California

State Budget Practice Report Cards and Budget Resource Guide

America’s biggest state economy earned top average A grades for 2017 through 2019 for a lack of budget maneuvers and strong rainy day fund and budgetary transparency policies. But California continues to be dogged by $247 billion in unfunded public worker pension obligations. The state’s handling of this liability, along with its large unfunded liability for other postemployment benefits (OPEB), principally health care, reduced its average in legacy costs for the period to D-minus—making it one of only seven states to receive the lowest possible mark. 

While the state made its full actuarial contributions for fiscal 2017 to 2019 to the state’s public employee pension system, it did not do so for the pension for teachers. For example, the $7.7 billion in fiscal 2018 fell about 20 percent short of meeting the actuarially determined amount. California’s total pension funding level dropped to 68 percent in 2018—2 percentage points below the total for all states—from 70 percent in 2016.

The state’s OPEB liability was $86.5 billion in fiscal 2018, with its annual contributions meeting just 54 percent of the amount needed to reach full funding over thirty years.

California was one of only four states to score a three-year average of A in transparency. Like Alaska, Hawaii, and Tennessee, it earned the top grade by disclosing the estimated cost of deferred infrastructure maintenance in budget documents. Most recent estimates put California’s liability at $67 billion. Additionally, each year’s budget presents a five-year infrastructure plan that provides an extensive accounting of the state’s infrastructure needs.

Download Printable State Report Card

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 presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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