California has more revenue than expected thanks to AI. Should it save it?

Proponents say Prop. 2 would allow the state to shore up its reserves for an economic downturn. Critics say it would only allow state leaders to spend more in the future.

The question Proposition 2 poses to California voters is simple: Should the state be able to save more money when its economy is booming?

The ballot measure, dubbed the Save for California’s Future Act, seeks to shore up California’s rainy day fund by allowing state lawmakers to sock away up to 20% of the state’s general fund tax revenue — double the current ceiling of 10%.

It would also require the state to save a bigger share of the gains when revenue is growing faster.

Proponents, including Gov. Gavin Newsom and Democratic lawmakers, say the state needs a bigger savings account to weather its volatile economy.

Because California’s tax revenue depends so much on wealthy residents’ stock earnings, the state budget is often caught in a boom-or-bust cycle at the mercy of the market. In recent years, the state has seen robust tax revenue from an AI-fueled economy, which has helped state leaders avoid or delay painful cuts to social services even when they projected significant deficits. But economists have consistently warned the boom may not last, and the federal budget cuts to healthcare and welfare programs this year deepened that uncertainty.

Get ready for California’s midterm election. This voter guide has everything you need to know