put on my journalistic hat for that as well. So a couple, some words, right? Some definitions. Prop 2, this rainy day fund, applies to the general fund of the state budget, right? So the state budget is about, in total, $227 billion. If you take state general funds, special funds, bond money, federal funds, you put it all together, the state's gonna spend $227 billion in the next year. The general fund is about $95 billion of that. So it's a significant portion of it. And that general fund is the part that comes back, most of it comes back to our community, 75 cents out of every dollar in the general fund doesn't get spent by a state agency, it gets spent by a local government. Schools are the biggest benefactors, K-12. But it's also where we get money for higher education and where we get money for corrections and where we get money for the state match for locally administered health and human services. So if you're wondering about why you should care about this, do you care about K-12 education, the safety net? Do you care about higher education and those kinds of things? And this is the state general fund that we're talking about. And the sources for the state general fund are the personal income tax, we all pay that. The sales tax, we all pay that. Corporate tax and then there's a bunch of other smaller taxes there. But the biggest portion is the personal income tax. And that's pretty important because the personal income tax, particularly in California, but to some extent in other states is very volatile. In good years it goes up a lot. And in bad years it doesn't go up as much and sometimes even falls below average, right? There's a little chart on the action fund handout that you've got there that shows you the personal income tax over time. And you can see, and the governor, when he got onto this issue, he started walking around the state with this great big chart or a PowerPoint slide showing this heart arrhythmia going up and down because he really focused on that volatility. He really saw that as part of the problem. The Pew Center for the Study of the States, very knowledgeable, database folks. They do a lot of work on state fiscal practices and they've concluded that California has the most volatile general fund revenue sources, right? So this is a problem everywhere. It's a bigger problem in California. The state budget crisis task force, which was a bipartisan effort that looked at six large states last year, similarly concluded this was a problem in all states and a bigger problem in California. So again, I'm pointing out that this isn't just normal business cycle, good times, bad times. We have a volatility problem that we have to manage. And for those folks who've been involved in state government or been around the Capitol, a couple of characteristics of this, it's really hard to tell in real time how much of your revenue is volatile, right? It's a big debate among the budget committees about revenue projections. And when it does go up, how do we know is this really strong, reliable, sustainable growth in revenue or is this what the budget writers refer to as non-recurring revenue? Something that's gonna be here this year and not next year. And most of those spikes in revenue, as I said, have to do with personal income tax. And in fact, most of it has to do with capital gains or stock options, right? The rich, we have a very dynamic economy. People who are wealthy and at the top end of the income have a tendency to make their money, mostly in good years. And that's if you like a progressive income tax, that's what you like. You want to tax the rich more than you do the middle class or the poor. But the challenge is their income goes up and down and you're gonna get a lot of it in good years and you're not gonna get very much of it. And so this, what this happens is if you don't do a good job of managing this it causes really roller coasters in the state spending. So let me give you some examples. 1998 to 2000, we all rode the dot com bubble. I rode it up and down. I don't know about your 401K. Mine went up and down and so did the state budget, right? The general fund increased from $58 billion in 1998 to $76 billion in 2000, right? From $58 billion to $76,000. If you look at Governor Gray Davis' budget for that year, he actually admonished that a big portion of that had to do with stock options and capital gains and urged the legislature not to make permanent decisions with what he thought would be one-time revenue. But it's incredibly tempting not to do that. I can also remember members, including ones on the Little Hoover Commission. I was at the Little Hoover Commission at that time that thought, no, this was the new economy. This was what was gonna be produced by this economy and we had an obligation to do things. Well, we did. We expanded programs. We cut the car tax not once, but twice. Within an 18 month period, we make permanent decisions with what clearly turned out to be one-time revenue. In 2011, excuse me, 2001, the next year, the tax revenue dropped by $12.8 billion. So we went from a beautiful surplus, right? Of 22 billion to $12 billion less. And if you can see if what we had done with that, which is what we had done with that, was mostly make permanent decisions, not one-time decisions. We ended up digging through 2001, 2002, 2003. As a matter of fact, we went all the way through the next business cycle without actually ever reconciling