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.