BUDGET BILL PREPARATION GUIDELINES

I. INTRODUCTION

The California Constitution requires that within the first 10 days of each calendar year, the Governor submit a proposed Budget to the Legislature and that the Budget be accompanied by a Budget Bill.

The Department of Finance (Finance) prepares the Budget Bill utilizing the previous Budget Act as a base. The Office of State Publishing (OSP) provides the initial galley which is commonly referred to as "language sheets". Language sheets for every item and section in the previous Budget Act are distributed to various budget units in early December of each year for updating. Several updates are made in late December and early January, culminating in Senate and Assembly versions of the Budget Bill for introduction in the two houses by the chair of each house’s budget committee.

For a major portion of the items and sections, the updating is merely a changing of dollars and fiscal year references. However, there may be major changes which need to be made such as the restructuring of programs, adjustments for organizational changes, additions of new appropriations and provisional language. Finance staff often need to work with departmental staff and the Legislative Counsel’s Office in developing language. The Legislative Counsel’s Office designates staff to work on budget language for both the budget development and enactment stages. In some situations, Finance staff may work with staffs of the Legislative Analyst’s Office and the legislative fiscal committees in preparing language sheets.

Annually, Finance issues a Finance Memo to provide any special instructions, issue a calendar for the update and finalization of the Budget Bill, and inform staff of the designated contact people in the Legislative Counsel’s Office.

The following are standard guidelines applicable from year to year. Finance staff and departmental staff who assist in the preparation of the Budget Bill must be familiar with these guidelines.

II. GUIDELINES

A. Updating Language Sheets for Existing Items and Control Sections

1.      Ensure language sheets are accurate, complete, coordinated with other units, etc.

2.      Make all changes on language sheets using standard editing marks and insertion techniques. For new staff, copies of standard editing marks are available from the budget editor. If it is necessary to retype a language sheet or if departments produce language sheets through an automated process, attach the old version(s) to the newly created page(s); do not destroy the old version(s) because the OSP needs to refer to the existing item(s) contained in its computer file.

3.      Mark the language sheet "canceled," if an item or section is no longer required.

Do Not Destroy Canceled Language Sheets. Turn them in!

4.      Update the following information:

a.      Dates contained in control language,

b.      Code section references,

c.      Cross-references to other items, and

d.      Language to be sure it is current and still applicable.

e.      Change references to bill numbers (e.g, AB 511) to Chapters or codified sections as appropriate, usually after a year or so.

5.      Clear substantive changes with the Legislative Counsel’s Office, unless otherwise instructed by your Program Budget Manager.

B. Control Sections

Control Sections should be limited to general statewide provisions. Therefore, if a proposed new or existing section contains language pertaining to one or only a few items/departments, it should be included as control language within the appropriate item(s). As a general rule, appropriation items should be used instead of control sections for authorizing expenditures or transfers. (This provides for more consistency with other appropriation/transfer items. Also, additional expenditure/transfer records do not have to be created in the computer files to reflect the effect of such control sections.)  If a new section is required, coordinate the assignment of a section number with the Financial Operations (FO) section.

All control section language sheets need to be submitted to FO with budgets at the paging point (if final decisions can be incorporated) or within 2-3 days of final decision.

C. Appropriations for Proposition 98

Proposition 98 funding must be appropriated in a separate item. Under no circumstances may an appropriation include expenditures for both Prop. 98 and non-Prop. 98 purposes. The following format should be used for Prop. 98 items.

6110-101-0001—For local assistance, Department of
Education (Proposition 98), for transfer to Section A of the
State School Fund ............................................................250,000,000

Section 12.32  of the Budget Act requires language stating appropriations subject to Article XVI of the California Constitution be designated with the wording "Proposition 98."  This ensures that appropriations can be properly identified and charged against the minimum school funding guarantee. It helps avoid the General Fund Reserve being charged twice for Proposition 98 expenditures.

D. Appropriations for State-Mandated Local Programs

Funding for State-Mandated Local Programs must be appropriated in separate items within the budgets directly involved with the programs. A Finance Memo may be issued providing detailed instructions and sample items with control language.

E. Reappropriation and Reversion Language

  1. Reappropriation—The following sample language should be used for a reappropriation when the availability for expenditure is to be extended for an additional period of time (usually one fiscal year). In this case, do not use the words "unencumbered", "unexpended", "undisbursed", or "unspent" to describe the balance to be reappropriated.  In addition, it is not necessary to add "Notwithstanding..." language.

Sample for Standard Reappropriation:

4300-491—Reappropriation, Department of Developmental Services. The balance of the appropriation provided in the following citation is reappropriated for the purposes provided for in that appropriation and shall be available for encumbrance or expenditure until June 30, 2005:
0001—General Fund
1) Item 4300-001-0001, Budget Act of 2003 (Ch. 157, Stats. 2003)

Other circumstances may require the use of wording other than this standard language.

Sample for Reappropriation for change of purpose:

2660-490—Reappropriation, Department of Transportation.  $4,750,000 of the appropriation provided in Item 2660-101-0001, Budget Act of 2003 (Ch 157, Stats. 2003) is reappropriated for acquiring ferry boats until December 31, 2003.  At such time, any unencumbered balances remaining from the $4,750,000 reappropriated by this item may be transferred to and in augmentation of Item 2660-301-0001, Budget Act of 2004 with the approval of the Department of Finance.

