PROJECTCalifornia
State Fiscal Briefs

August 2023

California’s budget basics

According to the National Association of State Budget Officers (NASBO), California’s total expenditures in fiscal year (FY) 2022 were $510.0 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2022 were $2.9 trillion, ranging from $5.6 billion in Wyoming to $510.0 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, California’s combined state and local direct general expenditures were $574.8 billion in FY 2021 (the most recent year census data were available), or $14,685 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $11,087.

(Note: We cite data from both NASBO and Census to provide a broader picture of each state’s fiscal situation. However, these sources detail spending from different levels of government in different years, and the COVID-19 pandemic and the federal government’s response to it significantly affected these totals in different ways in different years. Please only use one source if you are looking for historical comparisons.)

California’s largest spending areas per capita were public welfare ($3,870) and elementary and secondary education ($2,527). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

California’s combined state and local general revenues were $630.7 billion in FY 2021, or $16,114 per capita. National per capita general revenues were $12,277. California uses all major state and local taxes. California’s largest sources of per capita revenue were individual income taxes ($3,738) and federal transfers ($3,670).

California’s politics

Governor Gavin Newsom, a Democrat, was elected in 2022 with 58 percent of the vote. The next gubernatorial election is in 2026.

Democrats control both the Assembly (62 Democrats to 18 Republicans) and Senate (32 Democrats to 8 Republicans), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in California, which they have had since Newsom’s predecessor, Jerry Brown, took office in 2011. All California Assembly seats are on the ballot in 2024 because members serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2024, and the other half will be up for election in 2026.

California’s budget institutions, rules, and constraints

California uses an annual budget. The legislature must pass and the governor must sign a balanced budget, but deficits can be carried into the following year. The state does not implement any debt limits on either debt service or authorized debt.

California limits both spending and revenue growth with binding rules that require a legislative supermajority or popular vote to override them. Further, the state operates under one of the country’s most influential tax restrictions: Proposition 13. Named after its successful 1978 ballot initiative, Proposition 13 , the rules do the following:

  • caps the property tax rate for all local governments at 1 percent,
  • sets a property’s assessed value at its purchase price (not its market value) and restricts annual assessment increases to 2 percent,
     
  • requires a two-thirds majority in both houses of the state legislature for any state tax increases, and
  • requires support from two-thirds of voters for any tax increases by local governments.

However, California can still raise state taxes via ballot initiatives, which only require majority support from voters.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

California’s current budget

Governor Newsom released his FY 2024 budget proposal in January 2023. He has not yet given his state of the state address.

California enacted its FY 2023 budget in June 2022. The enacted budget included $234.4 billion in general fund spending. California also sent tax rebates to many residents in calendar year 2021 and 2022.

Under the American Rescue Plan, California will receive $27 billion in direct state fiscal aid and $14.7 billion in local government aid from the federal government. As of January 2022, California had spent part of its state ARP funds on housing assistance, revenue replacement, economic development, and broadband expansion.

According to NASBO, California’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

  • FY 2022: $242.9 billion/$510.0 billion
  • FY 2021: $162.1 billion/$498.9 billion
  • FY 2020: $146.3 billion/$357.1 billion
  • FY 2019: $140.4 billion/$300.4 billion

For more on California’s budget, see