State Budget Practice Report Cards and Budget Resource Guide
California began a massive fiscal turnaround in 2015, when it paid off the last of the $15 billion in bonds it issued in 2004 to help cover a $35 billion budget shortfall. The improvement helped the nation’s most-populous state achieve A or B budgetary averages in all but one category for 2015 through 2019.
In reserve funds, California was among seventeen states winning A averages. The state was first credited with linking revenue volatility to reserve fund policies in 2016, after voters approved a constitutional requirement to set aside deposits equal to 1.5 percent of general fund revenues plus any capital gains tax proceeds exceeding 8 percent of general revenues. As of fiscal 2019, the state had $21 billion in its reserve funds, equivalent to 15 percent of general fund expenditures—potentially enough to weather a recession with minimal program cuts.
California was also one of seventeen states scoring an A average in budget maneuvers. From 2015 through 2019, it avoided common measures of masking budgetary imbalances, such as deferring expenditures, shifting revenues or costs, using debt to cover operating costs, or tapping other one-time revenues to support ongoing spending.
The one exception to its high marks was the legacy costs category, in which California averaged a D despite a decade of economic recovery. In 2018–19, the state failed to pay the actuarially determined contributions for public employee pension plans and other postemployment benefits (OPEB), primarily health care. Its pension funding ratio was 69 percent in 2019, 2 percentage points below the total for all states.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.