the budget that came out of balance in 2001. So in 2004 to 2007, general fund revenue increased from 82 billion to 102 billion. Over three years, increased 20 billion, just about 20%. And in 2008, general fund tax revenue dropped by $20 billion. So this is this roller coaster that we are on and how do we manage this? Okay, so now step back, you all look like likely registered voters or likely voters. My hunch is you're all saying deja vu, didn't we already vote on a rainy day fund? You did. In 2004, Prop 58, you probably all came to a meeting here and they told you to vote for Prop 58 and you went out and diligently voted for Prop 58 and it created a rainy day fund for the state. We were gonna put 3% of general fund revenue in it every year until it reached 5% or $8 billion. Well, guess what? We put money into it in two years. We took money out that same year to spend the money because we didn't really have the in and outs kind of worked out very well. And when the state went into the next recession, the amount of money in the rainy day fund was zero. So there was wide consideration that we had taken a step in the right direction but we hadn't taken a step far enough in the right direction. And the legislature came back and as part of the 2010-11 bond put a much more complicated measure that was gonna be on the ballot, ACA-4, was its beautiful nommaker. But it was highly controversial. It in fact has a lot of kind of political overtones as to the first water bond that Lois referenced. This was maybe a good solution, maybe a bad solution but there was people who loved it and there was people who hated it. And as a result, the legislature when it had the opportunity took it off. But again, we hadn't solved that problem. And so the governor came in this year and said now it's time to solve this problem. And he put a proposal on the table that said it's really all about volatility, let's capture those spikes. And a lot of us that geek out on this kind of stuff went to work, we did modeling, we prepared white papers, we did testimony, we worked with staff and the legislature to say was this gonna work and how do we improve it? And through some I think incredibly deliberative conversations that were bipartisan, the legislature did improve on the governor's idea and it was passed as ACA one and is now on the ballot. So I'm gonna give you the ticker, here's what it does. It's gonna require that we take 1.5% of the general fund budget and put it into this reserve. Notice it's smaller than the previous one. But half of that revenue is gonna actually go into our rainy day fund or our reserve and the other half is gonna pay down budgetary debt. This isn't long-term debt, this isn't the water bonds. This is the amount of money that the governor Brown refers to as the wall of debt that we're still paying off of from the year 2000s when we were doing internal borrowing and external borrowing in order to keep things going. And everybody in the legislature unanimously knows that if they pay down that debt now, it actually makes their life easier when the revenue actually does go down because they're not having to spend money out of the budget to pay down that debt. Then the second thing it does, and remember I told you it had two parts, in addition to putting a little bit of money aside in every year, when this capital gains goes up over 8%, we're gonna capture that amount over 8% and similarly, put it in the reserve and pay down debt. And this is really, I think, the part that's tailored to California and really smart. And here's why it's smart, because if we took everything above that 8% and we did those permanent things, the things that feel really good, but the things we cannot sustain, like cutting taxes or offering more permanent tax credits or expanding programs or expanding pensions, things that can't be sustained on that revenue, we've set up budget cuts for everything else in the general fund. K-12 education, the safety net, higher education. If we don't manage those spikes, that's actually the biggest problem. Sometimes, we've done this analysis, it says given these huge business cycles we have in California, how much do you have to have in a rainy day fund? Do you have to have $20 billion? Well, you don't if you manage your spikes. If you're gonna baseline that budget every time money goes way up there, then you do have to have an enormous budget reserve. But if you manage these spikes, it turns out you can actually do a pretty good job. Just today, there was a column in Fox and Hounds, don't know if you read that, but there was reference to a Department of Finance letter that you can click through on the wizardry of the internet and get from the director of finance who did some calculations and said, what would be in now if we'd had this in place going into the Great Recession? And it doesn't solve it, right? The Great Recession was the Great Recession, but it would have significantly reduced and they've got the billion dollars in there if you wanna click on that, that would how much less we have in cuts to the safety net and the education. So this is the kind of analysis that I think brought the legislature to put this before voters. Now I told you it was a compromise. And even now you hear folks that are fairly strident in their ideology that will tell you why they don't like this measure. I was speaking with a former assembly member the other day, Republican, very active in