Skip to content

key takeaway

California’s budget shortfall presents significant challenges for the state’s economy, public services, and residents. Addressing the shortfall requires a balanced approach that includes revenue-raising measures and targeted spending cuts to ensure continued support for critical programs and vulnerable populations.

Building a just and equitable California for every person no matter their race, ethnicity, gender, age, or zip code requires investments to create health, housing, economic, and educational opportunities. The foundation for these investments is the state budget, through which policymakers can commit the funding needed to build a California where everyone can be healthy and thrive. But sustaining and expanding the state’s investments in individuals and communities becomes more challenging when revenues fall short of projections and lead to a state budget shortfall — as is the case this year.

This Q&A:

  • looks at the size of the state budget shortfall and why it emerged,
  • notes that state revenues could come in higher or lower than expected,
  • outlines state leaders’ options for addressing the budget gap, including raising revenues and using reserves, and
  • describes how advocates can work, even in a tough budget year, to advance their priorities and lay the groundwork for building a more equitable California.

What is the size of the budget shortfall?

California faces a budget shortfall — also known as a “budget problem,” “deficit,” or “gap” — of tens of billions of dollars. The shortfall is based on estimates of revenues and spending across three fiscal years: 2022-23 (the prior year), 2023-24 (the current year), and 2024-25 (the fiscal year that begins on July 1, 2024). This three-year period is known as the “budget window.”

Policymakers must close the deficit by June 2024 as part of the 2024-25 budget process by taking actions that apply to all three fiscal years. (Potential budget actions are described in later sections of this Q&A.)

There is no single, agreed-upon estimate of the current size of the budget shortfall. Estimates involve making assumptions about economic conditions, revenue collections, and the needs of California communities in the future. The governor’s administration and the Legislative Analyst’s Office (LAO) independently produce estimates of revenue collections and the state’s overall fiscal condition for the three-year budget window, and their assumptions are often different.

For the current budget window (July 2022 through June 2025):

  • Governor Newsom’s proposed budget, released on January 10, estimates a shortfall of $38 billion.
  • However, the actions the governor proposes to take to close the deficit add up to $58 billion, according to the LAO. This means the governor has actually identified a $58 billion budget problem, based on the LAO’s analysis, even though his “headline” number — $38 billion — is much smaller. The reason why there are two different numbers is that the governor and the LAO disagree about how to categorize some spending actions in the governor’s proposed budget.
  • The LAO’s own estimate of the budget shortfall is $68 billion.

In short, the governor solves for a smaller budget shortfall ($58 billion) than the LAO projects ($68 billion). This difference is largely due to the governor’s more optimistic state revenue forecast. The governor currently assumes that revenues will be about $15 billion higher over the three-year budget window compared to the LAO’s projections.

Estimates of the budget shortfall will be updated in May as more information becomes available. The key takeaway is that the state has a sizable budget problem to address in this year’s budget process.

Why is California facing a budget problem this year?

The main reason for the budget problem is that state revenue collections have been coming in much lower than previously projected, and forecasts for future revenues have also been adjusted downward as a result. This occurs after several years of strong revenue growth that produced budget surpluses and made possible new spending commitments.

A large portion of the problem is related to state revenues for the 2022 tax year, which are estimated to be about $25 billion lower than policymakers expected when they adopted the budget for the current fiscal year last summer.

One major factor leading to the lackluster revenue performance in 2022 was the impact of the Federal Reserve’s interest rate hikes, which decreased investment, slowed economic activity, and contributed to a steep stock market decline. The stock market drop negatively impacted personal income tax collections from high-income earners, whose income is disproportionately made up of capital gains and stock-based compensation.

The extent of the 2022 revenue shortfall only became clear in late 2023 due to the extension of tax filing deadlines for 2022 taxes to November 2023. Because of this delay, state leaders had to finalize the 2023-24 budget last June with much less complete revenue information than usual, and they enacted a budget assuming significantly more revenue for the 2022 tax year than actually materialized.

Could state revenues come in higher — or lower — than current projections?

The estimated budget shortfall is just that — an estimate. In May, the governor’s Department of Finance and the Legislative Analyst’s Office will release updated projections of the size of the budget gap. These new numbers will take into account the most recent information available on the economy, revenues, and spending needs.

The governor’s updated estimates will be unveiled in his revised budget (the “May Revision”), which must be released by May 14. The May Revision will set the stage for negotiations between the governor and legislative leaders in June over the key outlines of the 2024-25 budget package. 

At that point, the state will have mostly complete information on 2023 tax receipts since the April tax deadline will have passed. Policymakers also will have some information on 2024 tax collections from quarterly estimated tax payments by businesses and high-income individuals. However, the revenues assumed in the 2024-25 budget, when enacted this summer, will involve some projections. In other words, it is still possible that actual revenues for the 2022-23 through 2024-25 period (the “budget window”) will be higher or lower than expected. 

If revenues come in higher than anticipated, state leaders could revisit some of the spending reductions, spending delays, and/or other “budget solutions” that they decide to adopt in June. Alternatively, if revenues were to come in significantly lower, state leaders would need to take additional actions, potentially including more spending solutions, although such actions would likely not occur until early to mid-2025 as part of the 2025-26 budget cycle.

Secure your ticket!

Join us in Sacramento on April 16, 2024, for engaging sessions, workshops, and networking opportunities with fellow changemakers, inspiring speakers, and much more.

What revenue-raising options do state leaders have to balance the budget?

Policymakers have many options to increase state revenues and make the state’s tax system more fair. These options should be seriously considered, not just to address the current budget problem, but also to strengthen state services on an ongoing basis and create a more equitable state.

State leaders consistently fail to examine the tens of billions of dollars that the state loses to tax breaks each year as part of the annual budget process. Many of the largest tax breaks primarily benefit wealthy corporations and high-income individuals. Eliminating or scaling back ineffective or inequitable tax breaks would provide additional revenue to support Californians struggling with the basic costs of living while also increasing tax fairness. 

For example, the state is estimated to lose around $4 billion a year to a tax break called the “water’s edge election.” This break incentivizes corporations to avoid taxes by using foreign tax havens. Policymakers should ensure that corporations are sufficiently contributing to state revenues by reexamining this and other corporate tax breaks.

Policymakers can also restructure corporate tax rates so that the small number of immensely profitable corporations — which receive the majority of profits in the state — are subject to a higher tax rate than less profitable corporations. 

Wealthy corporations can afford to pay their fair share in state taxes. Corporate profits are near record highs, yet corporations contribute a smaller share of their profits toward state taxes than they did a generation ago due to tax cuts and tax breaks approved by state policymakers. Increasing corporate taxes would only affect businesses that report profits, so it would not impact businesses’ ability to pay their workers and cover their other expenses.

The governor did put forth modest revenue solutions in his proposed 2024-25 state budget, but they make up less than 1% of the overall package of solutions — a package that also includes substantial spending cuts that would negatively impact Californians facing the most disadvantages. Policymakers could avoid painful cuts by growing state revenues instead of focusing mainly on spending solutions as the governor has proposed.

What other options do policymakers have to balance the state budget?

Aside from increasing revenues, policymakers have several additional tools to close the budget shortfall in a way that minimizes the impact on public services — particularly services that reduce poverty and prioritize economic opportunities, well-being, and the overall improvement of Californians’ lives.

One option is to use the state’s General Fund reserves. In fact, the state has built up substantial reserves precisely to help support critical services when revenues fall short.

State leaders especially should use reserve funds to bolster programs that help Californians meet basic needs like food, health care, housing, and child care. However, reserves should be used prudently. Reserve funds may be needed over multiple fiscal years, particularly if state revenues are expected to decline over an extended period. (See below for more on the state’s General Fund reserves and how they may be used.) 

Policymakers also could borrow from state special funds. Many of the state’s 500+ special funds may have large balances that aren’t immediately needed. The state could borrow these excess revenues and use them to temporarily support services that are typically supported with General Fund dollars. The borrowed funds are later repaid with interest when General Fund revenues rebound. However, policymakers should avoid borrowing from a special fund if doing so would compromise the state’s ability to achieve the policy goal for which the fund was created.

understanding California’s State Budget reserves

Want to learn more about each of California’s budget reserve accounts? View our report California’s State Budget Reserves Explained.

Another option is to shift General Fund costs onto another fund source, such as a special fund. In this case, the dollars are not borrowed. Instead, the General Fund cost displaces spending that the special fund would otherwise have paid for. This would include, for example, shifting climate-related costs from the General Fund to the Greenhouse Gas Reduction Fund or paying for the state’s typical costs for Medi-Cal with revenues from the managed care organization (MCO) tax. The governor has proposed both of these actions as part of his 2024-25 spending plan.

Borrowing from and/or shifting costs onto special funds is a reasonable and prudent budgeting practice. This approach can help to close a state budget gap in a way that minimizes the need for cuts to critical public services without compromising the state’s fiscal health.

Policymakers also can revert, delay, and/or reduce appropriations to help close a budget gap.

  • A reversion means returning unspent funds to the General Fund when state costs come in “below budgeted amounts.” Funds are typically reverted after three years, but reversions can be accelerated.
  • A delay means moving an expenditure to a later period when revenues may be more robust.
  • A reduction means providing less funding than “what has been established under current law or policy.” This could involve either partially or entirely eliminating the expenditure.

Spending reductions should be used with caution and especially should avoid targeting services that support Californians’ health and well-being — things like cash aid, food assistance, child care, and health care. Services like these are lifelines for individuals and families, and cutting them would disproportionately impact low-income communities and Californians of color.

