California Budget Frequently Asked Questions (FAQ)

There are several ways to look at budget totals. Expenditures of:

1. General Fund = General Fund Budget Totals;
2. “a” and Special Funds = Budget Expenditure Totals;
3. “b” and Selected Bond Funds = Expenditure Totals including Bond Funds; or Total State Funds
4. “c” and Federal Funds = Expenditure Totals including Federal Funds; and
5. “d” and other Nongovernmental Cost Funds = Total State Spending Plan; or Total All Funds

All of these could be considered the Budget Total; “c” is the most commonly used.

See:

• Chart B (Historical Data, Budget Expenditures, General, Special, Bond, and Federal Funds)
• Schedule 1 (General Budget Summary)
• Schedule 9 (Comparative Statement of Expenditures by Org Unit, Character, Function and Fund)
• Finance Glossary of Accounting and Budgeting Terms
• Description of Fund Classifications in the (State) Treasury

See: Chart B (Historical Data, Budget Expenditures, General, Special, Bond, and Federal Funds)

See:  Chart A (General Fund History, Revenues, Transfers vs. Expenditures)

See:

• Budget Summary
• Revenue Estimates
• Schedule 8 (Comparative Statement of Revenues)
• Monthly Finance Bulletins

Governor Edmund G. Brown, Jr. was reelected Governor and took office in January 2011. He proposed the 2011-12 Budget. Governor Arnold Schwarzenegger took office in November of 2003 and his first Budget was for the 2004-05 fiscal year. Governor Gray Davis’ first Budget was 1999-00; Governor Pete Wilson’s was 1991-92; Governor George Deukmejian’s was 1983-84 and Governor Edmund G. Brown Jr’s was 1975-76.

See:  Chart B (Historical Data, Budget Expenditures, All Funds)

Also see:  FAQ #1

The state’s “surplus/deficit” is commonly thought of either as the (positive for surplus, negative for deficit) unreserved fund balance of the General Fund, i.e., the Special Fund for Economic Uncertainties (SFEU), or a “windfall” for surplus or a “shortfall” for deficit in the state’s revenues. From the governmental budgeting and legal perspectives, the former interpretation is more appropriate. It is the SFEU that provides a source of funds for the general activities of the state in the event of a decline in General Fund revenues or an unanticipated increase in General Fund expenditures. This is also the residual of total resources after total expenditures and all legal reserves (such as reserve for encumbrances). However, since there are hundreds of funds in the State, each fund is a separate legal entity, and the balance of a fund other than the General Fund generally cannot be used for purposes of another fund, there is no (single) state surplus. Despite being outdated and somewhat misleading, the term “surplus” is widely used, especially in the news. It is often used to represent a “windfall” in unanticipated revenues. When a new projection of revenues is made and total revenues are estimated to be higher than previously assumed, the news media often calls the additional amount “surplus”. This “surplus” can be for past, current and/or budget years depending on the point of comparison, either to the Budget Act or to the Governor’s Budget. In either case, the amount of revenues above the previous projection would be included in the updated budget forecast. Neither interpretation of “surplus” equates to “cash in the bank”. The actual amounts of SFEU or “windfall” are not known until much later – six months after the end of the fiscal year. The amount of revenues is in constant influx from the initial projections to actual collections, which are not known until two years later. Similarly, major caseload-driven costs can vary widely over this period of time. See:

• Chart A (Historical Data, General Fund Balance Sheet)
• Schedule 1 (General Budget Summary)
• 2023-24 Enacted Budget
• Schedule 10 (Summary of Fund Condition by Funds)

Also see:

• Finance Glossary of Accounting and Budgeting Terms
• Description of Fund Classifications in the (State) Treasury

While it has changed over time and changes somewhat from year-to-year, about 52 to 55 percent of the State General Fund Budget is spent on K–12 and Higher Education. See:

• Schedule 9 (Statement of Expenditures by Organization Unit, Character, Function and Fund)

Proposition 98 is an initiative passed in November 1988 and amended in June of 1990 by Proposition 111. It provides a minimum funding guarantee for school districts, community college districts, and other state agencies that provide direct elementary and secondary instructional programs for kindergarten through grade 14 (K–14).