some business work we're doing and he says, you know, I just think the legislature's gonna game it, I just think we need a hard spending cap, right? He's still in that place where we need a hard spending cap. And then there are some advocates for incredibly noble, hardworking advocates for the poor that say it's raining now. We need to continue spending and if we put money aside now when we could be spending it on programs, we're not providing the benefits we need to Californians who need our help. And you can see those are the, I'm suggesting that there are people on either side of this that are arguing that why this isn't the right answer. But clearly, as I said, unanimous members of the legislature do a significant number of both business groups, political parties, the list is on again on that sheet, have said this is the right, you know, this is as close as we can come to the Goldilocks solution to a real problem. Interestingly, the other side of this you might have been asking yourself and this is the kind of final footnote and maybe looking to the horizons what's to come. If you might say if we have a very volatile revenue system why don't we fix the volatile revenue system? Well, that's not a bad idea, except that in terms of the income tax the answer is not to rely so much on the high income earners to pay or to find a way to tax their wealth and not their income which maybe is a doable proposition or to broaden out the base of the sales tax. The sales tax, both as a percentage of its contribution to the general fund has been declining for a number of years because it's on goods. Most states tax services and goods and as we've shifted to a service based economy the contribution of the sales tax to the general fund has shrunk. What that means is you're gonna tax things that aren't taxed now. So you go to your attorney, you go to your accountant. These are all things that are services that are currently not taxed. So as you can imagine, those two standard bromide solutions to how we could take volatility out of the revenue stream have their champions and have their ardent opponents. But there are now people that are starting to think even more again that says prop two doesn't solve the problem. It's gonna provide some modest but we think very beneficial management of these volatile revenues. But how are we gonna then continue to make improvements to the revenue system not just to reduce volatility but to provide reliable stable and adequate revenue for the investments we really wanna make in human capital, physical and capital so that the next generation of Californians are prepared to compete in the global economy and we can leave them a sustainable California in which to enjoy and benefit. So with that, Lucas, we can see if I completely befuddled them or if they've all got a better answer as to how to solve the state's budget problem. And if there are members of the audience that have questions, we'll start the process. Just could you give a response to this note about we'll create new rules that will make it harder for schools to receive adequate funding? What is there to that and what all is there? So there's two parts to that concern. The first is that under certain circumstances which are actually very narrow in very, very good years, some of the money that would have been allocated to schools under Prop 98 will go into a Prop 98 fund, a reserve for the state that comes back to the schools. So even that had some folks in the education community concerned even at that stage. But then some kind of last minute legislative maneuvering and maybe the Senator can enlighten on this if my knowledge isn't as great as it should be. But there was a trailer bill that was passed as part of this last budget without the normal due process of the policy committees that said if this is passed by voters, there'll be some additional restrictions on the amount of reserves that local school districts can keep. It's a pretty complicated formula. And again, the Lauren Kaye answer and Fox and Hounds their Q&A today, I thought he broke it down pretty well to persuade that it's gonna take some really unusual circumstances for a school district to actually have to abide by that cap. But perhaps most importantly, when that became very public, a lot of the local school districts said, wait, wait, wait, we didn't know anything about this. This isn't a square deal. We bought into Prop 2. We're not so sure we don't buy into this legislature. There was some members of the legislature that introduced bills. It was literally the last session, last week of session. It was kind of hard to argue this answer didn't move in a transparent way. And now we wanna fast track this bill to solve it. So there was some debate about the need to solve this. Some members of the governor administration and last week, the governor acknowledged, you know, we rushed that, we didn't get it right. It's not consistent with what we're trying to do. We'll come back and revisit it in January. I'm taking the governor on his word because I don't think he would have said that if he didn't mean it, but some opponents to the measure are using that to suggest that if Prop 2 passes and if this piece of legislation isn't changed, that it could have impacts on the ability of school districts to raise and keep the reserves that they think are prudent to be able to provide reliable services to their schools. Senator Wolk is kind of