Instead, if spending reductions are needed to help balance the budget, they should target ineffective spending, such as poorly targeted tax breaks as well as the billions of dollars that annually fund the state’s costly and inequitable prison system.

How much does the state have in budget reserves, and when can those funds be used?

California policymakers’ prudent decisions to set aside funds for a rainy day mean the state has significant resources to address a budget shortfall.

At the end of January 2024, California held a total of more than $25 billion in four state budget reserves:

  • the Budget Stabilization Account (BSA),
  • the Public School System Stabilization Account (PSSSA),
  • the Safety Net Reserve, and
  • the Special Fund for Economic Uncertainties (SFEU).

California’s Constitution and state law govern when funds may be withdrawn from these reserves, the amount that can be withdrawn, and how funds may be used. For example, the state Constitution only allows withdrawals from the BSA and PSSSA if the governor declares a budget emergency and the Legislature passes a bill, by majority vote, that approves the withdrawal. In contrast, state law allows the Legislature to withdraw funds from the Safety Net Reserve or the SFEU at any time by majority vote.

All of the funds in the PSSSA, Safety Net Reserve, and SFEU may be withdrawn in one year. However, a withdrawal from the BSA is limited to the lower of the amount needed to address the budget emergency or 50% of the BSA balance — unless funds had been withdrawn in the previous fiscal year, in which case all of the funds remaining in the BSA may be accessed. 

First Look: Understanding the governor’s 2024-25 state budget proposal

Learn about the key pieces of the 2024-25 California budget proposal, and explore how the governor prioritized spending and determined cuts amid a sizable projected state budget shortfall.

The PSSSA is the only reserve with strict limits on the use of its funds, which must be provided to support K-12 schools and community colleges. On the other hand, the Legislature may use funds from the BSA and the SFEU for any purpose.

State law specifies that funds in the Safety Net Reserve are intended to support CalWORKs and Medi-Cal benefits and services during an economic downturn. However, the Legislature may allocate these funds for other purposes if the governor signs a bill to do so.

Governor Newsom’s 2024-25 budget proposes withdrawing the entire Safety Net Reserve while also making cuts to the CalWORKs program. These proposals likely run counter to the intent of the Legislature when it created a reserve fund to support families with the greatest need. Moreover, draining the Safety Net Reserve would leave no funds to support CalWORKs and Medi-Cal benefits and services if economic conditions worsen.

What should advocates keep in mind when advancing their policy priorities this year?

Advocating for policies and the funding to support them is clearly more challenging when the state faces a budget shortfall, like it does this year. In particular, proposals that call for new spending will face much greater scrutiny — and significantly higher hurdles — compared to years when state revenues are stronger. But advocates still have options for navigating a tough budget year.

Advocates can push for new revenues and a fairer tax system. Revenues are a key tool in the budget-balancing toolbox and can prevent harmful spending cuts when there’s a budget shortfall. For example, advocates can encourage state leaders to examine the tens of billions of dollars that the state loses to tax breaks each year as part of the annual budget process.

Ensuring that our state has adequate revenues to support robust public services should be a top long-term priority regardless of the state’s fiscal condition. New revenues are needed to continue making progress toward an equitable state where everyone can be healthy and thrive, and advocates can make that case even in a tough budget year.

Advocates can also urge policymakers to protect recent policy gains and funding commitments, particularly investments that help to create a more equitable state. These include investments in child care, housing, health care, assistance for older adults and people with disabilities, and other critical services. Many recent investments could be at risk if the governor’s May Revision identifies a much larger budget gap than currently anticipated, so advocates will need to make a strong case for protecting recent gains and urge policymakers to exhaust alternatives to cuts to vital services.

Furthermore, advocates can plan for the future by continuing to make the case for additional state investments that prioritize the overall improvement of Californians’ lives. Advocates can educate state leaders about Californians’ ongoing needs, highlight policy solutions, and seek allies to help advance their proposals — using both the policy bill process and the budget process. Educating policymakers today can lay the groundwork for policy wins and expanded funding when the revenue situation improves.

In some cases, state leaders may be open to adopting a policy change, while delaying implementation until funding is provided in a subsequent state budget. This approach keeps the issue on the state’s “front burner” and puts advocates in a good position to argue for the needed resources in a future state budget cycle. However, given the significant budget challenges the state is facing, policymakers may be reluctant to commit now to a future expansion of services, even if it’s only “on paper.”

Finally, advocates should keep in mind that the budget is never truly final when the governor signs the budget package into law each June. State leaders always return to the budget later in the summer, making minor and sometimes substantial changes. For example, the Legislature may pass amendments that change the spending levels in the Budget Act. Lawmakers also may pass additional trailer bills, thus increasing the size and scope of the original budget package.

Unexpected opportunities can always emerge — so advocates should be prepared to advance their priorities through the budget process year-round.

Don't miss an update.

Join our email list!

California’s Budget Reserves

California’s Constitution and state law govern when funds may be withdrawn from the state’s budget reserves, the amount that can be withdrawn, and how funds may be used. 

  • Established in the state Constitution: Budget Stabilization Account, Public School System Stabilization Account
  • Established in state law: Safety Net Reserve, Special Fund for Economic Uncertainties 
Budget Stabilization Account (BSA)Public School System Stabilization Account (PSSSA)Safety Net ReserveSpecial Fund for Economic Uncertainties (SFEU)
Is the state required to make an annual deposit?YesNo
However, a deposit is required under a restricted set of circumstances.1For example, these circumstances include requirements that deposits only occur when capital gains tax revenues exceed a specific level of total General Fund proceeds of taxes and when growth in the state’s minimum funding guarantee for K-12 schools and community colleges is relatively strong.
NoNo
Can a required deposit be reduced or suspended — and by who?Yes
A required deposit can be reduced or suspended if the governor declares a budget emergency and the Legislature approves the reduction or suspension by a majority vote.
Yes
A required deposit can be reduced or suspended if the governor declares a budget emergency and the Legislature approves the reduction or suspension by a majority vote.
Not applicableNot applicable
When can funds be withdrawn?Funds may be withdrawn if the governor declares a budget emergency and the Legislature passes a bill, by majority vote, to withdraw funds.2These withdrawal rules apply to funds that are deposited into the BSA as required by Proposition 2 of 2014. State policymakers may also deposit funds into the BSA on top of Prop. 2 requirements, creating a “discretionary” balance within the reserve. The Legislative Analyst’s Office suggests that the Legislature can withdraw a discretionary balance at any time without a declaration of a budget emergency by the governor. Separate from this issue, funds must be withdrawn from the BSA — without the need for a declaration of a budget emergency — when updated revenue estimates indicate that a prior-year deposit was greater than required.Funds may be withdrawn if the governor declares a budget emergency and the Legislature passes a bill, by majority vote, to withdraw funds.3Funds must be withdrawn from the PSSSA — without the need for a declaration of a budget emergency — when the state’s minimum funding guarantee for K-12 schools and community colleges is less than the prior year’s funding level, adjusted for changes in student attendance and the cost of living, or when updated revenue estimates indicate that a prior-year deposit was greater than required.The Legislature may withdraw the funds at any time by majority vote.The Legislature may withdraw the funds at any time by majority vote.4Additionally, the Department of Finance may withdraw funds from the SFEU without legislative approval to cover the cost of state disaster response efforts upon an emergency proclamation by the governor.
Is there a limit on the amount of funds that can be withdrawn?Yes
The amount that can be
withdrawn is limited to the lower
of 1) the amount needed to
address the budget emergency
or 2) half of the funds in the BSA,
unless funds had been withdrawn
in the previous fiscal year, in
which case all of the funds
remaining in the BSA may be
withdrawn.
No5However, in any year when funds must be withdrawn from the PSSSA because the state’s minimum funding guarantee for K-12 schools and community colleges is less than the prior year’s funding level — adjusted for changes in student attendance and the cost of living — the required withdrawal is limited to the amount of that shortfall.NoNo
How can the funds be used by the state?Funds may be used for any purpose.Funds must be used to support K-12 schools and community colleges.Funds are intended to maintain existing CalWORKs and Medi-Cal benefits and services during an economic downturn, but may be used for any purpose if the Legislature so chooses.Funds may be used for any purpose.

Note: A ”budget emergency” that’s declared by the governor is defined as either: 1) the existence of ”conditions of disaster or of extreme peril to the safety of persons and property within the State, or parts thereof” as defined in Article XIII B, Section 3(c)(2) of the state Constitution; or 2) a determination by the governor that there are insufficient resources to maintain General Fund expenditures at the highest level of spending in the three most recent fiscal years, adjusted for state population growth and the change in the cost of living. Article XIII B, Section 3(c)(2), defines “conditions of disaster or of extreme peril” as being “caused by such conditions as attack or probable or imminent attack by an enemy of the United States, fire, flood, drought, storm, civil disorder, earthquake, or volcanic eruption.”

Sources: California Constitution, California Government Code, and California Welfare and Institutions Code

Secure your ticket!

Join us in Sacramento on April 16, 2024, for engaging sessions, workshops, and networking opportunities with fellow changemakers, inspiring speakers, and much more.

