Chapter 8: The state budget and limitations

Step 1: Fall Agency Requests

executive branch departments submit funding requests to department of finance

Step 2: January- Governor’s Proposal

Governor submits a BALANCED budget by January 10 (or 15 if first year in office) for fiscal year July 1st

Step 3: Spring: Legislative Review

budget committees in both assembly and senate hold hearings, legislation analysis LAO provides independent analysis

Step 4: June 15- Legislative Deadline

Legislature must pass budget by June 15

Step 5: Governors Action

governor signs, vetoes or uses line item veto on budget

Step 6: July 1st Fiscal year begins

budget takes effect

mid year adjustments

mid year budget proposals: common due to revenue volatility

Personal income tax

largest source of revenue, highly progressive, 1-13%, includes capital gains

Sales tax

second largest source of revenue, applies to goods (except unprepared food items) but not most services

Prop 30 temporarily raised

corporate tax

third major source, subject to fluctuations with corporate profits

property tax

severely limited by Prop 13, goes mostly to local governments

Lottery winnings

are taxed

Proposition 13 1978

caps property tax at 1% of assessed value at the time of purchase

limits assessment increases to 2% per year unless property is resold

requires 2/3 majority of local voters to raise local special tax

requires 2/3 majority to raise any state tax

state controls allocation of local property tax

Health and human services

one of the largest budget categories, driven by medical

k-12 education

large budget category due to Prop 98 1988

40% of general fund

higher education

covers uc, CSU and community colleges

corrections

prison system, ongoing realignment to shift prisoners to counties

business, transportation and housing

infrastructure and transport funding

proposition 98 1988

guarantees minimum funding for k-12 and community colleges

minimum 40% of general fund

Proposition 2 2014: Rainy day fund

really good budget year: 3% goes into savings account for emergencies