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California’s budget basics
According to the National Association of State Budget Officers (NASBO), California’s total expenditures in fiscal year (FY) 2021 were $512.8 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2021 were $2.7 trillion, ranging from $4.7 billion in Wyoming to $512.8 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 $516.0 billion in FY 2019 (the most recent year census data were available), or $13,084 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 $10,161.
California’s largest spending areas per capita were public welfare ($3,397) and elementary and secondary education ($2,408). 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 $533.2 billion in FY 2019, or $13,520 per capita. National per capita general revenues were $10,563. California uses all major state and local taxes. After federal transfers, California’s largest sources of per capita revenue were individual income taxes ($2,538) and charges ($2,482), such as state university tuition and highway tolls.
Governor Gavin Newsom, a Democrat, was elected in 2018 with 62 percent of the vote. The next gubernatorial election is in 2022.
Democrats control both the Assembly (56 Democrats to 19 Republicans and 1 independent) and Senate (31 Democrats to 9 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 2022 because members serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.
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
California enacted its FY 2022 budget in July 2021. The enacted budget included $196.4 billion in general fund spending. General fund spending increased 18.3 percent over the previously enacted budget. California also sent tax rebates to most residents who earn less than $75,000 in calendar year 2021.
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 2021: $166.1 billion/$512.8 billion
FY 2020: $146.3 billion/$357.1 billion
FY 2019: $140.4 billion/$300.4 billion
For more on California’s budget, see
California’s economic trends
California’s per capita income (per the Bureau of Economic Analysis) was $76,386 in 2021, ranking fourth among the states. It was above both the national average of $63,444 and the Far West regional average of $73,053. The state’s median household income (five-year estimate) was $78,672 in 2020, ranking sixth among the states and above the national average of $64,994. California’s poverty rate was 12.6 percent in 2020 (five-year estimate), below the national rate of 12.8 percent.
Although California’s averages tell a story about the entire state, California is composed of diverse localities. For example, the city of Coachella’s median household income was $33,999, and its poverty rate was 18.9 percent; the city of Los Altos’s median household income was $240,094, and its poverty rate was 2.8 percent.
California’s unemployment rate has historically been above the national average, particularly following the Great Recession. In recent years, California’s unemployment rate has been among the highest in the country. (See how COVID-19 is affecting state employment and earnings data.)
Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In California, the average unemployment rate in 2021 was 6.8 percent for white residents, 12 percent for Black residents, and 7.9 percent for Hispanic or Latino residents. (This is preliminary data. See the 2020 data for a more detailed breakdown of state unemployment rates by race and ethnicity.)