The 2025-26 Budget

Estimated State Savings From Proposition 47

Background

Proposition 47 (2014) Reduced Punishment for Certain Lower-Level Drug and Property Crimes. Proposition 47, which was approved by the voters in November 2014, reduced certain nonserious and nonviolent drug possession and property crimes from wobblers or felonies to misdemeanors. (Wobblers are crimes that can be charged as either a felony or a misdemeanor.) For example, prior to Proposition 47, possession for personal use of most illegal drugs (such as cocaine or heroin) was a misdemeanor, a wobbler, or a felony—depending on the amount and type of drug. Proposition 47 specified that such crimes would always be misdemeanors. In addition, Proposition 47 specified that all thefts of property worth $950 or less are misdemeanors. Previously, some of these crimes could be punished as felonies depending on the type of property taken or if the defendant had certain previous theft-related convictions. The measure limited these reduced penalties to people who have not committed certain severe crimes, such as murder, and are not required to register as sex offenders.

Proposition 47 Requires State Savings From Its Punishment Reductions to Be Spent on Specified Programs. By reducing the size of the state’s prison population, Proposition 47 created state savings. Proposition 47 requires the Director of the Department of Finance (DOF) to annually estimate these savings and the State Controller to transfer that amount from the General Fund into a state fund created by the measure—the Safe Neighborhoods and Schools Fund (SNSF). Proposition 47 further requires that monies in the SNSF be allocated as follows: (1) 65 percent to the Board of State and Community Corrections for mental health and substance use treatment, (2) 25 percent to the California Department of Education for school truancy and drop-out prevention, and (3) 10 percent to the California Victim Compensation Board for trauma recovery services.

Administration Estimates Current Year Savings and Projects Future Savings Biannually. As part of the Governor’s January budget proposal each year, DOF (1) estimates the state savings resulting from Proposition 47 in the current year, which is then reflected in the budget as a transfer to the SNSF in the budget year and (2) projects the estimated state savings that will occur in future years. DOF then modifies these estimates based on updated data as part of the May Revision.

Proposition 36 (2024) Is Expected to Reduce the State Savings Attributable to Proposition 47. Proposition 36, approved by the voters in November 2024, (1) created a new court process called a “treatment-mandated felony” for certain people who possess illegal drugs and (2) increased punishment for various drug and theft crimes. In some cases, these changes undo punishment reductions that were made by Proposition 47. By undoing parts of Proposition 47, Proposition 36 reduces the state savings attributable to Proposition 47.

Governor’s Proposal

Estimated Savings of $88.3 Million in 2024-25 to Be Transferred to SNSF in 2025-26. The Governor’s budget assumes that an estimated $88.3 million in savings will accrue to the state in 2024-25 and be transferred to the SNSF in 2025-26. These savings are primarily associated with an estimate that the prison population will be 3,464 lower than otherwise in 2024-25 due to Proposition 47. These estimates represent a $6.4 million (7 percent) and a 332 person (9 percent) decline relative to the 2023-24 estimates, as shown in Figure 1. These declines primarily reflect the administration’s estimate of the impact of Proposition 36—which is in effect for the second half of 2024-25.

Projected Savings of $30.5 Million in 2025-26 and $24.7 Million in 2026-27. The administration projects Proposition 47 savings to decline to $30.5 million in 2025-26 (which will be the first full fiscal year with Proposition 36 in effect) and $24.7 million in 2026-27—representing an overall $70 million (74 percent) decline relative to 2023-24. These declines are driven by the administration’s estimates that the prison population reduction attributable to Proposition 47 will decline by 3,357 (88 percent) over the period. This primarily reflects the administration’s projections that Proposition 36 will significantly reduce the impact of Proposition 47 on the prison population.

Assessment

Effect of Proposition 36 on Proposition 47 Prison Population Impact Likely Overestimated… The administration did not provide detailed backup showing its methodology to estimate the impact of Proposition 36 on the prison population. However, based on discussions, it is our understanding that the administration used the number of people that were admitted to prison for drug possession and certain lower level theft crimes in 2013-14, the year before Proposition 47 reduced prison admissions for these crimes. The department then assumed that the same number of people would again be admitted to state prison under Proposition 36 and would remain in state prison for 11 months on average. In other words, the administration assumes that Proposition 36 will essentially reverse Proposition 47. We find this assumption causes the administration’s methodology to overestimate the effect of Proposition 36 in two ways:

• Does Not Account for Key Features of Treatment-Mandated Felony. The administration’s estimate assumes that the same number of people who were committed to prison for drug possession prior to Proposition 47 would again be committed to prison under Proposition 36. However, this is not plausible for two primary reasons. First, Proposition 36 only allows people who possess certain drugs to be charged with a treatment mandated felony if they have at least two past drug convictions. Whereas, people who possessed drugs prior to Proposition 47 could be charged with a felony even without any prior convictions. Second, it requires that people are generally given the option of treatment in lieu of incarceration in county jail or state prison. Accordingly, the number of people that reach prison under Proposition 36 for drug possession is likely to be substantially smaller than the number of people that were sentenced to prison for drug possession prior to the passage of Proposition 47.

• Includes Crimes That Were Not Affected by Proposition 36. The methodology counts 2013-14 prison admissions for people who were convicted of receiving stolen property. However, this crime was generally not affected by Proposition 36. Similarly, the estimate appears to include all admissions for the lower level theft crimes affected by Proposition 47. However, Proposition 36 only affects a subset of those cases, such as by allowing multiple acts of misdemeanor theft to be prosecuted as a felony if the combined dollar amount exceeds $950.

…Causing Proposition 47 Savings to Be Likely Underestimated. By overestimating the impact of Proposition 36, the administration underestimates the remaining prison population reduction still attributable to Proposition 47. This means that the $88.3 million in state savings estimated to occur in 2024-25 and reflected in the 2025-26 Governor’s budget as a transfer from the General Fund to the SNSF is likely underestimated. We estimate that the 2025-26 transfer could be underestimated by around a few million dollars. The projected 2026-27 and subsequent transfers could be underestimated by significantly more—potentially in the tens of millions annually.

Recommendation

Direct Administration to Address Flaws in Proposition 47 Savings Estimate in the May Revision. We recommend that the Legislature direct the administration in spring budget hearings to address the flaws with its methodology for estimating the savings attributable to Proposition 47 in the May Revision. We recognize that any estimates will be subject to significant uncertainty due to the limited amount of actual data since the enactment of Proposition 36. However, the flaws we identify above are conceptual problems that can be improved through reasonable assumptions in areas where actual data is lacking. We will continue to monitor Proposition 36 implementation and the prison population and make recommendations based on the updated information available at the May Revision, including the administration’s revised estimates.