The budget of the U.S. state of

California California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...

is made up of several funds derived from taxes. The General Fund makes up 3/4th of the entire budget; it allocates monies to state operations and payments to localities. The annual budget is proposed by the California State Legislature and approved by the Governor of California, who enjoys the prerogative of

line-item veto The line-item veto, also called the partial veto, is a special form of veto power that authorizes a chief executive to reject particular provisions of a bill enacted by a legislature without vetoing the entire bill. Many countries have different ...

California's tax system

California levies a 9.3 percent maximum variable rate

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

, with six

tax bracket Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, though that is rarer). Essentially, tax brackets are the cutoff values for taxable income—income past a certain poin ...

s, collecting about $40 billion per year (representing approximately 51% of General Fund revenue and 40% of tax revenue overall in FY2007). California has a

state sales tax Sales taxes in the United States are taxes placed on the sale or lease of goods and services in the United States. Sales tax is governed at the state level and no national general sales tax exists. 45 states, the District of Columbia, the te ...

of 8.25%, which can total up to 10.75% with local sales tax included. All real property is taxable annually, the tax based on the property's fair market value at the time of purchase or completion of new construction. Property tax increases are capped at 2% per year (see

Proposition 13 Proposition 13 (officially named the People's Initiative to Limit Property Taxation) is an amendment of the Constitution of California enacted during 1978, by means of the initiative process. The initiative was approved by California voters on J ...

). One notable side effect of California's tax structure is that a substantial portion of the state's income comes from a small proportion of wealthy citizens. For example, it is estimated that in 2022 the top 5% of state taxpayers (those with tax returns showing over $200,000 in yearly income) paid approximately 70% of state income taxes.

Surplus

California had a surplus of $97.5 billion as of 2022, "...almost as much as the entire budget of Ireland", yet critics have decried the surplus as not producing, "...improvements in the provision of services..."

California public spending

State spending increased from $56 billion in 1998 to $131 billion in 2008, and the state was facing a budget deficit of $40 billion in 2008. California faced a $26.3 billion

budget deficit Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...

for the 2009–2010 budget year. While the legislative bodies appeared to address the problem in 2008 with the three-month delayed passage of a budget they in fact only postponed the deficit to 2009 and due to the late 2008 decline in the economy and the

credit crisis A credit crunch (also known as a credit squeeze, credit tightening or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from banks. A credit cr ...

the problem became urgent in November 2008. California faced another budget gap for 2010, with $72 billion in debt. California faced a massive and still-growing debt. In June 2009 Gov. Arnold Schwarzenegger said "Our wallet is empty, our bank is closed and our credit is dried up." He called for massive budget cuts of $24 billion, about of the state's budget. 2012 brought somewhat of an improvement to state finances, though the state still faced a $16 billion budget deficit for the year. To help alleviate this, Governor Jerry Brown introduced proposals to bring measures to voters, in order to pass tax increases. If these are not passed, more severe cuts are expected. California's unemployment rate also fell from a high above 12.4% to below 11% in 2012. In 2017 a miscalculation of the costs for the state's Medi-Cal program of $1.9 billion in 2016 led Governor Jerry Brown to project the state of California will face a $1.6 billion budget deficit. As of January 2017, California and Kansas were the only two western states with an AA−

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Public borrowing

California uses two kinds of tax anticipation notes: Revenue Anticipation Notes (RANS), which are issued and paid back within a fiscal year, and Revenue Anticipation Warrants (RAWS), which are issued on a fiscal year and paid back the following fiscal year. RANS are commonly used due to the delay between expenditure and tax collection while RAWS are only used in times of crisis.

References

External links

{{DEFAULTSORT:California state finances Government of California Economy of California State government finances in the United States