  • 1
    For example, these circumstances include requirements that deposits only occur when capital gains tax revenues exceed a specific level of total General Fund proceeds of taxes and when growth in the state’s minimum funding guarantee for K-12 schools and community colleges is relatively strong.
  • 2
    These withdrawal rules apply to funds that are deposited into the BSA as required by Proposition 2 of 2014. State policymakers may also deposit funds into the BSA on top of Prop. 2 requirements, creating a “discretionary” balance within the reserve. The Legislative Analyst’s Office suggests that the Legislature can withdraw a discretionary balance at any time without a declaration of a budget emergency by the governor. Separate from this issue, funds must be withdrawn from the BSA — without the need for a declaration of a budget emergency — when updated revenue estimates indicate that a prior-year deposit was greater than required.
  • 3
    Funds must be withdrawn from the PSSSA — without the need for a declaration of a budget emergency — when the state’s minimum funding guarantee for K-12 schools and community colleges is less than the prior year’s funding level, adjusted for changes in student attendance and the cost of living, or when updated revenue estimates indicate that a prior-year deposit was greater than required.
  • 4
    Additionally, the Department of Finance may withdraw funds from the SFEU without legislative approval to cover the cost of state disaster response efforts upon an emergency proclamation by the governor.
  • 5
    However, in any year when funds must be withdrawn from the PSSSA because the state’s minimum funding guarantee for K-12 schools and community colleges is less than the prior year’s funding level — adjusted for changes in student attendance and the cost of living — the required withdrawal is limited to the amount of that shortfall.

Don't miss an update.

Join our email list!

Introduction

Governor Gavin Newsom released his proposed 2024-25 California state budget on January 10, projecting a $38 billion shortfall that is notably smaller than the independent Legislative Analyst Office’s estimate of $68 billion released last month. The governor proposes to close the budget gap through the use of reserves, delays or deferrals of spending authorized in earlier years, and spending cuts. The $209 billion General Fund spending plan would protect many investments made in prior years, but fails to propose significant tax policy changes to increase state revenues to meet near-term needs and build a more equitable, thriving state in the long run.

The projected budget shortfall is primarily the result of state revenue collections that the administration now projects are $44 billion lower over the three-year budget window (fiscal years 2022-23 through 2024-25) than was anticipated when the current-year budget was enacted last June. The extent of this revenue drop only recently became clear because filing deadlines for the 2022 tax year were pushed from April 2023 to November 2023 by the IRS. The shortfall reflects the steep stock market decline in 2022 — after significant growth in 2020 and 2021 — that negatively impacted income tax collections from high-income Californians and corporations, as well as the economic dampening effects of the Federal Reserve’s interest rate hikes.

Lower state revenues over the three-year budget window result in automatic adjustments to constitutionally-required funding allocations, including to the state’s main reserve and education reserve accounts as well as for K-12 schools and community colleges.

The governor’s proposed solutions to cover the shortfall include:

  • Using $18.8 billion of state reserves, often called “rainy day funds” (leaving an estimated $18.4 billion for future use),
  • Internal fiscal measures including internal borrowing ($5.7 billion) and fund shifts ($3.4 billion), and
  • Various reductions in funding levels ($8.5 billion) and delays and deferrals in funding to later years ($7.2 billion).

The governor’s proposal notably does not include any substantial tax policy measures to increase revenues to avoid reductions in funding levels for critical services and enable additional ongoing investments. As a result, the austerity measures used to cover the shortfall include some reductions and delays in funding that will disproportionately impact low-income communities and Californians of color, including:

  • Ongoing cuts to CalWORKs supportive services (despite draining the Safety Net Reserve designed to avoid cuts to CalWORKs),
  • Delays to programs that help address homelessness,
  • Various reductions in funding for workforce systems and supports, and
  • Various reductions in climate and housing programs.

Overall, the governor’s budget proposal would protect and maintain much of the progress made in prior budget years to help improve economic security and opportunities for Californians with low incomes and Californians of color, including policy advances in health care and behavioral health, cash assistance (refundable tax credits and SSI-SSP), food assistance, and universal transitional kindergarten (TK).

However, California has the wealth and state leaders have the tools and resources to further protect essential services and build upon earlier progress. The state is better equipped to tackle current fiscal challenges as a result of a decade of prudent budgeting and building reserves. But, there is still much more that can be done to help Californians thrive and secure our state’s fiscal future. In good times and in bad, all Californians deserve the dignity and support necessary to lead thriving lives.

This First Look report outlines key pieces of the 2024-25 California budget proposal, and explores how the governor prioritized spending and determined cuts amid a sizable projected state budget shortfall.

what is the governor’s proposed budget?

The budget proposal provides a detailed overview of the governor’s proposed expenditures for the upcoming fiscal year, estimated expenditures for the current fiscal year, and actual expenditures for the prior fiscal year. The proposed budget is released — along with the governor’s budget summary — on or before January 10.

Table of Contents

Budget Overview

Health

Homelessness & Housing

Economic Security

Education

Justice System

Workforce & Climate Change


Budget Overview

Governor’s Budget Projects Slower Job Growth, Modest Wage Gains

The Administration’s economic outlook for California projects slower job growth and an uptick in the unemployment rate over the next two years, largely in response to actions taken by the Federal Reserve to slow inflation. Specifically, nonfarm employment is projected to rise by just 1% in 2024, followed by a 0.4% increase in 2025 – notably slower than the 2.2% rise in employment in 2023 and 1.5% increase in 2019, just before the pandemic. In addition, the state’s unemployment rate is projected to increase from 4.6% in 2023 to 5.1% in 2024 and 5.2% in 2025 – also much higher than the 4.1% pre-pandemic unemployment rate in 2019. While the Administration does not provide projections for specific groups of workers, the devastating impact of rising unemployment is likely to hit communities of color harder, as the effects of structural racism mean that Black and Latinx workers, in particular, always face much higher unemployment rates than white workers, in both good times and bad.

Projections for wages and inflation are a brighter spot in the Administration’s outlook. The average worker’s wage is expected to increase by 3.4% and 3.7% in 2024 and 2025, respectively — up from 2.7% growth in 2023 — reflecting the strengthening tech sector, in particular. Nevertheless, average annual wage gains are projected to still fall short of pre-pandemic levels during the forecast period. The Administration also projects that rates of inflation in the US and California will continue to moderate over the next few years, with growth in the state’s inflation rate falling to 3.0% in 2024 and 2.4% in 2025, down from 3.8% in 2023.

Budget Assumes a $44 Billion Revenue Shortfall Over 3-Year Budget Window

The proposed budget is built on state revenue estimates that are significantly lower than projected when the 2023 budget was enacted. Still, the revenue shortfall assumed by the administration is substantially smaller than the $58 billion previously estimated by the Legislative Analyst’s Office (LAO). For the three-year budget window, including fiscal years 2022-23 through 2024-25, the governor estimates that General Fund revenues will be $44 billion below the 2023 Budget Act estimate before accounting for proposed budget solutions.

A large share of the shortfall — about $25 billion — is attributable to fiscal year 2022-23, which ended last June. The extent of this shortfall only recently became clear because filing deadlines for the 2022 tax year were pushed from April 2023 to November 2023. The shortfall reflects the steep stock market decline in 2022 — after significant growth in 2020 and 2021 — that negatively impacted income tax collections from high-income Californians, as well as the economic dampening effects of the Federal Reserve’s interest rate hikes.

For fiscal years 2023-24 and 2024-25, the administration’s revenue projections are more optimistic than the LAO’s, leading to the difference between the two revenue shortfall estimates. This difference in revenue projections also contributes to the difference between the governor’s estimate of an overall $38 billion budget problem and the LAO’s estimated $68 billion budget problem, but the estimates of the budget problem reflect spending projections in addition to revenue projections.

It’s important to keep in mind that both the governor’s and the LAO’s estimates of the 3-year revenue shortfall and overall budget problem are just estimates and are subject to change as additional information becomes available. There is always a high degree of uncertainty in forecasting future revenues, and the picture may very well look better or worse by the time the 2024-25 budget is being finalized, depending on changes in economic conditions and their impact on state tax collections.

Governor Proposes Modest But Insufficient Revenue Increases

One piece of the governor’s plan to address the budget problem is a package of tax proposals that the administration estimates would raise state revenues by about $400 million in 2024-25 and about $293 million ongoing by limiting or eliminating some tax breaks. These proposals include:

While these proposals to bolster state revenues and limit wasteful tax breaks are commendable, they fall far short of the level of revenue increases needed to avoid cuts to important state services and to meaningfully improve those services to better meet the needs of Californians. There are many ways to make the state’s tax system more fair while substantially raising state revenues.

Notably, the state loses tens of billions of dollars on corporate and personal income tax breaks each year. However, these costly tax breaks are not re-evaluated in budget discussions each year, meaning billions of dollars in tax expenditures often continue yearly without scrutiny. Some of the largest of these tax breaks largely benefit highly profitable corporations and wealthy individuals and make the state’s tax system less equitable, yet the governor does not propose changes to these. For example:

  • The “Water’s Edge election” is estimated to cost the state around $4 billion each year, and encourages corporations to avoid taxes by using foreign tax havens.
  • The Research and Development tax credit is estimated to cost around $2-3 billion each year and is overly generous, leaving room for reforms that would retain the credit but limit the revenue loss.

Along with reductions to the official state corporate tax rate, these and other corporate tax breaks explain why corporations pay only about half as much of their California profits in state taxes as they did a generation ago. Meanwhile, corporate profits shot up during the pandemic and are still near record highs despite more recent economic challenges, including higher inflation and rising interest rates. California corporate taxes make up a very small share — about 0.1% — of corporations’ expenses, and requiring more fair contributions from the most profitable of these corporations would only marginally increase that share. Policymakers have many options to combat corporate tax avoidance and ensure the wealthiest corporations and individuals are paying their fair share to support the needs of California communities.

In both good and bad budget times, raising revenues and making the state’s tax system more equitable is a key strategy to help keep Californians healthy, housed, well-fed, and able to access educational and economic opportunities.

Governor Proposes Withdrawal of Reserve Funds, Maintains Some Reserves for Future Use

California has a number of state reserve accounts that set aside funds intended to be used for a “rainy day” when economic conditions worsen and state revenues decline. Some reserves are established in the state’s Constitution to require deposits and restrict withdrawals, and some are at the discretion of state policymakers. 

