Opinion: California is about to get a windfall. Let’s not blow it.

The IPOs of SpaceX, OpenAI and Anthropic could deliver billions of dollars to California’s coffers.

We’ve seen this movie before.

In 2022, California recorded a nearly $100 billion surplus, saved just $10 billion in its rainy day fund and then spent the rest. Two years later, a $56 billion deficit loomed.

Now, with the state facing ongoing operating deficits of more than $10 billion, we’re back in familiar territory.

The coming IPO windfall is a rare second chance. But we’ll only benefit from it if we first fix the structural flaw that’s caused us to squander every previous boom — a budget reserve that isn’t built to hold what we put in it.

The stakes this time are higher than ever. The war in Iran raised recession risk, and the federal government is systematically dismantling the funding streams California has depended on for decades.

When Washington retreats, Sacramento has to choose: cut services, raise taxes or have enough saved to bridge the gap. Right now, we don’t have enough saved.

We’re not outside observers wringing our hands. We helped shape the fiscal architecture the state is now straining against, and we’re here to say: It needs to be rebuilt.

As California state controller, one of us campaigned alongside Gov. Arnold Schwarzenegger to pass Proposition 58 in 2004 — creating California’s first Budget Stabilization Account. The other authored the Assembly Constitutional Amendment that became Proposition 2 in 2014 — the stronger, harder-to-raid replacement that voters approved with 69% support.

California’s tax system is the envy of progressive states and the nightmare of budget directors. We tax the wealthy at high rates, capture enormous capital gains revenue in boom years and then discover — every single time — that the peak doesn’t last.

If California treats the IPO windfall from SpaceX, Anthropic and OpenAI as permanent revenue, our state would repeat exactly the mistake we made four years ago.

Gov. Gavin Newsom and Assemblymember Avelino Valencia have each proposed important reforms to strengthen the fund. First, they call for requiring the state to make deposits until the fund reaches 20% of the general fund total, rather than the current 10%. Second, they propose changing an arcane accounting rule that treats saving for future downturns as spending.

We see one additional opportunity to make the rainy day fund even stronger.

If we want a larger budget reserve, we have to do more than merely allow it — we need to require it. Proposition 58 taught us everything we need to know on this front: Between 2004 and 2014, with that proposition fund in place, only two deposits were made. If we want consistent deposits during the boom times, they can’t be optional.

These reforms should be a win-win for the California Legislature. A larger reserve is the most durable protection that public sector workers, social service recipients and education advocates have against the kind of emergency cuts that have repeatedly gutted programs during downturns.

It’s also the strongest argument against tax increases in a recession because you don’t need to raise taxes if you actually save during the booms.

Building a stronger rainy day fund isn’t the cautious choice. It’s the visionary one — the closest thing we have to investing in the next generation of Californians.

We built the last rainy day fund because we’d lived through the consequences of not having one. We’re making the same argument again, for the same reason except now the stakes are higher. This time, the federal backstop is weaker, and the next storm is closer than it looks.

Fix the fund this year. The next generation of Californians will thank us for it.

Mike Gatto served in the state Assembly between 2010 and 2016, and he authored the measure that created California’s current rainy day fund. Steve Westly served as state controller between 2003 and 2007, and he co-championed Proposition 58, California’s original rainy day fund. Westly chairs the 21st Century Alliance, a nonpartisan organization focused on solutions to the state’s most pressing challenges.