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ACA 20

A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by amending Sections 20 and 22 of Article XVI thereof, relating to state finance.

2025-2026 Regular Session Introduced by Jesse Gabriel and 3 co-sponsors

Aims to strengthen California’s long-term budget resilience by formalizing regular reserve contributions, expanding the Budget Stabilization Account, and clarifying emergency trans

Chaptered by Secretary of State - Res. Chapter 130, Statutes of 2026.
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Bill Summary · ACA 20

Overview

  • Bill: ACA 20 (Assembly Constitutional Amendment No. 20)
  • Session/Jurisdiction: California, 2025-2026
  • Title: A resolution to propose to the people of California an amendment to the Constitution, amending Sections 20 and 22 of Article XVI, relating to state finance
  • Purpose: Enact a long-term framework to strengthen and formalize budget reserves in California, expand and protect budget stabilization mechanisms, and adjust governance around budget emergencies and transfers between funds.

Main purpose and intent

  • Establish and reinforce robust budget reserves to better weather economic cycles, disasters, and emergencies.
  • Expand the Budget Stabilization Account (BSA) and related reserve tools.
  • Provide a structured, legislatively guided process for managing budget emergencies and transfers during downturns or crises.
  • Ensure that savings and reserve transfers occur with transparency and within defined limits, while allowing targeted use of reserves to address emergencies and unfunded obligations.

Key provisions and changes

  • Creation and augmentation of Budget Stabilization Account (BSA)

    • For 2027–28 and each subsequent year, a transfer from the General Fund to the BSA equal to 1.5% of estimated General Fund revenues, to be completed by October 1.
    • The measure details reporting requirements from the Department of Finance about tax proceeds, including components related to net capital gains and their relation to total General Fund proceeds.

  • Allocation and limits related to BSA contributions

    • The measure allows transfers to the BSA and related reserve accounts while imposing a cap: transfers cannot cause the BSA balance to exceed 20% of estimated General Fund tax proceeds for the year.
    • If funds are withdrawn from the BSA, the withdrawals may count as appropriations subject to the state’s appropriation limitations in the year of withdrawal or transfer.

  • Projected Surplus Temporary Holding Account

    • Aligns with the BSA framework by incorporating the Projected Surplus Temporary Holding Account as a complementary budgeting tool to counter tax revenue volatility.
    • Transfers to this account, when made, would be treated similarly with respect to appropriations subject to limitation, and such transfers would have a 10% cap relative to General Fund tax proceeds.

  • Suspension and adjustments during budget emergencies (Section 22 amendments)

    • The Governor can proclaim a budget emergency and the Legislature may:
    • Suspend or reduce transfers to the BSA or to the Public School System Stabilization Account (PSSSA) by a specified dollar amount for one fiscal year.
    • Return funds from the BSA to the General Fund to address the emergency, with limits on the portion that can be returned in any year (not more than 50% unless funds were returned in the immediately preceding fiscal year).
    • Appropriate funds from the PSSSA for the support of school districts and community college districts.
    • Defines budget emergency in terms of Governor-declared emergencies or fiscal resource inadequacy relative to recent budget acts, adjusted for cost of living and population growth.

  • Exclusions from appropriations subject to limitation (State budget cap)

    • Beginning 2027–28, transfers to the BSA and to the Projected Surplus Temporary Holding Account would be excluded from the State’s discretionary appropriations subject to limitation.
    • Withdrawals or transfers from these reserve accounts would, in the year of withdrawal, count as appropriations subject to limitation.

Who/what would be affected

  • State finances and budgeting processes:
    • General Fund revenues and transfers to the Budget Stabilization Account and Projected Surplus Temporary Holding Account.
    • Budget emergency actions and related transfers or reversals.
    • Treatment of reserve funds for purposes such as unfunded liabilities, pensions, postemployment benefits, unemployment insurance loans, and infrastructure usage.
  • Public education funding stability:
    • The Public School System Stabilization Account (PSSSA) remains a target for stabilization transfers, with potential reallocation during emergencies.
  • Oversight and reporting:
    • The Department of Finance and the Legislature would receive ongoing estimates and calculations related to capital gains, tax proceeds, and reserve balance implications.

Procedural and timeline aspects

  • Constitutional amendment process:
    • Requires two-thirds approval in both the Assembly and Senate.
    • If approved, it would be placed on the ballot for voter consideration.
  • Implementation timeline:
    • 2027–28 fiscal year marks the first year of the 1.5% transfer to the Budget Stabilization Account, with ongoing annual transfers through 2039–40, and continuing thereafter as described.
    • Additional reporting and calculations for tax proceeds and net capital gains begin in 2027–28 and continue with specified periodic updates.
  • Emergency provisions:
    • Provisions for suspending or reducing transfers and for returning funds to address budget emergencies can be invoked by Governor proclamation, subject to legislative action and defined limits.

Summary assessment

ACA 20 aims to codify and strengthen California’s financial resilience by formalizing consistent reserve contributions, expanding the BSA and related tools, and clarifying emergency powers and transfer rules. It seeks to protect essential services during downturns while providing fiscal flexibility to address emergencies, unfunded liabilities, and infrastructure needs. The measure also introduces guardrails to limit excessive accumulation and to regulate the use and withdrawal of reserve funds.

Compiled from official sources — confirm details with the bill’s official record.

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