Daily News reports on resurgence of The Gann Limit

Assemblymember Avelino Valencia, D-Anaheim, introduced Assembly Constitutional Amendment 1 on the first day of the new legislative session, proposing to double the state funds in the Budget Stabilization Account from 10% to 20% of the annual budget. The increase aims to address the issue of revenue volatility in California, caused by reliance on high-income earners and their fluctuating capital gains. However, ACA 1 may violate the Gann spending limit, which restricts government spending growth. The limit has been weakened over the years by exceptions for education and transportation spending. A surplus in 2022-23 almost reached the limit, and ACA 1 could prevent taxpayer refunds by exempting transfers into the Budget Stabilization Account from the spending limit. There are concerns that this could lead to unlimited appropriations and no refunds for taxpayers. Taxpayers advocate for adhering to the Gann limit and returning excess funds through tax rate revisions. It is important to find solutions to revenue volatility without violating spending limits and ensuring taxpayer refunds.

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