California voters approved Proposition 2 in November 2014, amending the California Constitution to revise the rules for the state’s Budget Stabilization Account (BSA), commonly referred to as the rainy day fund. Prop. 2 requires an annual set-aside equal to 1.5% of estimated General Fund revenues. An additional set-aside is required when capital gains revenues in a given year exceed 8% of General Fund tax revenues. For 15 years — from 2015-16 to 2029-30 — half of these funds must be deposited into the rainy day fund, and the other half is to be used to reduce certain state liabilities (also known as “budgetary debt”). Prop. 2 also established a new state budget reserve for K-12 schools and community colleges called the Public School System Stabilization Account (PSSSA). The PSSSA requires that when certain conditions are met, the state must deposit a portion of General Fund revenues into this reserve as part of California’s Prop. 98 funding guarantee (see Prop. 98 section). In order to access the funds in the BSA and PSSSA, the governor must declare a budget emergency.

The BSA is not California’s only reserve fund. The 2018-19 budget agreement created the Safety Net Reserve Fund, which holds funds intended to be used to maintain benefits and services for CalWORKs and Medi-Cal participants in the event of an economic downturn. Additionally, each year, the state deposits additional funds into a “Special Fund for Economic Uncertainties” (SFEU) — a reserve fund where state leaders have total discretion as to when and how they can use the available funds.

The current-year (2023-24) budget, enacted in mid-2023, projected $22.3 billion in the BSA; $10.8 billion in the PSSSA; $900 million in the Safety Net Reserve; and $3.8 billion in the SFEU. However, revenue adjustments in the current year result in updated 2023-24 projections in the governor’s proposed budget — $23.1 billion in the BSA; $5.7 billion in the PSSSA; $900 million in the Safety Net Reserve; and a shortfall of $2.5 billion in the SFEU, which fluctuates throughout the year based on changes in revenues.

The governor proposes to use $18.8 billion in reserve funds from the BSA, PSSSA, and Safety Net Reserve to cover a portion of the projected budget shortfall. The proposal includes $12.2 billion from the BSA, $5.7 billion from the PSSSA, and all $900 million from the Safety Net Reserve. (The portion from the BSA includes dollars that would normally be deposited into that account — a transfer that the governor proposes to suspend.) The withdrawal of the Safety Net Reserve funds is surprising and concerning because the governor also proposes cuts to CalWORKs for low-income families with children — a program the reserve is intended to protect from budget cuts (see CalWORKs section).

For 2024-25, the proposal projects balances, after withdrawals, of $11.1 billion in the BSA, $3.9 billion in the PSSSA, no funding remaining in the Safety Net Reserve, and an SFEU balance of $3.4 billion. 

Taking into account the remaining reserves in the BSA, PSSSA, and SFEU, the governor’s proposal assumes total reserves of $18.4 billion in 2024-25.

virtual event: breaking down governor newsom’s 2024-25 state budget proposal

How will policymakers navigate a tough budget year? Budget Center policy experts will dive deep into that and what the proposal means for Californians.

Join us for this free, virtual event on January 22.

Health

Governor Keeps Commitment to Expand Medi-Cal to All Undocumented Californians

Access to health care is necessary for everyone to be healthy and thrive. About 14 million Californians with modest incomes — nearly half of whom are Latinx — are projected to receive free or low-cost health care through Medi-Cal (California’s Medicaid program) in 2024-25. Another 1.6 million Californians purchase health coverage through Covered California, the state’s health insurance marketplace.

The governor’s proposed budget protects major health care investments that were established in prior years. Specifically, the budget:

In order to sustain recent health care investments, the governor’s administration seeks to increase the Managed Care Organization (MCO) tax, which was approved by the federal government in December 2023. The MCO tax is a provider tax imposed by states on health care services that essentially reduces, or offsets, state General Fund spending on Medi-Cal. The governor’s administration is seeking early action by the Legislature to request federal approval to increase the tax by $1.5 billion for a total of $20.9 billion from April 1, 2023 through December 31, 2026. Of this amount, $12.9 billion would support the Medi-Cal program and $8 billion would support provider rate increases to drive greater Medi-Cal provider participation.

State leaders can take additional steps to ensure that all Californians, regardless of race, age, disability, or immigration status, can access and maintain the critical health coverage they need to be healthy and thrive. The need for action is evident as almost 1 million Californians have lost Medi-Cal coverage during the ongoing processing of Medi-Cal renewals since the start of the pandemic. Although not everyone who loses Medi-Cal coverage becomes uninsured, the majority of people who lost coverage did so because of paperwork challenges. Certain groups, including immigrants, older adults, and people with disabilities, are at greater risk of losing Medi-Cal coverage. State leaders should invest in health navigators and pause procedural terminations to prevent Californians who remain eligible for Medi-Cal from losing coverage.

Proposed Budget Upholds Major Behavioral Health Initiatives

Millions of Californians who cope with behavioral health conditions — mental illness or substance use disorders — rely on services and supports that are primarily provided by California’s 58 counties. Improving California’s behavioral health system is critical to ensure access to these services for all Californians, regardless of race, age, gender identity, sexual orientation, or county of residence.

The budget proposal maintains funding to continue behavioral health initiatives that state leaders launched in recent years. Specifically, the budget preserves:

Due to the state’s projected General Fund revenue decline, the proposed budget:

Investing in the state’s behavioral health system is crucial for supporting Californians who are coping with mental health conditions or substance use disorders. State leaders should continue to invest in the behavioral health system and address the behavioral health workforce shortage. Policymakers can also invest in efforts to make sure that the behavioral health workforce better reflects the diversity of all Californians, including their gender identities and sexual orientations.

Homelessness & Housing

Proposed Budget Does Not Advance Funding to End Homelessness

All Californians deserve a dignified, safe and stable place to call home. Yet, in early 2023 Californians experiencing homelessness increased to over 181,000 individuals statewide. Unhoused Californians face harmful effects to their physical and mental health, and severe disruptions to employment, school, and basic needs. Deeply rooted inequities have also placed Black, American Indian or Alaska Native, and Pacific Islander Californians, adults without children, older adults, and LGBTQ+ individuals at higher risk of facing homelessness within their lifetimes.

While the administration largely sustains previous budget allocations to address homelessness, there is no additional funding in 2024-25. Most notably, the administration maintains $1.1 billion General Fund in 2023-24 for the Homeless Housing, Assistance and Prevention (HHAP) Grant Program, which provides local jurisdictions with flexible funds to address homelessness. However, it delays $260 million General Fund in 2023-24 to 2025-26 for HHAP “bonus” funds for grant recipients that meet performance conditions. It also reverts $100.6 million General Fund for HHAP administration, leaving $51.1 million for this use.

The proposed budget also delays or shifts funding for various homelessness programs that serve diverse populations at risk of or experiencing homelessness. Specifically, the proposed budget:

The administration further upholds previous allocations that leverage federal and state Medicaid funds to allow up to six months of rent or temporary housing to eligible individuals experiencing or at risk of homelessness transitioning out of institutions or foster care (see Coverage, Affordability & Access section). Broadly, the governor notes addressing California’s homelessness challenge remains a top priority and funding will be revisited in the spring. 

Budget Reduces Funds and Fails to Continue Affordable Housing Investments

All Californians deserve safe, stable, and affordable housing. However, the state’s affordable housing shortage and accompanying high housing costs are preventing many Californians from remaining stably housed. Renters, people with low incomes, Black and Latinx Californians, and Californians who are undocumented are especially likely to struggle to afford their homes. Yet despite noting California’s serious housing affordability challenges, the governor proposes funding reductions from prior years and no additional investments to increase the affordable housing supply.

As an austerity effort, the administration instead reduces $1.2 billion in funding allocated since 2019 for various housing-related programs, which encompass initiatives that promote affordable housing development and homeownership. Some reductions include:

  • $300 million General Fund for Regional Early Action Planning Grants 2.0.
  • $250 million General Fund for the Multifamily Housing Program, leaving $75 million in 2023-24.
  • $247.5 million General Fund over the next three years for the Foreclosure Intervention Housing Preservation Program.
  • $200 million for the Infill Infrastructure Grant Program, leaving $25 million in 2023-24.
  • $152.5 million General Fund for CalHOME Program, which initially received $300 million one-time General Fund in 2023-24.
  • $50 million General Fund for the Veterans Housing and Homelessness Prevention Program, fully reducing allocated state funds in 2023-24.

The proposed budget also does not include an additional $500 million – as has been done since 2019 – for state Low Income Housing Tax Credits, which help promote and finance affordable housing development. Regarding student housing, the administration eliminates a total of $494 million General Fund for the California Student Housing Revolving Loan Fund Program in 2023-24 and 2024-25. This reduction leaves $6 million General Fund in 2023-24 to provide interest-free loans to campuses for new student housing projects (see CSU/UC section).

state budget terms defined

What’s the difference between a trailer bill and policy bill? A deficit and an operating deficit? And what exactly is a “Budget Bill Jr.?” Our Glossary of State Budget Terms answers that and more.

Economic Security

Governor’s Budget Preserves Refundable Tax Credits for Low-Income Californians, Makes No New Investments

California’s Earned Income Tax Credit (CalEITC), Young Child Tax Credit, and Foster Youth Tax Credit are refundable income tax credits that collectively help millions of families and individuals with low incomes pay for basic needs like food. These credits also help to promote racial and gender equity by targeting cash to Californians of color, immigrants, and women who are frequently blocked from economic opportunities and forced into low-paying jobs that fail to provide economic security.

