March 2, 2017 - Under the State Constitution, state tax revenues in excess of the Prop 4 (1979) state appropriations limit, or Gann Limit, must be split between taxpayer rebates and additional school spending. The Governor now proposes a new calculation methodology that creates $22 billion in additional state spending capacity. We find that the Governor's proposal violates the spirit of Proposition 4 and—in our view—is highly vulnerable to legal challenges. We recommend that the Legislature reject the proposal and offer options for legislative consideration.
April 21, 2021 - This report: (1) describes how appropriations limits work for the state, school districts, and local governments in California; (2) explains why the limit is a constraint for state government; and (3) concludes with a variety of short- and long-term policy options—both of which we think the Legislature will need to take—in response to the issue.
September 30, 2022 - This post describes the legislative and administrative decisions regarding the State Appropriations Limit (SAL) in the 2022‑23 budget process.
August 30, 2021 - This post describes the legislative and administrative decisions regarding the State Appropriations Limit (SAL) in the 2021‑22 budget process.
December 1, 1979 -
On November 6, 1979, California voters overwhelmingly approved Proposition 4, the "Spirit of 13" Initiative sponsored by Paul Gann. The proposition, which places Article XIIIB in the California Constitution, limits the growth in appropriations of both state and local governments to changes in the cost of living and population in order to control the spending levels established by California governments. Proposition 4 also attempts both to clarify the fiscal roles played by the various branches (legislative, judicial and executive) and levels (federal, state and local) of government, and to insure that any surplus funds are promptly returned to the people.
Proposition 4 is a sweeping measure which will dramatically affect both the state government and the vast majority of California's 6,600 local governments. Precisely how it will affect these governments, though, is not clear because the measure raises many questions and problems regarding how it is to be interpreted.
April 12, 2000 - California's state appropriations limit (SAL)--which grows annually by a population and cost-of-living factor--places an "upper bound" each year on the amount of monies that can be spent from state tax proceeds. The SAL has not been a constraint throughout the 1990s. It could again become one if current revenue trends continue.
May 16, 2022 - On May 13, 2022, Governor Newsom presented a revised state budget proposal to the Legislature. (This annual proposed revised budget is called the “May Revision.”) In this brief, we provide a summary of the Governor's revised budget, focusing on the overall condition and structure of the state General Fund—the budget's main operating account. In the coming days, we will analyze the plan in more detail and provide additional comments in hearing testimony and online. The information presented in this brief is based on our best understanding of the administration's proposals as of 11:00 AM, May 14, 2022. In many areas of the budget, this understanding will continue to evolve as we receive more information. We only plan to update this brief for very significant changes (that is, those greater than $500 million).
Update (5/20/22): Updated to reflect information about state appropriations limit (SAL) excluded spending and other budget proposals.
March 30, 2022 - This brief estimates the condition of the budget over the multiyear taking state appropriations limit requirements into consideration.
January 13, 2022 - On January 10, 2022, Governor Newsom presented his proposed state budget to the Legislature. In this report, we provide a brief summary of the proposed budget based on our initial review. In the coming weeks, we will analyze the plan in more detail and release several additional budget analyses.
Update (1/21/22): Includes a corrected estimate of Governor’s Budget proposals that are excludable under the State Appropriations Limit (SAL).
January 13, 2017 - On January 10, 2017, the Governor presented his Proposition 98 budget package to the Legislature. In this post, we provide an overview and initial assessment of the package.
May 17, 2021 - On May 14, 2021, Governor Newsom presented a revised state budget proposal to the Legislature. (This annual proposed revised budget is called the “May Revision.”) In this post, we provide a summary of the Governor’s revised budget, focusing on the overall condition and structure of the state General Fund—the budget’s main operating account. In the coming days, we will analyze the plan in more detail and provide additional comments in hearing testimony and online.
November 16, 2016 - Under our current projections, assuming no changes in existing state and federal policies, we estimate the state will end the 2017-18 fiscal year with $11.5 billion in total reserves. This includes $8.7 billion in required reserves, which must be deposited into the rainy day fund, and $2.8 billion in discretionary reserves, which the Legislature can appropriate for any purpose. These reserve levels reflect the continued progress California has made in improving its budget situation. Our estimates include the effects of statewide ballot measures that were approved on November 8. The condition of the state budget depends on many volatile and unpredictable factors. This uncertainty is present in the near term and becomes greater in each subsequent year. We discuss two illustrative economic scenarios for the fiscal years after 2017-18. Under a mild recession scenario, the state would have enough reserves to cover its operating deficits through 2020-21. This means, under our assumptions, the state could weather a mild recession without cutting spending or raising taxes. However, this conclusion assumes that the state does not make any changes to its current policies and programs in any year during the outlook. This outlook also assumes no changes in federal policy, even though the recent election results suggest some such changes are now likely. State or federal policy changes could have a significant impact on the state's bottom line.