One-time Spending “freeze” Initiated by State of California
AENN
In one of the most spectacular statements issued by the California State Department has issued a formal “freeze” on current spending. “Pursuant to Section 74 of the recent “early action” budget bill, AB 106, the state Department of Finance has issued a formal budget letter (BL) to departments to implement an “expenditure freeze” for certain one-time appropriations, focused on those in Section 2.00 of the 2021, 2022, and 2023 budget acts”.
This freeze is NOT NORMAL but of course as we have been telling the public over the last 7 years the California financial train wreck would arrive and now it has arrived and with a vengeance.
Finance issues formal budget letter to departments
JASON SISNEY substack
Pursuant to Section 74 of the recent “early action” budget bill, AB 106, the state Department of Finance has issued a formal budget letter (BL) to departments to implement an “expenditure freeze” for certain one-time appropriations, focused on those in Section 2.00 of the 2021, 2022, and 2023 budget acts. The budget letter is here.
“Departments that received such appropriations shall immediately cease spending or encumbering these resources,” if they meet certain general criteria listed, the letter states. Only unallocated one-time funding items greater than $1 million are affected by the BL. Affected departments are directed to “contact Finance to assess remaining funds and impacts of this BL.”
From the Budget Letter (BL)
“Statewide Constitutional Officers are strongly encouraged to comply with the provisions of this BL,
as applicable”.
The executive branch has broad authority to determine the timing of disbursement for most categories of non-payroll state spending. Recognizing the discretionary nature of recent one-time appropriations and acknowledging the uncertainty of last year’s delayed tax receipts, the 2023 Assembly budget plan included a provision—eventually to become Section 21 of the 2023 budget act—that specifically authorized delay of one-time expenditures by Finance. Section 74 of the recent AB 106 amended Section 21 to specifically authorize the current freeze. With significant deficits projected for the foreseeable future, continuation of one-time spending, when deemed necessary, draws down state reserves and uses “quasi-reserves” (such as borrowing and fund shifts) faster than would be the case in the absence of that one-time spending. Faster use of reserves and quasi-reserves may make the 2025 budget more difficult to balance and require the most difficult budget decisions, such as ongoing program cuts or broad-based tax increases, to be made sooner.
The freeze is intended to enlarge the pool of potential options that the Governor and the Legislature have to balance the 2024 state budget in June.