The administration does not propose to make any new investments in these tax credits. Yet the need for additional cash support among Californians with low incomes remains high.  Sustained inflation, together with the expiration of federal pandemic supports, has made it increasingly difficult for families and individuals to make ends meet as rising shares of Californians are now facing food insecurity and poverty – particularly among children and Californians of color.

The administration also does not propose to sustain the state’s $20 million investment in refundable tax credit outreach, education, and free tax preparation assistance grants, which allows community based organizations (CBOs) to provide year-round services to tax filers. The budget reduces this funding to $10 million, which will reduce the capacity of CBOs to provide tax-filing support.

Proposed Budget Makes Significant Cuts to CalWORKs Support Services

The California Work Opportunity and Responsibility to Kids program (CalWORKs) is a critical support that provides modest cash assistance to families with low incomes, particularly families of color. The governor’s budget proposal includes an approximate 0.8% grant increase. This increase is required by AB 85 (2013), which links CalWORKs grant increases to projected sales tax revenues. The governor also proposes drawing down the full $900 million in the Safety Net Reserve, which was created to maintain existing CalWORKs and Medi-Cal benefits and services during an economic downturn (see Reserves section).

In addition to drawing down the entire Safety Net Reserve, the governor proposes ongoing cuts to Family Stabilization and Expanded Subsidized Employment services within the CalWORKs program, effectively eliminating both services. Specifically, the proposed cuts include:

Recognizing the significant challenges facing CalWORKs families — and the importance of respectfully addressing these challenges to enable families to secure long-term stability — these cuts undermine the recent steps the state has taken to create a more family-centered CalWORKs program. These programs play an important part in supporting families with the greatest need and the budget proposal fails to recognize the cost savings that can be obtained by helping families thrive and preventing deeper poverty.

Governor Retains Most Food Assistance Commitments, But No New Investments

Being well-nourished is one of the necessary foundations for individuals to thrive. Yet since the end of pandemic-era enhancements to food assistance, food insecurity is on the rise. The proposed budget appears to retain commitments made in recent years to expand food assistance, including:

  • Expanding the California Food Assistance Program (CFAP) to include undocumented adults age 55 and older beginning in October 2025;
  • Funding a pilot program to increase the minimum CalFresh benefit (California’s version of the federal Supplemental Nutrition Assistance Program) from $23 to $50 for some recipients; and 
  • Providing administrative funding to phase in the new Summer EBT program to provide Electronic Benefit Transfer Cards to students eligible for free or reduced-price school meals in 2024.

The proposed budget also includes an additional $122.2 million in ongoing Proposition 98 General Fund dollars to fully fund the universal school meals program in 2024-25 (see K-12 education section).

However, the governor does not propose any additional support for nutrition assistance programs to address the rising rates of food insecurity, nor does he propose fully ending the exclusion of undocumented Californians of all ages from CFAP. The proposal also does not provide a funding plan for Cal Grant reform, which would allow more college students to qualify for CalFresh benefits (see Student Financial Aid section).

Finally, the proposed budget would revert $33.2 million of the previously approved $35 million for the California Nutrition Incentive Program, which provides grants to organizations to provide matching funds to recipients of CalFresh, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and the Senior Farmers Market Nutrition Program when they purchase fruits and vegetables at farmers markets and certain other retailers.

Governor Proposes to Maintain Current Grant Levels, Provides No Additional Funding to Increase Grants

The Supplemental Security Income (SSI) and State Supplementary Payment (SSP) programs together provide grants to well over 1 million low-income older adults and people with disabilities to help them pay for housing and other necessities. Grants are provided to individuals and couples and are funded with both federal (SSI) and state (SSP) dollars. State policymakers made deep cuts to the SSP grant in 2009 and 2011 to help close budget shortfalls caused by the Great Recession. During this period, the state repealed the Cost of Living Adjustment (COLA), which has limited the grant’s ability to keep up with rising prices. 

The 2021-22 budget adopted a substantial (24%) increase to SSP grants that took effect on January 1, 2022. There have been steady increases in recent years, primarily in 2017, 2021, 2022, and most recently in 2023 when the budget raised the maximum SSP grant for individuals from $219.73 in 2023 to $239.94 in 2024. For couples, the maximum monthly SSP grant increased from $556.62 in 2023 to $607.83 in 2024. Despite these recent increases, the SSI/SSP grants for individuals have not caught up to the level they would have been had the COLA not been repealed, and they remain below the Federal Poverty Line (FPL). 

The governor’s proposal protects the recent SSP grant increase but does not allocate any additional funding or make commitments to closing the gap between grants and the FPL. Grants are trailing significantly behind housing costs across the state, and delayed policy action in closing these gaps hinders low-income Californians from making ends meet.

Governor Maintains Temporary Rate Increase but Does Not Expand Slots

California’s subsidized child care and development system is a critical resource for families with low to moderate incomes seeking to access affordable, nurturing early learning and care. The 2023-24 enacted budget contained significant steps forward for child care, including a more affordable family fee schedule and a historic agreement with Child Care Providers United (CCPU) that secured stronger benefits and mandated a path forward for rate reform. While these recent efforts have contributed to a more equitable child care system, poverty among young children has increased. More resources are needed to ensure the system meets the needs of all families and reflects the integral role of child care providers. Too few families can access affordable child care options, and providers continue to face uncertainty around crucial ongoing wage increases.

The governor’s proposed budget:

Regarding ongoing provider rate reform, the 2024-25 Budget Act will be finalized alongside the development of a single rate structure and alternative methodology for child care reimbursements. Specifically, by July 2024, the State of California will submit a state plan to the federal Administration for Children and Families to approve a proposed alternative methodology. Following federal approval, the State of California will issue an implementation outline and the CCPU rate-related contract sections will be reopened to negotiate a restructure to reimbursement rates and associated funding. Therefore, the 2024-25 Budget Act will likely not include items related to the alternative methodology currently being developed, and questions of how much funding will be appropriated for ongoing rate reform and how it will be implemented will be carried into the next fiscal year.

Immigrants and their families are deeply ingrained in the state’s social fabric. They are members of the state’s workforce, pay taxes, attend schools, own businesses, and raise families who invest in local communities. California has the largest share of immigrant residents of any state. Over half of all California workers are immigrants or children of immigrants, and more than 2 million Californians are undocumented, according to estimates.

The governor’s budget proposal maintains some key recent commitments to immigrant Californians. Specifically, the budget:

The proposed budget reduces funding for immigration legal services, which are a lifeline for immigrant families. Specifically, the budget:

State leaders can take additional action to better support immigrant communities, such as by providing humanitarian support to migrants and border communities, fully ending the exclusion of undocumented Californians of all ages from CFAP, and strengthening the safety net for California workers who lose their jobs and are undocumented, therefore excluded from unemployment insurance benefits despite their critical contributions to the state’s economy and our communities.

Proposed Budget Fails to Extend Funding for Domestic Violence Survivors

All Californians should be able to live in safe environments free from violence. However, millions of Californians experience domestic violence every year – women, transgender, and non-binary Californians, and some women of color are most likely to experience this type of violence. 

Domestic and sexual violence prevention programs are proven ways to stop the violence from occurring in the first place by taking a proactive approach and seeking to shift culture on racial and gender inequities. Since 2018, state policymakers have provided small, one-time grants for prevention programs, administered by the California Governor’s Office of Emergency Services. Besides funding for prevention services, the state also receives federal funding through the Victims of Crime Act (VOCA) to help provide essential services to survivors of crime, including survivors of domestic violence. These funds help provide survivors with critical services like emergency shelter, counseling, and financial assistance. 

However, the last round of prevention grants will run out at the end of 2024. Prevention efforts take time, and organizations doing this critical work cannot commit to long term programming without permanent, ongoing funding. Additionally, California is anticipating a reduction in VOCA funding to the state of around $170 million, or approximately 40%, due to anticipated cuts in federal funding.

In his proposed budget, the governor:

related content

See our report Dollars and Democracy: A Guide to the California State Budget Process to learn more about the state budget and budget process.

Education

Pre-K and Transitional Kindergarten Funding Continues, but With Key Delays

In addition to the child care and development programs housed within the California Department of Social Services (CDSS) (see Child Care section), the California Department of Education (CDE) hosts two additional early learning and care programs: transitional kindergarten (TK) and the California State Preschool Program (CSPP). CSPP provides preschool to children ages 3 and 4 for families with low to moderate incomes. TK serves 4-year-olds, and eligibility is based on age alone in public schools and is not dependent on family income. As the state continues to roll out universal TK for all 4-year-olds, California’s state leaders can strengthen and expand access to early learning and care opportunities by fully developing a mixed delivery system tailored to the needs and diversity of California families. 

The governor’s proposed budget:

K-14 Education’s Minimum Funding Level Drops Due to Lower Revenue Estimates

Approved by voters in 1988, Proposition 98 constitutionally guarantees a minimum level of annual funding for K-12 schools, community colleges, and the state preschool program. The governor’s proposed budget assumes a 2024-25 Prop. 98 funding level of $109.1 billion for K-14 education. However, because the Prop. 98 guarantee tends to reflect changes in state General Fund revenues and the proposed budget’s estimate of General Fund revenue is lower than estimates in the 2023-24 budget agreement, the governor’s budget proposal assumes a significant decrease in the Prop. 98 guarantee in 2023-24 and 2022-23. Specifically, the governor’s budget assumes a Prop. 98 guarantee of $105.6 billion in 2023-24 and $98.3 billion in 2022-23, $2.7 billion and $9.1 billion below the levels assumed in the 2023-24 budget agreement respectively. The governor’s budget “proposes statutory changes to address roughly $8 billion of this decrease.” 