The guarantee is based upon prior-year Proposition 98 appropriations, a cost-of-living index, population estimates, changes in per capita personal income, estimated General Fund tax proceeds and various other formulas and tests that result in the calculation of an amount that is required to be appropriated by the State for K–14 education. The guarantee varies from year to year and throughout the stages of a fiscal year’s budget (from the initial Governor’s Budget proposal to actual expenditures) as the various factors change.

The state’s share of the guarantee is derived by subtracting local property tax revenues (the local share of the guarantee) from the total guarantee amount. Proposition 98’s share of overall General Fund tax proceeds averages about 43 percent. As a percentage of new (additional) General Fund tax revenues, Proposition 98 gets approximately 54 percent, depending upon the factors and tests. For example, for an increase in General Fund tax proceeds of $100 million, Proposition 98 would get about $54 million on the average.

See:

• Governor’s Budget Summary, Proposition 98
• Finance Glossary of Accounting and Budgeting Terms

See:

• Chart F (Expenditures by Character, All Funds)
• Schedule 9 (Statement of Expenditures by Organization Unit, Character, Function and Fund)

Most of the State’s Debt is long-term, used to finance capital projects, and owed to holders of the state’s General Obligation and Lease-Revenue bonds. Short-term debt of the state’s General Fund is for cash flow purposes and consists of external borrowing (normally Revenue Anticipation Notes, RANs) and internal borrowing (borrowing from other funds within the state). See:

• Chart K-1 (General Fund G.O. Bond Interest and Redemption Costs)
• Chart K-2 (General Fund Lease-Revenue Bond Interest and Redemption Costs)
• Chart K-3 (General Fund G.O. and Lease-Revenue Bond Interest and Redemption Costs)
• Chart K-4 (General Obligation Bonds)
• Chart K (Bond Interest and Redemption, Agency Debt Service Costs)
• Schedule 11 (Statement of Bonded Debt, General Obligation Bonds)

The State’s General Obligation Bonds are rated by the three rating agencies.

See:

• Chart K-5 (California Municipal Bonds Rating History)
• Chart K-6 (History of California General Obligation Bond Ratings)

The State does not accumulate statewide data at this low level of expenditure, only individual departments maintain such data in their accounting and budgeting systems.

See:

• Chart H (Historical Data, Proposed, Enacted, Mid-Year Revised, and Actual Expenditure Data,General Fund)

Also see:

• Budget Process Flowchart
• Budget Process Explanation

See:

• Budget Process Flowchart
• Budget Process Explanation

For the General Fund, this can be viewed in at least two ways. Does the General Fund take in more than it spends within the same fiscal year (an ‘operating surplus’)? Also, does the state spend less than its resources (beginning balances and revenues and transfers)?

See:

• Chart H (Historical Data, Proposed, Enacted, Mid-Year Revised, and Actual Expenditure Data, General Fund)

Proposition 4 is an initiative passed in November 1979 which generally limits the growth in the level of certain appropriations from tax proceeds to the level of the prior year’s appropriation limit as adjusted for changes in the cost of living and population.

In addition, Proposition 58 was passed in March of 2004 which requires that the Legislature may not pass and the Governor may not sign a budget bill that authorizes General Fund expenditures greater than the estimated General Fund resources.

See:

• Chart L (Historical Data, State Appropriations Limit)
• Schedule 12A (State Appropriations Limit Summary)
• Schedule 12B (State Appropriations Limit, Revenues to Excluded Funds)
• Schedule 12C (State Appropriations Limit, Non-Tax Revenues in Funds Subject to Limit)
• Schedule 12D (State Appropriations Limit, Transfers from Excluded Funds to Included Funds)
• Schedule 12E (State Appropriations Limit Exclusions)

See:

• Chart D-1 (General Fund Unanticipated Costs)

The Department of Finance tracks Personnel Years, which are the actual or estimated portions of positions expended for the performance of work. The number of Personnel Years is roughly equal to the number of full-time equivalent employees. See:

• Schedule 4 (Positions and Salary Cost Estimates – Revised)
• Schedule 6 (Summary of State Population, Employees and Expenditures)

Also See:

• Finance Glossary of Accounting and Budgeting Terms