California

California

Budget Cycle
Annual
  

Governor Submits Budget
January 10 

Fiscal Year Begins
July 1
 
Governor Signs Budget 
June 27

Budget Links

FY2025 (enacted)
FY2025 (proposed)
FY2024 (enacted)
FY2023 (enacted)
FY2022 (enacted)
FY2021 (enacted)
FY2020 (enacted)


Enacted Budget – Fiscal Year 2025

Governor Gavin Newsom signed the state’s fiscal 2025 budget into law on June 29. The budget provides for total state expenditures (excluding federal funds) of $297.9 billion for fiscal 2025. This includes $211.5 billion in general fund spending, a 5.2 percent decline from fiscal 2024. The budget is based on forecasted general fund revenues of $207.2 billion before rainy day fund transfers, representing an 8.9 percent annual increase. The budget also provides for a revenue transfer from the state’s Budget Stabilization Account (rainy day fund) to the general fund as well as a withdrawal from the Safety Net Reserve to zero out that fund balance. After transfers, the enacted budget projects a $22.2 billion balance (10.5 percent of general fund expenditures) in the state’s rainy day fund accounts (including the Budget Stabilization Account, Public School System Stabilization Account, and Special Fund for Economic Uncertainties) in addition to $10.6 billion in the Reserve for Liquidation of Encumbrances, for a total balance of $32.8 billion. 

The fiscal 2025 budget includes a package of strategies to close the state’s projected $46.8 billion budget gap, including $16.0 billion in spending reductions; $13.6 billion in additional revenue sources and internal borrowing; $6.0 billion in reserve withdrawals (as mentioned above); and a series of fund shifts, delayed and paused spending, and payment deferrals. Spending cuts include a statewide reduction in ongoing operations funding for nearly all department budgets by an estimated 7.95 percent in fiscal 2025, as well as additional targeted reductions and savings from reducing budgets for vacant positions. Revenue-raising measures in the budget include suspending Net Operating Loss and limiting business tax credits, as well as increasing the Managed Care Organization (MCO) tax. At the same time, the budget maintains funding for programs serving vulnerable populations, including meeting the minimum guarantee for state funding of Pre-K-12 schools and community colleges under Proposition 98; maintaining Medi-Cal expanded services such as covering all residents regardless of immigration status (including in-home supportive services); preserving behavioral health program funding; maintaining base grant levels for several public assistance programs; and preserving funding for Middle Mile and Last Mile Broadband Initiative projects. In addition, the budget continues investments in homelessness programs, encampment resolution grants, nonprofit security grants, food assistance to students over the summer, updated foster care rates, and other key priorities.

Proposed Budget - Fiscal Year 2025

On January 10, California Governor Gavin Newsom introduced his budget proposal for fiscal 2025. The budget calls for total state expenditures (excluding federal funds) of $291.5 billion, including $208.7 billion in general fund spending for fiscal 2025. This represents a 9.6 percent general fund decrease compared to spending levels in fiscal 2024. This decrease reflects a series of strategies proposed by the governor to close the state’s budget gap. This gap results from the impacts of a weak stock market performance in 2022 on state revenues coupled with significant and unprecedented delays in state income tax collections due to postponed federal tax deadlines related to disaster declarations, which delayed the state from taking corrective budgetary action sooner. The fiscal 2025 budget is based on total general fund resources for fiscal 2025 of $222.7 billion, including an $8.0 billion beginning balance and $214.7 billion in annual revenue after a $12.0 billion transfer from the state’s rainy day fund (also known as the Budget Stabilization Account or BSA). General fund revenues, prior to transfers, are forecasted to increase 2.2 percent in fiscal 2025 compared to current estimates for fiscal 2024. The recommended budget projects reserve balances at the end of fiscal 2025 of $11.1 billion in the BSA and $3.9 billion in the Public School System Stabilization Account (PSSSA). Additionally, the general fund ending balance is expected to be $14.0 billion, including a $10.6 billion Reserve for Liquidation of Encumbrances and $3.4 billion in the Special Fund for Economic Uncertainties (SFEU) (the state’s operating reserve). This amounts to combined budgetary reserves (BSA, PSSA, and SFEU) of $18.4 billion (8.8 percent of recommended general fund expenditures for fiscal 2025), and a total balance of $29.0 billion. 


Proposed Budget Highlights 

The governor’s budget for fiscal 2025 recommends a balanced approach to close the state’s $37.9 billion estimated budget shortfall and maintain fiscal stability, while preserving investments in priority areas including education, public safety, homelessness, behavioral health, and climate action. Key highlights in the budget include:

Maintaining Fiscal Stability
  • Withdraws $13.1 billion from the state’s reserves, including $12.2 billion from the BSA (rainy day fund) and $900 million from the Safety Net Reserve.
  • Makes targeted spending reductions totaling $8.5 billion to a variety of programs, including climate, housing, school facilities, student housing revolving loans, middle class scholarships, legislative requests, and university immunology research, as well as a state vacant position fund sweep.
  • Raises $5.7 billion from internal borrowing and revenue increases, including $3.8 billion from an increase to Medicaid Managed Care Organization Tax.
  • Delays $5.1 billion in funding for various programs to spread them out over three years.
  • Shifts $3.4 billion in general fund expenditures to other funds.
  • Defers $2.1 billion in specific obligations.
Education
  • Includes total funding of $126.8 billion ($23,519 per pupil) for all K-12 education programs.
  • Preserves critical investments in community schools, universal school meals, expanded learning opportunities, education workforce, and continued implementation of universal transitional kindergarten.
  • Withdraws $5.7 billion from the PSSSA to maintain support for Local Education Agencies and Community College Districts.
  • $25 million ongoing to support educator training to administer literacy screenings.
  • $20 million one-time to support developing and providing training for mathematics coaches who can in turn train math teachers.
Public Safety
  • Invests $1.1 billion over four years to increase safety of communities, including: 
  • $373.5 million to fight organized retail theft;
  • $215.1 million for opioid and fentanyl enforcement, naloxone distribution and related victim services;
  • $302 million for nonprofit security grants, officer training and more; and 
  • $197 million to combat gun violence.
Homelessness
  • Maintains $3.4 billion in general fund investment to address homelessness for fiscal 2024 as committed to in prior budgets, including: 
  • $400 million for encampment resolution grants. 
  • $1 billion for Homeless Housing, Assistance, and Prevention program grants.
Behavioral Health
  • Funds to make wellness coaches available for children and youth.
  • Maintains $7.6 billion from various funds to implement the Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) demonstration.
Climate Action
  • Maintains approximately $48.3 billion out of $54 billion in previously committed investments in climate programs over seven years, while achieving $6.7 billion in general fund savings through reductions, delays, and fund shifts.
  • $159.1 million in new climate investments to support flood protection, levee repair, and restoration of the Salton Sea, in addition to pursuing available federal climate funding.