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Department of Finance frames Governor's proposed budget as balanced, warns of revenue volatility
Summary
At the Judicial Council meeting Feb. 20, California Department of Finance Director Joe Steffenshaw presented the Governor's proposed budget as balanced, citing a $4.5 billion special fund for economic uncertainties and warning that capital‑gains volatility and rising program costs create multiyear structural risks for state spending, including impacts on courts.
Joe Steffenshaw, director of the California Department of Finance, told the Judicial Council on Feb. 20 that the Governor’s proposed budget — released to the Legislature in January — is “a balanced budget” and stressed the state’s exposure to revenue swings driven by capital gains and market performance.
Steffenshaw said the proposed budget includes a special fund for economic uncertainties (SFEU) of $4,500,000,000 and total spending of about $348,900,000,000. He urged greater rainy‑day savings to smooth the effects of volatile revenues and said the administration has proposed a new surplus holding account to avoid spending projected revenue before it materializes. “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 said.
The director outlined programmatic cost pressures the administration expects to carry forward, including an estimated $1,400,000,000 in fiscal‑year costs tied to federal changes that mainly affect Medi‑Cal ($1,100,000,000) and CalFresh ($300,000,000). He also noted that the budget assumes nearly $12,000,000,000 in delayed obligations will be repaid over future budgets and that constitutionally required long‑term debt payments total just under $12,000,000,000 over the next four years.
Council members pressed DOF on the composition of the roughly $25,000,000,000 in delayed obligations the administration tracks; DOF staff said that total includes about $5,800,000,000 in special fund loans, $11,700,000,000 in cash‑flow loans, a Prop 98 settle‑up of roughly $5,600,000,000, and another Prop 98 deferral near $2,000,000,000.
Why it matters: the Judicial Council oversees policies and proposes requests that the Department of Finance considers when evaluating branch funding. Steffenshaw said DOF evaluates judicial branch requests under statewide budget policies and by weighing availability of general fund resources versus special funds. The presentation signaled that while revenues have improved recently, reliance on volatile revenue sources means the branch should plan for constrained new ongoing commitments.
What’s next: DOF will update revenue and expenditure projections ahead of the May revision; council members said they will continue to provide material to support judicial branch funding requests.