nodding her head. She would violently object if I got that wrong. Is that pretty close? Okay, that's. Yeah, thank you very much, Senator. Thanks, Jerry. Other questions and also feel free to use the index cards. I have to admit, I'm not sure if you just answered this. I wasn't able to follow everything that you said, but I'm also looking at the League of Women Voters information and it says the new school reserve would receive funds only occasionally and would not affect total state funds given to schools over time. I don't understand what that's saying. Let me try in even simpler terms. As I said, for most of this reserve doesn't affect schools at all. Under most years, the money that's set aside, as much money that would normally come back to schools will come back to schools. Under certain circumstances, when the state has paid back all the money it owes to schools, when we're at the very peak of the Prop 98 allocation, the formula that decides how much local school districts give. If we still get a spike in that revenue, the spike portion of that revenue that would have gone to schools is gonna go into a fund at the state for schools. So when we have another downturn that money can be used to keep schools whole. So basically we're establishing a savings account for the state for schools, at the state for schools. So that's what the League is describing there. And then over time it's not changing how much money's gonna be distributed to schools because in tough years when normally they would be getting less and they would be having to make cuts at the local level that money will be distributed to schools through the normal formula. I see here that the California Democratic Party and the California Republican Party both endorse this bill, this proposition. So they usually don't agree about things like this. That seems like, I mean I always thought that they didn't agree about things like this. So what's going on here and who doesn't agree? It's a very good observation. And I was maybe bending over backwards to say if you wanted to say something bad from the left or the right, here's what people are saying. But even the party leaders in both parties think this is the right thing to do. And so the only, there's a small list of formal opposition, not any significant groups. You'll notice that labor unions are basically neutral on this. You don't see them lining up saying rainy day fund, rainy day fund, because they're afraid of the message it sends that government has enough money. But they're not saying no. They're just, you know, and I think the governor has been persuaded to them that says, look, it's a different argument about adequacy. If we need more money in the system over time, let's go ahead that conversation with voters. But regardless of the outcome of that conversation, we need to manage our money better. And that's what I think he's, and I think the governor's persuasiveness and political stature has helped to forge this compromise. And he's been, I think, pretty respectful of the Republican concerns to make sure that they got addressed. Other questions at all from the audience? I'm not seeing any at the moment. Okay, well, thank you. Thanks so much. You're welcome. Thanks, Jim, appreciate that. Susan, did you wanna come on up here for a second and I will go check on our... Oh, okay. Hi, everybody, Susan Levenberg. It's nice to see you all here. My purpose was really to wind up. We did propositions one and two because we had some significant support in the community and people who wanted to present on behalf of those measures. But we knew that you might also have some questions about the other propositions. So we did provide you with the League of Women Voters voter guide, which is always a good resource as is their website. And we did have somebody who was coming from Prop 45 who wanted to give you a little bit of information, but they're not here yet. So does anybody have any other questions about... I'm not sure that we have the resources here to answer questions on 45, 46, or 47, but any general questions or comments? I think after that we just wanna get your thoughts on additional forum topics in the future. Okay, so future topics. If you all had cards, which you may or may not have used for a question, if you have a suggestion for something you would like to hear about in the future, would you write that down for us? Because we really do wanna provide some information on issues that are of interest to you. So we do one of these forums about every four to six months, our last one was on the water bond as it was coming together. So anything that you find of interest in civic engagement in Davis, we would be interested in helping to bring together some speakers and find a venue and ask DMA if they would join us in partnership as they often do. So you could write that down on the card and then just leave it on the table as you go out. Senator Wolk also mentioned that you had a handout on the groundwater bill, which was not on your chairs. If you're interested in that, there's copies of it on the table at the back. We just didn't put it on the chairs because we didn't wanna overwhelm you with everything. So I wanted to thank Lucas for facilitating tonight's conversation. Thank you, Lucas. Thank you again to Senator Wolk and to Jim Mayer for coming out and talking to us about Proposition One and Two. And most of all, thank you all for coming. Okay, good evening.