The governor’s budget also reflects withdrawals of more than $3 billion in 2023-24 and more than $2.6 billion in 2024-25 from the Public School System Stabilization Account (PSSSA) – the state budget reserve for K-12 schools and community colleges (see Reserves section). Based on projections in the governor’s budget, funds in the PSSSA will total $3.9 billion by the end of 2024-25, nearly $7 billion lower than the 2023-24 balance estimated in the 2023-24 budget agreement. Because the revised 2023-24 PSSSA balance of $5.7 billion is projected to exceed 3% of the total K-12 share of the Prop. 98 minimum funding level in 2023-24, current law would continue to prevent K-12 school districts from maintaining more than 10% of their budgets in local reserves in 2024-25.

Budget Proposal Relies on Reserves to Support K-12 School Funding Formula

The largest share of Proposition 98 funding goes to California’s school districts, charter schools, and county offices of education (COEs), which provide instruction to 5.9 million students in grades kindergarten through 12. The governor’s budget proposal would withdraw funds from the Public School System Stabilization Account (PSSSA) – the state budget reserve for K-12 schools and community colleges – to support the Local Control Funding Formula (LCFF), the state’s main K-12 education funding formula.  Specifically, the governor’s proposed budget:

The Proposed Budget Includes Reserve Withdrawals to Support Community Colleges

A portion of Proposition 98 funding provides support for California’s Community Colleges (CCCs), the largest postsecondary education system in the country, which serves high percentages of students of color and students with low incomes. CCCs prepare more than 1.8 million students to transfer to four-year institutions or to obtain training and employment skills. 

The 2024-25 spending plan proposes a withdrawal from the Prop. 98 reserve for CCC apportionments and funds a 0.76% cost-of-living adjustment. Specifically, the proposed spending plan:

Proposed Budget Defers Planned Investments for the CSU and UC Systems

California supports two public four-year higher education institutions: the California State University (CSU) and the University of California (UC). The CSU provides undergraduate and graduate education to nearly 460,000 students at 23 campuses, and the UC provides undergraduate, graduate, and professional education to more than 290,000 students across 10 campuses. 

The 2024-25 budget proposal defers planned funding increases to the CSU and the UC systems. This funding was part of multi-year investments established through agreements between the administration and the CSU and UC systems in 2022. These agreements (also known as compacts) outline major goals, including increasing access, improving student success and advancing equity, increasing affordability, improving collaboration among systems of higher education, and supporting workforce preparedness.

For the CSU, the governor’s budget:

  • Defers $240 million General Fund dollars to 2025-26. These dollars were meant to fulfill multi-year funding increases as part of the compacts in 2024-25.

For the UC, the spending plan:

  • Defers $228 million General Fund dollars from 2024-25 to 2025-26 as part of the multi-year compacts. 
  • Defers $31 million General Fund dollars from 2024-25 to 2025-26 to support the UC in increasing the number of resident undergraduate students.

Other higher education proposals in the spending plan include:

  • Eliminating a total of $494 million in General Fund dollars for the California Student Housing Revolving Loan Fund Program . The proposal pulls back $194 million in 2023-24 and $300 million in 2024-25. This program provides interest-free loans to campuses for new student housing projects (see Housing section).

Spending Plan Fails to Propose Solutions to Fund Cal Grant Reform

The governor’s budget does not propose any budgetary actions to ensure Cal Grant reform is funded in 2024. The Cal Grant is California’s financial aid program for low-income students pursuing postsecondary education in the state. Grants made available through this program do not need to be paid back. These grants support students by providing financial assistance so they can afford the costs of college attendance, including meeting their basic needs such as housing, food, transportation, and child care. Students pursuing postsecondary education confront significant hardship to afford basic necessities, and are often forced to make difficult decisions that impact their college experience and degree completion. The 2022 budget included a plan to reform the Cal Grant program. This reform would reach thousands of new students who were previously not eligible and would also allow more students to qualify for CalFresh, freeing up resources for institutions to support students with other non-tuition costs. However, the plan will only be implemented if sufficient General Fund dollars are available in spring of 2024. The proposed spending plan does not include any actions, such as raising revenues, to fulfill this commitment. Meeting this commitment can ensure more students have the financial means to meet their basic needs and be able to complete their chosen educational programs. 

The proposed spending plan also eliminates a planned one-time increase of $289 million in 2024-25 for the Middle Class Scholarship (MCS) that was included in the 2023-24 budget. The MCS provides awards to students to help them cover the total cost of attendance at the University of California and the California State University systems.

Secure your early bird ticket!

Join us in Sacramento on April 16, 2024, for engaging sessions, workshops, and networking opportunities with fellow changemakers, inspiring speakers, and much more.

Justice System

Governor Does Not Propose Additional Prison Closures

More than 94,000 adults who have been convicted of a felony offense are serving their sentences at the state level, down from a peak of 173,600 in 2007. This sizable drop in incarceration is largely due to justice system reforms adopted since the late 2000s, including Proposition 47, which California voters passed with nearly 60% support in 2014. Despite this substantial progress, American Indian, Black, and Latinx Californians are disproportionately represented in state prisons — a racial disparity that reflects racist practices in the justice system as well as structural disadvantages faced by communities of color.

Among all incarcerated adults, most — about 91,000 — are housed in state prisons designed to hold roughly 75,500 people. This overcrowding equals 120.4% of the prison system’s “design capacity,” which is below the prison population cap — 137.5% of design capacity — established by a 2009 federal court order. California also houses nearly 3,100 people in facilities that are not subject to the cap, including fire camps, in-state “contract beds,” and community-based facilities that provide rehabilitative services.

In recent years, California embarked on a process of downsizing its costly and sprawling state prison system. Budget documents indicate that:

Despite these initial steps toward shrinking the prison system, California can do more — yet the governor’s proposed budget fails to chart a path toward additional prison closures. Research from the nonpartisan Legislative Analyst’s Office indicates the state can safely close up to five additional state prisons. The ongoing savings from closing five more prisons — around $1 billion per year — could be redirected to help people successfully transition back to their communities and boost services to support crime survivors, reduce poverty, increase housing stability, address substance use and mental health issues, and enhance the safety and well-being of our communities.

Governor Maintains Funding and Proposes Tougher Penalties to Tackle Retail Theft

Retail theft is defined in several ways in California law:

Retail theft increased following the isolation and social breakdown caused by the COVID-19 pandemic. However, while statewide shoplifting rates remain below their pre-pandemic (2019) levels, commercial burglary and robbery rates continued to exceed their 2019 levels as of 2022, the most recent year for which statewide data are available.

The governor proposes to provide $119 million in 2024-25 to address organized retail theft and other crimes. This is the same amount of General Fund support provided in the current fiscal year (2023-24) despite the large budget shortfall the state is facing.

  • Most of this funding would support grant programs for local law enforcement agencies ($85 million) and district attorneys ($10 million). In both cases, these funds would lapse in 2025-26 under the governor’s proposal.
  • The remaining $24 million proposed for 2024-25 would support state-level task forces and prosecution teams — all of which the governor proposes to make permanent starting in 2025-26, with ongoing annual funding of roughly $23 million.

In addition, the governor announced a set of proposals that aim to reduce certain property crimes. Specifically, the governor proposes to:

The governor’s framework wisely steers clear of modifying Prop. 47 — a key justice system reform that has significantly reduced prison overcrowding and reallocated hundreds of millions of dollars to trauma recovery services for crime survivors, programs for vulnerable youth, and local public safety programs that have reduced recidivism (see Prop. 47 Investments section.) However, the governor’s largely punitive approach to addressing certain types of property crime would further criminalize poverty, increase incarceration, and boost jail and prison costs, while doing too little to advance “upstream” solutions that can prevent crime from happening in the first place.

Budget Estimates Proposition 47 Savings of $88 Million in 2024-25

Overwhelmingly approved by voters in 2014, Prop. 47 reduced penalties for six nonviolent drug and property crimes from felonies to misdemeanors. Consequently, state prison generally is no longer a sentencing option for these crimes. Instead, individuals convicted of a Prop. 47 offense serve their sentence in county jail and/or receive probation.

By decreasing state-level incarceration, Prop. 47 reduced the state cost of the prison system relative to the expected cost if Prop. 47 had not been approved. The state Department of Finance is required to annually calculate these savings, which are deposited into the Safe Neighborhoods and Schools Fund and allocated as follows:

  • 65% for mental health services, substance use treatment, and diversion programs for individuals who have been arrested, charged, or convicted of crimes.
  • 25% for K-12 public school programs to support vulnerable youth.
  • 10% to trauma recovery services for crime victims.

Through 2023-24, Prop. 47 has generated roughly $720 million that has been invested in local programs that support healing and keep communities safe.

The governor estimates net state General Fund savings of $87.8 million in 2024-25 due to reduced incarceration stemming from Prop. 47. These additional savings will bring Prop. 47’s total investment in local communities to more than $800 million since this funding was implemented in 2016-17.

Workforce & Climate Change

Governor Seeks Changes to Health Care Worker Minimum Wages

Last year, the Governor signed into law Senate Bill 525 (Durazo, Chapter 890, Statutes of 2023) to gradually raise the statewide minimum wage for certain health care workers. A Berkeley Labor Center report found that this legislation would significantly boost the earnings of low-paid health care workers, the vast majority of whom are women and people of color and the majority of whom are the primary earners for their families. The proposed budget notes that the Administration is hoping the Legislature will take early action in January to make changes to this law, including adding an annual “trigger” to make the wage increases contingent upon General Fund availability. Additionally, Assembly budget documents point out that the proposed budget does not score any costs associated with SB 525 in 2024-25, implying that the Administration is assuming that the law does not go into effect during the budget year.

