The LA Times just reported, again, on the demise of the idea of a rainy day fund. Yes, we have a reserve fund (actually multiple reserve funds) on the books, but they never have any real money in them.
The Times story offers a detailed accounting of the reasons we don’t have a fund, including the very good reason that it makes more sense to pay off some debts before you put money in reserve.
But as in most discussions of the California budget, the discussion here is too small. Proposals to put money into rainy day funds usually involve a paltry amount of funds, by California budget standards — $1 or $2 billion, on an overall budget of north of $140 billion. That’s well less than 2 percent.
A real, useful rainy day fund – based on the wild swings in revenues we’ve seen in California — would need closer to 20 percent, or 10 times the proposals.
And no one wants a real, rainy day fund. Such a proposal would be considered politically impossible. Of course, calling a thing impossible doesn’t change the fact that such reserve funds are a good idea. (Why is it that all game changing good ideas for California governance are considered politically impossible? The answer, I suspect, is Kafka-esque).
Here’s what we do know: there’s no point in pursuing anything called a rainy day fund, since it’s clear from more than a decade’s worth of evidence that we won’t be using one.
What to do instead? Well, certainly, remaking the budget system along rational lines would be a good start. But of course, that’s one of those politically impossible good ideas.
So, in the meantime, why not a half-measure? A change in nomenclature. Rainy Day Fund clearly isn’t attractive, particularly in a state where it doesn’t rain all that much.
Why not call these proposals a Sunny Day Fund instead? Keep it positive. When things are going well, when it’s sunny out, you want to save some money for other days.
It’s worth a shot, rain or shine.