Sample for Reappropriation with dollars:

3340-491—Reappropriation, California Conservation Corps.  The amount specified in the following citation is reappropriated for the purposes provided for in that appropriation and shall be available for encumbrance or expenditure until June 30, 2006:  0005—Safe Neighborhood Parks, Clean Water, Clean Air, and Coastal Protection Bond Fund.

 

(1) $590,000 in Item 3340-101-0005, Budget Act of 2004 (Ch. 208, Stats. 2004), for local assistance to local conservation corps.  Of that amount, $106,000 shall be for Long Beach local corps for resource conservation projects, and $484,000 shall be for Fresno local corps for the construction of a recreation building where a neighborhood youth center.

Sample for Reappropriation for extension of liquidation period:

2660-491—Reappropriation, Department of Transportation.  Notwithstanding any other provision of law, the period to liquidate encumbrances of the following citations are extended to June 30, 2005.

0001-General Fund

(1) Item 2660-101-0001, Budget Act of 2002 (Ch 379, Stats. 2002)

  1. Reversion—the following sample language should be used for a reversion when the unencumbered balance of an appropriation is to be reverted before the existing reversion date of the existing appropriation.  In addition, it is not necessary to add "Notwithstanding..." language.

Sample for Standard Reversion with no amounts specified:

4260-495—Reversion, Department of Health Services. As of June 30, 2004, the unencumbered balance of the appropriation provided in the following citation shall revert to the fund balance of the fund from which the appropriation was made.
0001—General Fund
(1) Chapter 973 of the Statutes of 2002.

Other circumstances may require the use of wording other than this standard language.

Sample for Reversion with dollar amount specified:

2660-495—Reversion, Department of Transportation.  As of June 30, 2004, the balances specified below, of the appropriations provided in the following citations shall revert to the balance in the fund from which the appropriations were made.

0046—Public Transportation Account

(1) Item 2660-001-0046, Budget Act of 2002 (Ch. 379, Stats. 2002).  Up to $1,380,000 appropriated in Program 10 - Aeronautics.

F. Transfer Items

Most transfer items state “for transfer by the Controller”.  This language requires the  Controller (SCO) to transfer the amount specified shortly after the Budget Act is enacted.  However, if there is not enough cash in the fund available for transfer at that time, the SCO must contact the agency to determine how much and when to transfer.  Many times, when partial transfers are made, the remaining amount to be transferred is overlooked.  To alleviate this problem, transfer items should include the language “upon order of the Department of Finance”.  This provides written documentation in the form of an Executive Order to the SCO to make the transfer.

Sample for Transfer Items

2240-115-3006—For transfer by the Controller, upon order of the Director of Finance, from the Jobs-Housing Balance Improvement Account to the General Fund …………………(40,000,000)

Other circumstances may require the use of wording other than this standard language.

G. Appropriation Authority for Expending Revenues from Fines and Penalties, Chapter 654/95

Section 13332.18 of the Government Code states that revenues (including interest accrued) derived from the assessment of fines and penalties by any State department shall not be expended unless the Legislature specifically provides authority for the expenditure of these funds in the annual Budget Act. A fine or penalty is defined as a charge imposed for wrong-doing and in excess of the cost of investigating, processing, or prosecuting the conduct for which the charge is assessed, or the cost of collecting it. A charge reasonably related to a service provided by a department is not a fine or penalty for purposes of this law.

The intent is that these requirements/provisions are limited to governmental cost funds. Thus, nongovernmental cost funds, bond funds and federal funds are exempted.

Departments should be periodically reviewing their governmental cost fund revenues derived from the assessment of fines and penalties and the charges which are imposed for the costs of investigating, processing, prosecuting, and collecting. If there is an excessive charge above a reasonable assessment, the following standard language provision needs to be included as language in Budget Bill appropriations.

"The amount appropriated in this item includes revenues derived from the assessment of fines and penalties imposed as specified in Section 13332.18 of the Government Code."

Finance budget analyst need to ensure that departments are aware of these requirements and that the Budget Bill language is included when appropriate.

There are a number of specific exemptions1/ from the provisions of this legislation. Following is a list of these exemptions:

  1. Late charges collected by State agencies.
  2. Funds collected by a State agency that are required to be maintained by that agency for purposes of administration of a federal program.
  3. A fund established for restitution to victims of the conduct for which the fine or penalty was imposed or for repairing damage to the environment caused by the conduct for which the fine or penalty was imposed.
  4. The following funds:

a.      The Fish and Game Preservation Fund.

b.      The Restitution Fund.

c.      The Peace Officers' Training Fund.

d.      The Driver Training Penalty Assessment Fund.

e.      The Corrections Training Fund.

f.        The Local Public Prosecutors and Public Defenders Training Fund.

g.      The Victim-Witness Injury Fund.

h.      The Traumatic Brain Injury Fund.

i.        The Industrial Relations Construction Industry Enforcement Fund.

j.         The Workplace Health and Safety Revolving Fund.

k.      The Oil Spill Response Trust Fund.

l.         The Oil Spill Prevention and Administration Fund.

m.    The Environmental Enhancement Fund.

n.      The Recovery Account of the Real Estate Fund.

o.      The Motor Vehicle Account in the State Transportation Fund.

p.      The State Highway Account in the State Transportation Fund.

q.      The Motor Vehicle License Fee Account in the Transportation Tax Fund.

r.        Funds for programs established pursuant to the Food and Agricultural Code that can be terminated through an industry referendum vote.

1/ Exemption (1) contained in the legislation is omitted as it related to a prior version of the bill and has no application to the chaptered version per the author’s office.

(April 2006) (FO/PPBA)