Preface
The budget process for
Although
the size and complexity of
Budget Development
The State Constitution requires that the Governor submit a budget to the
Legislature by January 10. It provides for a balanced budget in that, if
the proposed expenditures for the budget year exceed estimated revenues, the
Governor is required to recommend the sources for the additional funding.
The
Director of Finance, as the chief financial advisor to the Governor, directs
the effort for preparation of the Governor's Budget. Under the policy direction
of the Governor, the Director of Finance issues instructions and guidelines for
budget preparation to agencies and departments. This effort typically gets
underway even before the Legislature has passed the budget for the current
fiscal year.
Although
The
general goal in the budget decision process is to resolve budget issues at the
lowest level possible. For those departments that are under an Agency
Secretary, departments must clear their proposals through Agency-level
hearings. The Department of Finance generally attends these hearings. For
non-Agency departments, proposals are presented directly to the Department of
Finance. Issues which are not resolved between departments and Finance staff
are discussed at hearings conducted by the Director of Finance. The most
sensitive issues are ultimately presented to the Governor for a decision.
After
all decisions are completed, the Department of Finance coordinates the printing
of the following publications which comprise the Governor's Budget package.
They are available from the Department of
Finance Website.
Governor's Budget Summary¾A summary
volume which includes the Governor's goals and objectives for the forthcoming
year, and the policy perspectives and highlights of changes in the Governor’s Budget.
Governor's Budget¾A detailed presentation for each department for the past,
current, and budget years.
Governor's Budget Highlights¾A pocket
size highlights book of narrative, charts and graphs issued on the Press Conference
day.
Salaries and Wages Supplement¾A detailed presentation of authorized staffing and related
salaries.
The
Governor annually unveils the budget at a formal press conference. The
Governor's State of the State address typically includes a general presentation
of the Administration’s budget policies and
priorities.
Budget Enactment
By constitutional requirement, the Governor's Budget must be accompanied by a
Budget Bill itemizing recommended expenditures which shall be introduced in
each house of the Legislature. The Constitution also requires that the
Legislature pass the bill by June 15.
In
addition, beginning with the 2004-05 fiscal year, the Constitution prohibits
the Legislature from sending to the Governor for consideration, and the Governor from signing, a budget bill
that would appropriate a total amount that, when combined with all
appropriations from the General Fund for that fiscal year, and the amount of
any General Fund revenue transferred to the Budget Stabilization Account for that fiscal year, exceeds General
Fund revenues for that fiscal year estimated as of the budget bill's passage.
The
Senate Budget and Fiscal Review Committee and the Assembly Budget Committee are
the two committees that hear the Budget Bills. They assign the items in the
bill to several subcommittees (by major subject areas such as Education or
Health and Human Services) which conduct budget hearings. These hearings
generally begin in late February soon after the Legislative Analyst issues the
"Analysis of the Budget Bill". The Legislative Analyst is appointed
by the Joint Legislative Budget Committee and is charged with providing a
nonpartisan analysis and recommendations for changes to the Governor's budget
plan.
In
addition to the Legislative Analyst, the Department of Finance and departmental
staff typically provide testimony at the subcommittee hearings. In recent
years, there has been increasing input by partisan fiscal committee consultants
of both the majority and minority parties. Additionally, lobbyists and the
public may provide testimony at the hearings.
The
Department of Finance proposes adjustments to the Governor's Budget through
"Finance Letters" in the spring. By statute, the Department of
Finance is required to give the Legislature all proposed adjustments, other
than Capital Outlay and May Revision, to the Governor’s
Budget by April 1. Capital Outlay adjustments are due by May 1. The traditional
May Revision adjustments are due by May 14, and consist of an update of
General Fund revenues and changes in expenditures for school funding
requirements pursuant to Proposition 98, caseload, enrollment, or population.
The Legislature typically waits for the May Revision update before final budget
decisions are made on major programs such as Education, Corrections, and Health
and Human Services.
When
a subcommittee completes its actions, it reports its recommendations to the
full committee. Upon adoption of the budget by the full committee, a
recommendation is made to the Floor (full house). Upon two-thirds vote of the
house, the Budget Bill is passed to the other house. A Budget Conference
Committee is then appointed to work out differences between the Senate and
Assembly versions of the bill. Upon completion of action by the Conference
Committee and a two-thirds vote, this conference version is then sent to the
two houses for approval.
Sometimes
the Conference Committee does not reach final resolution on the budget. This
stalemate typically results from non-resolution of a few major issues. These
issues are then resolved by the "Leadership" or "Big 5"
(Governor, Speaker of the Assembly, President Pro Tempore, and the minority
leaders of both houses).
When
the Budget Bill receives a two-thirds vote of each house, it is passed on to
the Governor. The Constitution allows the Governor to reduce or eliminate an
item of appropriation.
The
Department of Finance publishes three documents upon enactment of the Budget
Act. The first two are also available from the Department of Finance Website.
Final Budget Summary¾This document is an annotated version of the Budget Act
which includes summary tables, technical corrections to the Budget Act, and the
effect of vetoes on the items and sections of the Budget Act.
Final Change Book¾This document provides the detail of changes between the
January 10 budget and the enacted budget.
There
are generally budget changes proposed by the Governor or the Legislature which
necessitate changes to existing law in order to implement the budget changes.
If this is the case, separate bills are introduced to implement the change.
These budget implementation bills are called "trailer bills" and are
heard concurrently with the Budget Bill. By law, all proposed statutory changes
necessary to implement the Governor’s Budget are due
to the Legislature by February 1.
Administration
The Budget Act is the primary source for appropriations. Continuous statutory
appropriations and special legislation also provide expenditure authority.
Departments
have the primary responsibility to operate within budgeted levels and to comply
with any restrictions or limitations enacted by the Legislature. Further, the
general expectation is that State agencies comply with the legislative intent.
Although the general expectation is to conform to the enacted budget, the
Legislature has recognized a need to establish some flexibility to adjust
budgets. For example, the statutes provide a continuous appropriation for
allocations by the Director of Finance to meet expenditures resulting form
natural disasters for any emergency proclaimed by the Governor. The Legislature
has also provided provisions in the Budget Act to allow for budget adjustments.
Most of this authority requires Director of Finance approval; many require a
formal notice to the Legislature and a waiting period to provide the
opportunity for legislative review and response before final approval. Budget
Act provisions to allow adjustments include authorizations for:
- Changes to federal funding levels
- Deficiencies
- Changes to reimbursements
- Intra-item transfers
The
Department of Finance approves budget changes using Budget Revisions, Executive
Orders and letters. These changes are transmitted to the State Controller's
Office, which maintains the statewide appropriation control accounts.
The
Governor has certain powers to adjust expenditures. Although these powers do
not permit for adjustment of appropriations, the expenditure plan may be
changed. For example, past Governors have issued Executive Orders to implement
hiring and equipment purchase freezes and delayed capital expenditures. Under
emergency conditions, the Governor is also authorized to direct State resources
to meet emergency needs.
BUDGET PROCESS
Because of the dynamic nature of
- Governor's Budget package
- Legislative Analyst's "Analysis of the Budget Bill"
- State Administrative Manual
- Budget Act and Final Budget Summary
- Final Change Book
- Budget Letters and budget related Management Memos
- Internet:
The
annual budget process is portrayed in a relatively simple flow chart. It may be
viewed and printed using the Adobe
Acrobat Reader; scroll down to "Budget Process" and
click on "flowchart".
(January
2006) (BOS/PBM/APBM)