Frequently Asked Questions about California’s Balanced Budget Requirement

Did California always have to adopt a “balanced budget”? Probably, because prior provisions of the California Constitution were interpreted to require a balanced budget, at least to require the Governor to submit a balanced budget to the Legislature by January 10.

What does the California Government Code provide? Since 1983, Government Code Section 13337.5 requires a balanced budget be enacted. This statute provides:

The annual Budget Act shall not provide for projected expenditures in excess of projected revenues. Further, it is the intention of the Legislature that in the event, after enactment of the Budget Act, revised estimates of expected revenues or expenditures, or both, show that expenditures will exceed estimated revenues, expenditures should be reduced or revenues increased, or both, to ensure that actual expenditures do not exceed actual revenues for that fiscal year.

How was the California Constitution amended to address a balanced budget? An amendment as made to Article IV, Section 12, when subdivision (g) was added, which reads:

(g) For the 2004–05 fiscal year, or any subsequent fiscal year, the Legislature may not send to the Governor for consideration, nor may the Governor sign into law, a budget bill that would appropriate from the General Fund, for that fiscal year, a total amount that, when combined with all appropriations from the General Fund for that fiscal year made as of the date of the budget bill’s passage, and the amount of any General Fund moneys transferred to the Budget Stabilization Account for that fiscal year pursuant to Section 20 of Article XVI, exceeds General Fund revenues for that fiscal year estimated as of the date of the budget bill’s passage. That estimate of General Fund revenues shall be set forth in the budget bill passed by the Legislature.

Who determined whether the state budget is “balanced”? Per the California Constitution and an appellate court decision (Steinberg v. Chiang in 2014), the determination is made based upon what is contained in the Budget Bill, which lists both expenditures as well as the estimate of revenues for the forthcoming fiscal year.

How did the state appeals court describe the legislature’s role? The appellate court in the Steinberg case explained that “the balanced budget provision does not prescribe the manner in which the Legislature must calculate this estimate, the nature of the revenue sources the Legislature may or may not take into account, or any role for the Controller in overseeing the estimate.”

Are budget trailer bills required to be passed by the June 15 budget deadline? No, the appeals court in the Steinberg case ruled that the state Constitution does not require budget trailer bills to be enrolled and sent to the Governor for signature before the constitutional deadline of June 15.

Who enforces whether the budget is balanced or not? The appellate court in Steinberg ruled that “The Governor can enforce it either through vetoing the budget as a whole or exercising his power to veto line items to bring appropriations in balance with accurate revenues.”