California Budget ChallengeAbout Next 10Budget Overview

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.  

Since then, the Governor and the Legislature have been working to reduce the burden of 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. Due to higher revenue levels, the Governor is proposing an additional payment of $3.5 billion into the state’s Rainy Day Fund to guard against an economic downturn.

Despite high revenues, there are still significant outstanding liabilities for pensions and health care benefits for retired state employees. Prior to 2012, the state’s long-term retirement liabilities went unaddressed without a comprehensive plan or strategy for how these benefits would be funded. The 2018-19 proposed budget includes $6.2 billion ($3.6 billion General Fund) for state contributions to CalPERS for state pension costs. Included in these costs are $685.7 million General Fund for California State University retirement costs.

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