California Budget ChallengeAbout Next 10Budget Overview

Budget Basics

Budget Overview

Each year the Governor and Legislature work together to pass the state’s annual budget that determines how our taxes will be spent on state-funded programs like education, healthcare, and human services. The primary state fund is the General Fund, though total state funding also includes special and federal funds.

The California Constitution requires the legislature to pass a balanced budget each year, in which expected revenues meet or exceed expected expenditures. The budget process begins by the Governor releasing his or her proposed budget on January 10th of a given year, and the deadline to pass the budget is June 15th. The 2020-21 fiscal year begins on July 1, 2020 and will end June 30, 2021. The final 2020-21 budget will be called the 2020 Budget Act.

For many years, California had spent more money than it coming in, and often used short-term solutions and borrowed money in order to balance the budget. As the economic recovery since the Great Recession has continued, the state is in much better fiscal health overall and there is a surplus of $5.8 billion forecasted for 2020-21. 

However, tough choices remain:

  • How much new spending should be split between one-time and ongoing given the potential for a recession in the next few years?
  • How much should the state save as reserves and use to pay down unfunded pension liabilities and address deferred maintenance of our infrastructure given the current surplus and relatively good economic conditions?

The California Budget Challenge presents different spending, revenue, and reserve options meant to get at some of these questions. In each instance, there is always a Status Quo option in which you make no changes to the budget and abide by what is required by law and/or previous budget acts. The remaining options are all additional to the status quo, and will impact your starting budget surplus accordingly. Given the surplus, most of the other options are to increase spending, and cut or raise taxes. Reforms and other proposals that do not have a corresponding budget impact are not included in the Budget Challenge.

Of the $222 billion in total state funds for 2020-21, $153 billion (68.9%) are General Fund, $63.8 billion (28.7%) are special funds, and $5.4 billion (2.4%) are bond funds.

Take the Challenge