Governor Proposes Delay in Health Care Workforce Investments

Access to health care services is important for everyone’s health and well-being. The state’s workforce must meet the needs of Californians to achieve equitable access to timely and culturally competent health services. While state policymakers have made considerable investments in recent years to bolster the health workforce, investments in various health workforce areas still fall short, and the Administration proposes delaying spending on several investments this year. Specifically, the proposed budget delays until 2025-26:

  • $140.1 million General Fund spending for the nursing and social work initiatives administered by the Department of Health Care Access and Information; and
  • $189.4 million Mental Health Services Act Fund spending for the social work initiative, addiction psychiatry fellowships, university and college grants for behavioral health professionals, expanding Master of Social Work slots, and the local psychiatry behavioral health program overseen by the Health Care Access and Information Department.

Governor Proposes Cuts and Delays to Workforce Programs

The Administration proposes to delay or reduce spending on a wide range of workforce development programs to help address the budget problem. Specifically, the proposed budget delays $734.5 million (total funds) from 2023-24 and prior years to 2024-25 or beyond and cuts approximately $100 million General Fund. In addition, the budget proposes to borrow $125 million from the Labor and Workforce Development Fund that is “not currently projected to be used for operational or programmatic purposes” in order to offset General Fund spending.

Proposed spending delays include:

  • $300 million General Fund for California Jobs First (formerly called the Community Economic Resilience Fund);
  • $189.4 million Mental Health Services Act Fund and $140.1 million General Fund for various health care workforce investments (see Health Care Workforce section); 
  • $40 million General Fund for the Apprenticeship Innovation Fund at the Department of Industrial Relations;
  • $40 million General Fund for a Goods Movement Workforce Training Facility in Southern California; and
  • $25 million General Fund for the California Youth Apprenticeship Program at the Department of Industrial Relations.

Proposed reductions in spending include:

  • $45 million General Fund in 2023-24 for the High Road Training Partnerships program at the California Workforce Development Board;
  • $15 million General Fund for the Low Carbon Economy Grant Program at the California Workforce Development Board;
  • $10 million General Fund for the Displaced Oil and Gas Worker Pilot Fund at the Employment Development Department;
  • $10 million General Fund for the Emergency Medical Technician training program at the Employment Development Department; and
  • $5 million General Fund ongoing for the Women in Construction Unit at the Department of Industrial Relations.

Proposed Budget Reduces or Delays Funds for a Range of Climate Investments

Climate change poses a threat to all Californians, but the effects of climate change are often felt acutely by California’s low-income communities and communities of color, which have experienced segregation, underinvestment, and neglect, making them more vulnerable to climate catastrophes. The 2021 and 2022 budgets allocated substantial one-time resources to climate change resiliency projects, much of which was intended to be spent across several years.

To address the budget problem, the governor is proposing $2.9 billion in reductions of previously approved General Fund climate investments and $1.9 billion in General Fund expenditure delays, as well as $1.8 billion in shifts from the General Fund to other funds, mainly the Greenhouse Gas Reduction Fund, which is funded by cap-and-trade auction proceeds.

Significant reductions in the governor’s proposal include:

  • $796.8 million for various drought and flood resilience projects;
  • $475 million for the Climate Innovation Program; 
  • $452 million for coastal protection and adaptation programs;
  • $419 million in clean energy projects;
  • $200 million for the Active Transportation Program (meant to encourage more biking and walking);
  • $100.7 million for various wildfire and forest resilience projects;
  • $89.8 million for programs to advance climate resilience in low-income and underserved communities;
  • $79.1 million for sustainable agriculture programs, including the $33.2 million reversion to the California Nutrition Incentive Program (see Food Assistance section);
  • $40.1 million for the Extreme Heat and Community Resilience Program;
  • $38.1 million for various Zero-Emission Vehicle programs;
  • $25 million in climate-related workforce programs, including the Low Carbon Economy Grant Program and the Displaced Oil and Gas Worker Pilot Fund (see Workforce section); and
  • $15 million for “nature-based solutions” to climate change.

Significant spending delays proposed by the governor include:

  • $1 billion of Transit and Intercity Rail Capital Program formula grants from 2024-25 to 2025-26; 
  • $600 million Greenhouse Gas Reduction Fund dollars for Zero-Emission Vehicle programs from 2024-25 to 2027-28;
  • $505 million across various clean energy programs; and
  • $100 million for various drought and flood resilience projects.

Despite the reductions and delays, the proposed budget does include $159.1 million in new investments, including $93.9 million one-time General Fund for various flood safety projects and $65.2 million General Fund for Salton Sea restoration efforts.

Don't miss an update.

Join our email list!


Why We Focus on the State Budget

Every year, California’s governor and Legislature adopt a state budget that provides a framework and funding for critical public services and systems — from child care and health care to housing and transportation to colleges and K-12 schools.

But the state budget is about more than dollars and cents. The budget expresses our values as well as our priorities for Californians and as a state. At its best, the budget should reflect our collective efforts to expand economic opportunities, promote well-being, and improve the lives of Californians who are denied the chance to share in our state’s wealth and who deserve the dignity and support to lead thriving lives.

State budget choices have an impact on all Californians. These decisions affect the quality of our schools and health care, the cost of a college education, families’ access to affordable child care and housing, the availability of services and financial support to help older adults age in place, and so much more.

Because the state budget touches so many services and our everyday lives, it is critical for Californians to understand and participate in the annual budget process to ensure that state leaders are making the strategic choices needed to allow every Californian — from different races, backgrounds, and places — to thrive and share in our state’s economic and social life.

This report sheds light on the state budget and the budget process with the goal of giving Californians the tools they need to effectively engage decision makers and advocate for fair and just policy choices.

Key Takeaways

The Bottom Line

  1. The state spending plan is about more than dollars and cents.
    • Crafting the budget provides an opportunity for Californians to express our values and priorities as a state.
  2. The state Constitution establishes the rules of the budget process.
    • Among other things, these rules allow lawmakers to approve spending with a simple majority vote, but require a two-thirds vote to increase taxes. Voters periodically revise the budget process by approving constitutional amendments.
  3. The governor has the lead role in the budget process.
    • Proposing a state budget for the upcoming fiscal year gives the governor the first word in each year’s budget deliberations.
    • The May Revision gives the governor another opportunity to set the budget and policy agenda for the state.
    • Veto power generally gives the governor the last word.
  4. The Legislature reviews and revises the governor’s proposals.
    • Lawmakers can alter the governor’s proposals and advance their own initiatives as they craft their version of the budget prior to negotiating an agreement with the governor.
  5. Budget decisions are made throughout the year.
    • The public has various opportunities for input during the budget process.
    • This includes writing letters of support or opposition, testifying at legislative hearings, and meeting with officials from the governor’s administration as well as with legislators and members of their staff.
    • In short, Californians have ample opportunity to stay engaged and involved in the budget process year-round.

Key Facts About California’s State Budget

The State Budget = State Funds + Federal Funds

Three Kinds of State Funds

Three kinds of state funds account for over two-thirds (68.4%) of California’s $454.7 billion budget for 2023-24, the fiscal year that began on July 1, 2023. Specifically:

  1. General Fund — The state General Fund accounts for revenues that are not designated for a specific purpose. Most state support for education, health and human services, and state prisons comes from the General Fund.
  2. Special Funds — Over 500 state special funds account for taxes, fees, and licenses that are designated for a specific purpose.
  3. Bond Funds — State bond funds account for the receipt and disbursement of general obligation (GO) bond proceeds.

Federal funds comprise the rest (31.6%) of the state’s 2023-24 budget.

The State Budget is a Local Budget

Dollars spent through the state budget go to individuals, communities, and institutions across California. Under the enacted 2023-24 state budget:

  • More than three-quarters of total spending (78.7%) flows as “local assistance” to K-12 public schools, community colleges, families enrolled in the CalWORKs welfare-to-work program, and other essential state services and systems that are operated locally.
  • Nearly one-fifth of total spending (19.6%) goes to 23 California State University campuses, 10 University of California campuses, over 30 state prisons, and other recipients of “state operations” dollars.
  • Less than 2% of total spending flows as “capital outlay” dollars, supporting infrastructure projects across California. (Local assistance and state operations dollars also fund infrastructure.)

State Funds Primarily Support Health and Human Services or Education

Under the enacted 2023-24 state budget:

  • 7 in 10 General Fund and special fund dollars support three categories of spending: health and human services (37.2%), K-12 education (25.4%), and higher education (7.4%).
  • 6% of General Fund and special fund dollars support corrections, primarily the state prison system.
  • The balance of these dollars supports other essential services (such as transportation and environmental protection) and institutions (such as the state’s court system).

Federal Funds Primarily Support Health and Human Services

Under the enacted 2023-24 state budget:

  • Three-quarters of federal dollars (74.6%) support health and human services programs.
  • 6% of federal dollars go to transportation programs.
  • The balance of federal dollars supports other essential services, including labor and workforce development, K-12 education, and higher education.

The State Budget is a Different Kind of Bill

Bills change state law, such as by creating programs, modifying eligibility for services, or raising or lowering taxes.

  • Most legislation moves through the Legislature’s policy bill process, which includes review by policy and appropriations committees.

The state budget is a bill. But unlike other bills, the “budget bill”:

  • Provides authority to spend money across an array of public services and systems for a single year.
  • Moves through the Legislature’s budget committees on its own timeline.
  • Moves with other bills that are needed to implement the policies assumed in the budget. These bills are known as “trailer bills.”

