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.
September 30, 2022 - This post describes the legislative and administrative decisions regarding the State Appropriations Limit (SAL) in the 2022‑23 budget process.
April 6, 2018 - The State Constitution limits how much the Legislature can spend from tax revenues. The administration’s 2018-19 budget proposal reflects increased “room” under this limit—essentially spending capacity—of roughly $6 billion over June 2017 levels. Notably, the administration revised its approach for estimating costs to comply with federal and court mandates, which are excluded from the limit. We find that the mandates approach is inconsistent with the implementation of the spending limit because the administration reflects costs from any mandate whereas only costs resulting from mandates imposed after 1978-79 should be excluded from the limit. We recommend the Legislature direct the administration to revise its approach going forward to be consistent with the limit, which conceivably could increase or decrease room under the limit. In addition, we make several additional recommendations that would reduce room under the limit by several billion dollars.
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.
March 30, 2022 - This brief estimates the condition of the budget over the multiyear taking state appropriations limit requirements into consideration.
August 30, 2021 - This post describes the legislative and administrative decisions regarding the State Appropriations Limit (SAL) in the 2021‑22 budget process.
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.
November 18, 2020 - This report provides our fiscal outlook for schools and community colleges. State budgeting for schools and the California Community Colleges is governed largely by Proposition 98. The measure establishes a minimum funding requirement for K‑14 education commonly known as the minimum guarantee. This report provides our estimate of the minimum guarantee for the upcoming budget cycle. (The 2021‑22 Budget: California’s Fiscal Outlook contains an abbreviated version of our Proposition 98 outlook, along with the outlook for other major programs in the state budget.)
May 14, 2018 - In this report, we analyze the 2018-19 May Revision education proposals. We first provide an overview of Proposition 98 funding and then focus on the Governor’s major proposals for K‑12 education, child care and preschool, community colleges, universities, and student financial aid. In the pages that follow, we offer many specific recommendations for the Legislature to consider. Our package of recommendations includes adopting some proposals, modifying others in certain ways, rejecting others but inviting better proposals next year, and rejecting some proposals in their entirety.
February 4, 2022 - This post provides our office’s initial analysis on and comments about the Governor’s proposals to address state appropriations limit (SAL) requirements in the 2022-23 Governor’s budget.
November 20, 2019 - This report examines how the Proposition 98 minimum guarantee might change over the coming years. The report has five parts. First, we explain the formulas that determine the minimum guarantee. We then explain how our estimates of Proposition 98 funding in 2018‑19 and 2019‑20 differ from the estimates included in the June 2019 budget plan. Next, we estimate the 2020‑21 guarantee. Fourth, we explain how the minimum guarantee could change through 2023‑24 under two possible economic scenarios. Finally, we identify the amount of funding that would be available for new spending commitments in the upcoming year and describe some issues for the Legislature to consider as it prepares to allocate this funding.
In addition to this report, you can find the main California's Fiscal Outlook report along with a collection of other fiscal outlook material on our fiscal outlook budget page.
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).
March 6, 2020 - This report focuses on a state law enacted in the 1990s that shifts some of the property tax revenue in certain counties from schools and community colleges to other local agencies. For historical reasons, the shifted revenue is known as “excess ERAF.” (The acronym refers to the local accounts—known as Educational Revenue Augmentation Funds—that facilitate the shift.) We recently found that some counties are calculating excess ERAF in ways that seem contrary to state law and shift too much property tax revenue from schools to other agencies. We have three specific concerns related to the calculation of excess ERAF that together affect about $350 million in annual property tax revenue. Earlier this year, the Newsom administration began to address one of these concerns. In this report, we recommend the Legislature direct the administration to enforce state law on our other two concerns. We also recommend improving oversight to prevent similar issues from arising in the future.
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.