Department of Finance briefs Judicial Council on governor’s balanced budget and revenue volatility

Joe Steppenshaw, director of the California Department of Finance, told the Judicial Council on Feb. 20 that the governor’s proposed budget for the coming fiscal year “is a balanced budget.” He said the Special Fund for Economic Uncertainties stands at roughly $4.5 billion and described total state spending of about $348.9 billion and general‑fund expenditures near $248.3 billion in the governor’s plan.

Steppenshaw framed the budget against recent revenue swings tied to capital gains and other stock‑market activity, saying those spikes and subsequent corrections make revenue forecasting volatile. “One of the main things that we feel is very important that the state needs to do is to change our rainy day fund requirements to save more during the upswings,” he told the council, noting doing so could require a voter initiative.

Steppenshaw also described recent structural pressures in the multiyear outlook, noting the administration’s estimate of multiyear structural deficits in the range of about $20 billion. He said the governor’s budget includes additional reserve deposits and assumes nearly $12 billion in long‑term debt payments over four years, with roughly $3 billion due in the budget year to meet constitutionally required obligations.

During council questioning, a Department of Finance official said the state carries roughly $25 billion in delayed obligations that will need to be repaid or scored in future budgets. The official broke that figure into about $5.8 billion in special‑fund loans, roughly $11.7 billion in cash‑flow loans and Prop 98 settlement and deferral amounts aggregating several billion dollars.

Council members asked how the department evaluates agency funding requests and balances statutory requirements, administration priorities and fiscal constraints. A DOF representative described a process driven by a budget policy letter and judgment about the availability of general‑fund resources while acknowledging that the judicial branch is a co‑equal branch and that DOF had made recent trial‑court investments.

Steppenshaw cautioned that revenue gains tied to market performance are fragile and that downside market corrections remain the largest risk to the revenue forecast. He said the department will continue to monitor revenues and adjust at the May revise.

What’s next: DOF will provide follow‑up data on migration and revenue drivers and the Judicial Council will continue coordinating with the department ahead of the May revise.