The courts’ views on the Legislature’s budget authority

Both the Legislature and the Governor in California play critical roles in the development and adoption of the state budget. Relevant provisions of state law related to the budget process are contained in Article IV of the state Constitution.

The courts of this state have ruled that the judicial branch has a limited role and that other constitutional officers do not have any significant role in the budget process. For example, the California Supreme Court explained that “Article IV, Sections 10 and 12 (of the state Constitution) set forth the respective powers of the Legislature and Governor over the enactment of appropriations. It has long been clear that these separation-of-powers principles limit judicial authority over appropriations.” Butt v. State of California (1992) 4 Cal.4th 668, 698

So, what are the views of California courts on the Legislature’s budget authority?

In the case of National Asian American Coalition v. Newsom, 33 Cal.App.5th 993 (2019), the court of appeal explained that the Legislature has plenary lawmaking authority over the state’s budget. Unless the Legislature clearly conveys a contrary intention, it is the policy of the law to have funds authorized for a particular purpose expended for that purpose.

In addition, the appellate court said that money misappropriated from a special deposit fund is considered a loan by operation of law and a writ of mandate may be issued by a court to direct reimbursement.

The seminal case in this area is Steinberg v. Chiang, 223 Cal.App.4th 338 (2014). This case arose because the state Controller, one of nine statewide elected constitutional officers in California, made a unilateral decision to claim the state budget was not balanced. The state Supreme Court ruled that the Controller had no role in that determination and that the estimate of revenues and expenditures is done in the state budget bill and is determined by the Legislature and Governor alone.

Th court of appeal established that the Legislature’s estimate of revenues used to determine whether the state budget complies with the balanced budget provision of the state constitution may include revenue sources not yet authorized in existing law or in trailer bills. This determination was based upon the court’s interpretation of Article IV, Section 12(g).

According to the court, “All that the balanced budget provision prescribes for the budget bill is inclusion of a legislative estimate of revenues ‘made as of the date of the budget bill’s passage’ that exceeds the combination of the total amount of appropriations in the bill, the existing appropriations for the upcoming fiscal year, and transfers to the reserve fund. 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.”

The court of appeal went on to explain that the state Constitution does not expressly support the Controller’s assertion that the Legislature must enact any revenue bills (which cannot be part of the budget bill itself) along with identified trailer bills in the budget before the constitutional deadline of June 15. In fact, the court ruled “the Controller is not a party to the enactment of the budget bill.”

As a result, the courts in California generally view the adoption of the state budget to involve only the legislative and executive branches of state government. As such, the Legislature and Governor have authority to estimate revenues and expenditures and determine how, where, and for what purpose appropriations are to be made as part of the state budget.

The court of appeal in its Steinberg v. Chiang decision also addressed the question whether the balanced budget provision “is a dead letter.” The appellate court explained that the Governor can enforce this constitutional requirement either through vetoing the budget as a whole or exercising the Governor’s power to veto line items to bring appropriations in balance with accurate revenues. This gubernatorial authority is pursuant to Article IV, Section 10(a) and (e).