Terms & Definitions


The Constitutional Framework

The State Constitution Establishes the Rules of the Budget Process

The governor and legislators craft the state’s annual spending plan according to rules outlined in the state Constitution.

California voters periodically revise these rules by approving constitutional amendments that appear on the statewide ballot.

  • Proposals to amend the state Constitution can be placed on the ballot through a citizens’ initiative or by the Legislature.
  • A constitutional amendment takes effect if approved by a simple majority of voters.

Three Key Budget Deadlines

Two in the State Constitution (January 10 and June 15), One in State Law (May 14)



The governor must propose a budget for the upcoming fiscal year on or before January 10. The budget must be balanced: Estimated revenues (as determined by the governor) must meet or exceed the governor’s proposed spending.


The governor must release the May Revision on or before May 14.


The Legislature must pass a budget bill for the upcoming fiscal year by midnight on June 15. The budget bill must be balanced: Estimated General Fund revenues (as set Ωforth in the budget bill passed by the Legislature) must meet or exceed General Fund spending.

Proposition 25: Simple Majority Vote for Budget Bills and Trailer Bills

The budget package generally may be passed by a simple majority vote of each house of the Legislature.

  • Prop. 25 of 2010 allows lawmakers to pass, by a simple majority vote, budget bills as well as trailer bills that may take effect as soon as the governor signs them.
  • Under the rules of Prop. 25, trailer bills must (1) be listed in the budget bill and (2) contain an appropriation of any amount.
  • Even with Prop. 25, some types of trailer bills that could be included in a budget package will require a supermajority — generally two-thirds — vote of each house. This includes, for example, bills that would raise taxes or amend a state law that was approved by voters via a ballot initiative. However, most trailer bills in the budget package will need only a simple majority vote to pass.

Proposition 25: Penalties for a Late Budget

Lawmakers face penalties if they fail to pass the budget bill on or before June 15.

  • Prop. 25 requires lawmakers to permanently forfeit both their pay and their reimbursement for travel and living expenses for each day after June 15 that the budget bill is not passed and sent to the governor.
  • These penalties do not apply to budget-related bills, which do not have to be passed on or before June 15.

Proposition 26: Supermajority Vote for Tax Increases

Any tax increase requires a two-thirds vote of each house of the Legislature.

  • Under the state Constitution, “any change in state statute which results in any taxpayer paying a higher tax” requires a two-thirds vote of each house.
  • This standard was imposed by Prop. 26 of 2010. This measure expanded the definition of a tax increase and thus the scope of the two-thirds vote requirement, which was originally imposed by Prop. 13 of 1978.
  • Prior to Prop. 26, only bills changing state taxes “for the purpose of increasing revenues” required a two-thirds vote. Bills that increased some taxes but reduced others by an equal or larger amount could be passed by a simple majority vote of each house.

Proposition 26: Supermajority Vote for Tax Increases

Prop. 26 of 2010 also expanded the definition of a tax to include some fees.

  • Prior to Prop. 26, lawmakers could create or increase fees by a simple majority vote. These majority-vote fees included regulatory fees intended to address health, environmental, or other problems caused by various products, such as alcohol, oil, or hazardous materials.
  • Prop. 26 reclassified regulatory and certain other fees as taxes. As a result, a two-thirds vote of each house of the Legislature is now required for many charges that previously were considered fees and could be passed by a simple majority vote.

Additional Supermajority Vote Requirements

The state Constitution requires a two-thirds vote of each house of the Legislature in
order to:

  • Appropriate money from the General Fund, except for appropriations that are for public schools or that are included in the budget bill or in trailer bills.
  • Pass bills that take effect immediately (urgency statutes), except for the budget bill and trailer bills.
  • Place constitutional amendments or general obligation bond measures before the voters.
  • Override the governor’s veto of a bill or an item of appropriation.

A Bill Must Be Published for at Least 72 Hours Before the Legislature Can Act On It

Proposition 54 of 2016 requires bills to be distributed to legislators and published on the Internet, in their final form, at least 72 hours before being passed by the Legislature.

This rule applies to all bills, including the budget bill and other legislation included in the budget package.

This mandatory review period can be waived for a bill if:

  • The governor declares an emergency in response to a disaster or extreme peril, and
  • Two-thirds of legislators in the house considering the bill vote to waive the review period.

Proposition 98: A Funding Guarantee for K-12 Schools and Community Colleges

Prop. 98 of 1988 guarantees a minimum annual level of funding for K-14 education.

  • The amount of the guarantee is calculated each year based on one of three tests that apply under varying fiscal and economic conditions. Two of these tests include adjustments for changes in statewide K-12 attendance. Prop. 98 funding comes from the state General Fund and local property tax revenues.
  • The Legislature can suspend the guarantee for a single year by a two-thirds vote of each house and provide less funding. Following a suspension, the state must increase Prop. 98 funding over time to the level that it would have reached absent the suspension.
  • While the Legislature can provide more funding than Prop. 98 requires, the guarantee has generally served as a maximum funding level.

Proposition 2: Saving for a Rainy Day, Paying down Debt

Prop. 2 of 2014 revised the rules that apply to the Budget Stabilization Account (BSA) — the state’s constitutional rainy day fund — and also established a new requirement to pay down state budgetary debt.

  • The state is required to set aside 1.5% of General Fund revenues each year, plus additional dollars in years when tax revenues from capital gains are particularly strong.
  • Until 2029-30, half of the revenues go into the BSA and the other half must be used to pay down state budgetary debt, which includes unfunded pension liabilities. Starting in 2030-31, the entire annual transfer goes into the BSA.
  • State policymakers may suspend or reduce the BSA deposit and withdraw funds from the reserve, but only under limited circumstances that qualify as a “budget emergency.”

Proposition 2: A Budget Reserve for K-12 Education

Prop. 2 of 2014 also created a state budget reserve for K-12 schools and community colleges called the Public School System Stabilization Account (PSSSA).

  • Deposits come from state capital gains tax revenues in years when those revenues are particularly strong.
  • However, various conditions must be met before these dollars could be transferred to the PSSSA. For example, transfers could occur only in so-called “Test 1” years under Prop. 98, which have been rare.

Proposition 55: Potential New Funding for Medi-Cal from a Tax on the Wealthiest Californians

Prop. 55 of 2016 extends, through 2030, personal income tax rate increases on very high-income Californians and establishes a formula to boost funding for Medi-Cal, which provides health care services to Californians with low incomes.

  • Starting in 2018-19, General Fund revenues — including those raised by Prop. 55 — must first be used to fund (1) the annual Prop. 98 guarantee for K-12 schools and community colleges and (2) the cost of other services that were authorized as of January 1, 2016, as adjusted for population changes, federal mandates, and other factors.
  • If any Prop. 55 revenues remain after meeting these required expenditures, MediCal would receive 50% of this excess, up to a maximum of $2 billion in any fiscal year.
  • Prop. 55 has not yet resulted in any additional funding for Medi-Cal.

State Appropriations Limit (SAL): A Cap on Spending

Appropriations are subject to a limit established by Prop. 4 of 1979, as modified by later initiatives. This spending cap is known as the Gann Limit.

  • The SAL limits the amount of state tax proceeds that can be appropriated each year. This limit is adjusted annually for changes in population and per capita personal income.
  • Some appropriations from tax proceeds do not count toward the limit, including debt service and spending that is needed to comply with court or federal mandates.
  • Revenues that exceed the SAL over a two-year period are divided equally between Prop. 98 spending and taxpayer rebates. The state last exceeded the SAL in 2020-21 (but did not do so in the prior year).

State Mandates: Pay for Them or Suspend Them

The state must pay for or suspend mandates that it imposes on local
governments.

  • Prop. 4 of 1979 requires the state to reimburse local governments for costs related to a new program or a higher level of service that is mandated by the state.
  • Prop. 1A of 2004 expanded the definition of a mandate to include the transfer of
    financial responsibility from the state to local governments.
  • Prop. 1A also requires the state to suspend a mandate in any year in which local
    governments’ costs are not fully reimbursed.

What do the Governor and the Legislature Do?

The Governor

Approves, modifies, or rejects spending proposals prepared by state departments and agencies through an internal process coordinated by the DOF.

Proposes a spending plan for the state each January, introduced as the budget bill in the Legislature.

Updates and revises the proposed budget each May (the “May Revision”).

Signs or vetoes the bills included in the budget package.

Can veto all or part of individual appropriations (line items), but cannot increase any appropriations above the level approved by the Legislature.

The Legislature

Approves, modifies, or rejects the governor’s proposals.

Can add new spending or make other changes that substantially revise the governor’s proposals.

Needs a simple majority vote of each house to pass budget bills and most trailer bills.

Needs a two-thirds vote to pass certain other bills that may be part of the budget package, such as bills that increase taxes or propose constitutional amendments.

Needs a two-thirds vote of each house to override the governor’s veto of a bill or an appropriation.


What Happens When?

The State Budget Timeline

The state budget process is cyclical. Decisions are made throughout the year.


State Budget Resources

  • Department of Finance: The governor’s budget proposals and related documents (www.dof.ca.gov).
  • Legislative Analyst’s Office: Budget and policy analyses, budget recommendations, and historical budget data (www.lao.ca.gov).
  • Legislative Counsel: Bills and bill analyses, a free bill-tracking service, the state codes, and the state Constitution (www.leginfo.legislature.ca.gov).
  • State Assembly and Senate: Committee agendas and other publications, floor session and committee schedules, the annual legislative calendar, and live audio streaming of legislative proceedings (www.assembly.ca.gov and www.senate.ca.gov).

Don't miss an update.

Join our email list!