Some surprises in the handling of this year’s budget

For someone who is interested in the activities of the California Legislature and tracks the budget closely, the last two legislative sessions have brought some interesting developments, as well as a recognition of the tremendous work that legislators, staff, and the governor’s administration put into crafting the state’s spending plan each year.

Earlier in this calendar year, spread over several weeks, was a series of what were called “early action” bills, which were “budget bills junior” (BBJs) because these bills amended last year’s budget deal that was adopted in June 2020 for the current fiscal year.

That series of BBJs was unique because of their sheer volume, as well as the amount of additional, current-year spending that was appropriated. Perhaps this was a one-time occurrence in light of the surge in state tax revenues and the infusion of federal stimulus funds received this year.

Some of the remaining bills from this year will be carried over for use next year, which is a different approach than prior years.

In addition, there were several budget trailer bills as part of this “early action” that made statutory changes, such as the supplemental paid sick leave expansion and the “right to recall” employment law.

While there are often trailer bills adopted later in the summer following enactment of the state budget, these trailer bills occur less often in the following calendar year.

Another intriguing occurrence was not using the two-house budget conference committee both last year and this year.

The budget conference committee can be used to work out differences between the Assembly-adopted and the Senate-adopted versions of the state budget (there were no differences this year) as well as to create “conference compromises,” either between the two houses or among the two houses and the Governor’s administration.

Instead, the conference committee has not been used these two prior sessions primarily due to the limited time to operate during the pandemic.

There was also a large number of trailer bills introduced earlier this year — 71 Assembly bills and 71 Senate bills.

Many years ago, there were about two dozen such bills. In recent years, there have been 40 to 50 trailer bills per house each year. Some of the remaining bills from this year will be carried over for use next year, which is a different approach than prior years. Some of the increase may be attributable to the requirement that bills be in print for a minimum of 72 hours before they can be voted on by the Legislature. The main budget bill, AB 128, contains a listing of this year’s 142 trailer bills in Section 39.

With more than a quarter trillion dollars in spending, the California state budget is massive in both size and scope.

Another aspect of this year’s budget is that legislative intent language was contained in the main budget bill for future deals on specified topics. While multi-year budgeting is not new, its use has increased in recent years. The executive branch has pursued more multi-year budget practices as well. Multi-fiscal year forecasting has also become more prevalent for the Department of Finance and the Legislative Analyst’s Office.

For example, in AB 128, there was the following section: SEC. 19.55.  “Contingent upon future legislation, the following amounts totaling $17,800,000,000, including $12,900,000,000 from the General Fund and $4,900,000,000 from other funds, are appropriated for the following purposes….”

There have also been statements that proposed spending likely to be pursued in next year’s budget is being portrayed as this year’s budget-deal spending, even though there is no continuous appropriation provided and no legal means of enforcing such a promise of future budget spending.

As a specific example, AB 128 has language regarding the proposed $7 billion spending package for broadband, but only $1 billion was appropriated for this year in the main budget bill. While multi-year planning has occurred in prior years, it appears more prevalent this year. Some of this is also attributable to the fact that it takes time to develop specific spending plans, especially when new or expanded programs are proposed.

An additional development this year was tying spending to a future outcome.

For example, several different areas of state spending in the main budget bill (AB 128) were made contingent upon a supplemental bill because the spending provisions state that a bill must be passed by Oct. 1 or else the appropriated funds will revert to the General Fund. These sections of the budget contain the following provision: “Any funds described in Provision [2] not encumbered by October 1, 2022, for eligible activities attributable to the 2021–22 fiscal year shall revert to the General Fund.”

While not unique to this year, the state budget process continues to be constrained by the limited amount of time between the release of the governor’s May Budget Revision and the constitutional deadline of June 15 for adoption of the state budget. This year’s May Revise included not only a substantial increase in proposed spending, but also a number of new and expanded programs which limits the ability to put together the entire budget deal in less than a month.

With more than a quarter trillion dollars in spending, the California state budget is massive in both size and scope to fund the operations of the state and to allocate federal funding to a myriad of recipients. Some of the items described above represent changes to the “normal” budget process. It is unclear whether they will continue.

Remember that this year’s budget is the second time the Legislature and Governor have adopted a state spending plan during the pandemic.
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Editor’s Note: Chris Micheli is a principal with the Sacramento governmental relations firm of Aprea & Micheli, Inc. He serves as an adjunct professor at McGeorge School of Law.