Total state spending grew rapidly from 1985-86 to 1991-92, but spending growth stopped during the next two years, largely due to revenue constraints associated with the recession.
With the end of the recession, spending growth resumed in 1994-95 and will continue in 1995-96. About half of the current spending growth is for additional support to K-14 education, which is required by Proposition 98 as state revenues increase.
After adjusting for inflation, however, total spending in 1995-96 still will be below its peak in 1991-92.
Total state spending has grown at an average annual rate of 5.7 percent over the last decade, but annual spending growth for major program areas during this period varied from a low of 2.6 percent for higher education to a high of 9.9 percent for corrections.
The low rate of state spending growth for K-12 education reflects budget actions that increased school's share of local property taxes in order to reduce state school funding required under Proposition 98.
Prior to 1991-92, growth in special fund spending primarily reflected new earmarked funds (such as gasoline and cigarette tax increases) and the creation of new programs (such as fee-based environmental and recycling programs).
After 1991-92, special fund spending growth largely reflected restructuring within the budget, involving shifts of state costs to local governments along with shifts of state sales tax revenues to new special funds allocated to local governments to offset those costs.
The largest share of state spending is for education (39 percent). However, education's share of the state spending pie has diminished since the 1980s, when it received about half of total state spending.
Health and social services programs together account for 28 percent of state spending.
Although spending for prisons has grown rapidly, corrections still accounts for a relatively small share of total spending -- 6.4 percent.
The annual operating balance (surplus or deficit) is the difference between current revenues and current spending in any year. Adding any carryover surplus or deficit from the prior year to the operating balance yields the budget balance.
During the recession of the early 1990s, the state ran large operating shortfalls. These resulted in an accumulated deficit that was financed by borrowing.
Recent operating surpluses have reduced the carryover deficit, which is expected to be eliminated by the end of 1995-96.
Only about one-fifth of total federal spending in California flows through the state budget. The largest share of federal spending is for direct payments to individuals in programs that are not administered by the state.
Social Security and Medicare benefits comprised more than 70 percent of the direct federal payments in California.
Local agencies receive most of their federal funds via the state.
Table
of Contents 
Part
IV, State Revenue 
Part
VI, Program Trends -- Part A