The state income tax, general sales tax, and business and corporation taxes are paid into the General Fund, money that the governor and the Legislature can budget, debate, appropriate and control to some degree. The state simply passes on most federal funds without influence. Although the Legislature has discretion over General Fund spending, much of that spending is largely determined before the governor or Legislature even begin to consider each year's budget. Propositions 98 and 111 effectively define minimum state support for public elementary and secondary education and community colleges. Mandated sentencing laws and state and federal court decisions regarding the treatment of prisoners largely determine the amounts the state must spend for prison construction and operation.
Federal mandates determine much of California's spending on health and welfare.
The state has provided benefits in some programs at levels higher than required by the federal government, but the courts have rebuffed attempts to scale back on the level of state support. Special fund spending is entirely non-discretionary in that uses of these funds are specified in the law that establishes the fund and permits raising the money. If changes in economic conditions or other relevent factors affect the magnitude of special fund collections, spending on the functions they support will change too. Impact of Federal Budget Balancing To balance the federal budget, spending on all non-interest portions of it will have to be cut about 11 percent. First, regardless of which particular federal programs are cut, the total number of federal dollars flowing into the state will be less than if the deficit continues.