California Budget Challenge

Budget Basics

State Budget Trends

Income to the State's General Fund grew dramatically between1998 and 2007 in large part due to an economic boom in technology and housing construction. Public spending kept pace and in some years even exceeded revenue.

The financial crisis of 2007 and subsequent economic recession caused dramatic reductions in state income and state spending. In February 2009, state government passed a comprehensive budget solution of temporary tax increases and spending cuts. While the spending cuts largely remain in place, the temporary tax increases expired.  

The 2012-13 budget was balanced on the assumption that voters would approve new temporary sales and income tax increases. They did so by approving Proposition 30 on the November 2012 ballot. The 2013-14 budget was built on the continuation of these increases and was the first largely balanced in many years.   

However, the state still has significant debts consisting of loans from special funds, delayed mandate payments to schools and community colleges and other obligations incurred over the last decade in an effort to balance the budget in the face of a dramatic loss of revenue from the recession. The Governor proposes to eliminate these debts by 2017-18. However, this would still leave significant outstanding liabilities for pensions and health care benefits for retired state employees. 

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