- Associated Press - Thursday, May 8, 2014

SACRAMENTO, Calif. (AP) - Key answers to help you understand the rainy day fund deal announced Thursday.

1. DOESN’T CALIFORNIA ALREADY HAVE A RAINY DAY RESERVE?

Yes. Voters established a rainy day fund in 2004, which is supposed to be filled annually with 3 percent of general fund revenue. But it has been criticized for loose rules governing when lawmakers can tap it and when they must replenish it. It hasn’t been filled since 2007.

2. DOES THE DEAL ANNOUNCED THURSDAY REPLACE THE OLD RAINY DAY FUND?

Sort of. During a budget crisis in 2010, under then-Gov. Arnold Schwarzenegger, lawmakers negotiated a fix to the existing rainy day fund and placed it on the 2012 ballot. But Gov. Jerry Brown said that version, scheduled for a delayed vote this November, was too rigid and made the fund difficult to tap in times of natural disasters, emergencies and recessions.

3. HOW WILL THE NEW VERSION WORK?

Instead of requiring an annual contribution equal to 3 percent of state general fund revenue, the new version will require an annual contribution equal to just 1.5 percent. But additional money would flow in from capital gains increases during boom years, until the fund reached a total of 10 percent of the general fund. The existing voter-approved rainy day fund sets the maximum at 5 percent of general fund revenue.

4. HOW WILL THE RAINY DAY FUND BE SPENT?

The deal requires the state to use half the money to pay down debts and liabilities for 15 years, with the other half available for disasters and budget crises. A report released this week pegs California’s total debts and liabilities at $340 billion, most of which are for unfunded public employee pensions and retiree health care.

5. WHY DOES IT MATTER THAT DEMOCRATS AND REPUBLICANS AGREE?

Placing a revised measure on the November ballot requires two-thirds votes in the Assembly and Senate. Democrats hold a supermajority in the Assembly, but the suspension of three Democratic lawmakers embroiled in legal cases has left the Senate short of that. Republicans pushed to keep a minimum annual contribution to the fund and to keep the fund from being tapped for ongoing projects such as high-speed rail.