California Constitution Article XVI - Public Finance [Sections 1 - 23]
California Constitution – Article XVI: Public Finance [Sections 1–23]
Overview:
Article XVI of the California Constitution governs the state’s public finance system. It outlines the rules and restrictions for public spending, borrowing, debt, taxation, and investment at both the state and local levels. The article is designed to ensure fiscal responsibility, accountability, and voter oversight in financial matters involving public funds.
Below is a section-by-section summary of Sections 1 to 23:
§1 – Appropriations
No public money may be drawn from the Treasury unless authorized by law and appropriated for a specific purpose.
§1.3 – Long-Term Care Fund (now repealed)
Previously established a Long-Term Care Trust Fund; this section has since been repealed.
§1.5 – Minimum Funding Guarantee for Education
Sets a minimum level of state funding for public schools and community colleges under Proposition 98 (1988).
Known as the Education Funding Guarantee.
§2 – State Debt
The state may not incur debt over $300,000 without voter approval.
Exceptions exist for short-term borrowing and in times of war or emergency.
§3 – Local Government Debt
Local governments cannot incur debt exceeding annual revenues without two-thirds voter approval.
§4 – Lending Credit and Stockholding Prohibited
The state and its subdivisions may not lend credit or become stockholders in any private corporation, bank, or business.
§5 – Public Works Funding
Proceeds from the sale of public works bonds must be used only for the purpose for which the bonds were issued.
§6 – Use of Public Funds
Limits how local governments can levy taxes and assessments. Emphasizes that taxes must be for public purposes only.
§6.5 – Veterans’ Bonds
Authorizes the issuance of bonds for veterans (e.g., to support the California Veterans’ Home Loan Program).
§7 – Investment of Public Funds
Public agencies may invest in securities permitted by law.
Also allows the state to invest in bonds and other debt instruments.
§8 – State Board of Equalization (now restructured)
Relates to how taxes are assessed and equalized across counties.
Some functions moved to other agencies in recent reforms.
§9 – Claims Against the State
No claims can be paid out of public funds unless authorized by law.
§10 – Retirement Systems
Prohibits the diminishing of vested public employee pension benefits.
Strengthens pension obligations as contracts protected by law.
§11 – Investment by Public Retirement Systems
Public pension systems are allowed to invest in stocks and other securities, subject to prudent person standards.
§12 – Budget Stabilization Account
Establishes the Rainy Day Fund (Budget Stabilization Account) for financial emergencies.
Mandates annual deposits and rules for withdrawals.
§13 – State and Local Treasurer Requirements
Requires all public funds to be accounted for and managed under uniform standards.
§14 – Ballot Pamphlet Disclosures
Requires ballot pamphlets to disclose the financial impact of bond measures or tax changes.
§15 – State Tax Apportionment
Describes the distribution of tax revenues (especially from property taxes) between the state and local governments.
§16 – Property Tax Allocation
Sets rules for how property tax revenue is distributed among counties, cities, and special districts.
§17 – Highway Users Tax Fund
Taxes collected on fuels and vehicles must be used only for transportation-related purposes.
§18 – Revenue Bond Act of 1941
Allows state agencies to issue revenue bonds for projects without voter approval, provided they don’t obligate the General Fund.
§19 – Public Utilities and Energy Efficiency
Authorizes local governments to create energy efficiency or utility financing programs, including property-based financing.
§20 – Budget and Fiscal Procedures
Reinforces procedures and timelines for the state budget process, including balanced budget requirements.
§21 – Infrastructure Financing
Allows for special infrastructure financing districts, with restrictions and voter approval in some cases.
§22 – Legislative Analyst’s Office
Establishes an independent Legislative Analyst to review and report on the budget and financial legislation.
§23 – Repealed Sections
Notes that several sections (especially older bond-related provisions) have been repealed or superseded.
✅ Key Themes of Article XVI:
Debt Limitations – Requires voter approval for most state and local borrowing.
Public Purpose Doctrine – All spending must serve a public benefit.
Pension Protection – Public employee pensions are contractually protected.
Fiscal Accountability – Emphasizes balanced budgeting, investment rules, and transparent tax allocation.
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