6000     INTRODUCTION TO THE BUDGETING CHAPTER 
(Revised 2/98)

The budgeting chapter of SAM provides an overview of the state’s budget process as well as a description of the events, actions and documents that make up the state's Financial Plan.  It also provides some instructions and examples for the preparation of the forms, documents, and schedules critical to the preparation and enactment of the annual financial plan and some instructions for its administration from day to day. 

Because of the dynamic nature of budgeting in California, this manual does not provide all the instructions which are necessary for the development, enactment or administration of the budget.  Budget policy and supplemental instructions are generally issued by the Department of Finance (DOF) through Budget Letters, budget related Management Memos, and other memoranda to supplement this manual.  Electronic mail notices to departmental budget officers and the Internet are also used, with the expectation of increased usage in the future.

6005     AVAILABILITY OF BUDGET INSTRUCTIONS AND FORMS 
(New 2/98)

The following information is available to departments on DOF’s Internet Website.  The address is http://www.dof.ca.gov/html/budlettr/letters.htm.

1. Background Information
2. Budget Letters
3. Budget Instructions

The DOF budget forms are available at the same Internet address.  Standard state budget forms may be obtained from the Department of General Services, Forms Management Office.

Other information issued by DOF such as the latest Governor’s Budget Summary, budget highlights and answers to “Frequently Asked Budget Questions” may be accessed via http://www.dof.ca.gov/.

6110     PREFACE 
(New 2/98)

The budget process for California defies a simple concise definition.  It is a process rather than a product.  It is not the development of the Governor's Budget, the Legislature's enactment of a budget nor the executive branch's administration of the budget.  Rather, it is the combination of all of these phases with all the ramifications and influences of political interactions, relationships with federal and local governments, public input, natural events, legal issues, the economy, initiatives and legislation, etc.

Although the size and complexity of California and the dynamics of the process make it difficult to establish and maintain an orderly process, these very reasons necessitate an orderly formalized process.  The following sections summarize the major steps and procedures of California's budget process.

6120     BUDGET DEVELOPMENT 
(New 2/98)

The State Constitution, Article IV, Section 12, requires that the Governor submit a budget to the Legislature by January 10.  The budget must contain itemized statements for expenditures and revenues.  It provides for a balanced budget in that, if the proposed expenditures for the budget year exceed available resources, the Governor is required to recommend the sources for the additional funding.

The Director of Finance, as the chief financial advisor to the Governor, directs the effort for preparation of the Governor's Budget.  Under the policy direction of the Governor, the Director of Finance issues instructions and guidelines for budget preparation to agencies and departments.  This effort typically gets underway even before the Legislature has passed the budget it is currently considering.

Although California has and does utilize concepts such as Zero-Based Budgeting, Management by Objectives, and Total Quality Management, the basic approach utilized is a mixture of incremental budgeting, zero-basing and special reviews.  This approach uses the current departmental/program level of funding as a base amount to be adjusted by change proposals, including zero-basing of some items/programs and subjecting others to special reviews to determine the proper funding level.  The Budget Change Proposal (BCP) has been the traditional decision document for departments to propose a change to the existing budget level.  BCPs are submitted to DOF for review and analysis. (Specific instructions for preparation of BCPs are issued annually in a Budget Letter.)

The general goal in the budget decision process is to resolve budget issues at the lowest level possible.  For those departments that are under an Agency Secretary, departments must clear their proposals through their respective Agency.  For non-Agency departments, proposals are presented directly to DOF.  Issues which are not resolved between departments and DOF staff are discussed at hearings with the Finance staff, the Agency and the departments.  Issues not resolved at this level are discussed at hearings conducted by the Director of Finance.  The most sensitive issues are ultimately presented to the Governor for a decision.

After all decisions are completed, DOF coordinates the printing of the following publications which comprise the Governor's Budget package.  The Budget Summary and Budget Highlights are also available from the DOF Website, http://www.dof.ca.gov/.

Governor's Budget Summary–A summary volume which includes the Governor's goals and objectives for the forthcoming year, and the policy perspectives and highlights of the changes in the Governor’s Budget.

Governor's Budget–A detailed presentation for each department for the past, current, and budget years.

Governor's Budget Highlights–A pocket size highlights book of narrative, charts and graphs issued on the Press Conference day.

Salaries and Wages Supplement–A detailed presentation of authorized staffing and related salaries.

The Governor annually unveils the budget at a formal press conference.  The Governor's State of the State address typically includes a general presentation of the Administration’s budget policies and priorities.

By constitutional requirement, the Governor's Budget must be accompanied by a Budget Bill itemizing recommended expenditures which shall be introduced in each house of the Legislature.  The Constitution also requires that the Legislature pass the bill by June 15.

6130     BUDGET ENACTMENT 
(New 2/98)

The Senate Budget and Fiscal Review Committee and the Assembly Budget Committee are the two committees that hear the Budget Bill.  See SAM 6945, Legislative Process.  They assign the items in the bill to several subcommittees (by major subject areas such as Education or Health and Welfare) which conduct budget hearings.  These hearings generally begin in late February soon after the Legislative Analyst issues the "Analysis of the Budget Bill."  The Legislative Analyst is appointed by the Joint Legislative Budget Committee and is charged with providing a nonpartisan analysis and recommendations for changes to the Governor's budget plan. 

In addition to the Legislative Analyst, DOF and departmental staff typically provide testimony at the subcommittee hearings.  In recent years, there has been increasing input by partisan fiscal committee consultants of both the majority and minority parties.  Additionally, lobbyists and the public may provide testimony at the hearings.

The DOF proposes adjustments to the Governor's Budget through "Finance Letters."  By statute, DOF is required to give the Legislature all proposed adjustments, other than Capital Outlay and May Revision, to the Governor’s Budget by April 1.  Capital Outlay adjustments are due by May 1.  The traditional May Revision adjustments are due by May 14, and consist of an update of General Fund revenues and changes in expenditures for school funding requirements pursuant to Proposition 98, caseload, enrollment, or population.  The Legislature typically waits for the May Revision update before final budget decisions are made on major programs such as Education, Corrections, and Health and Welfare.

When the subcommittees complete their actions, they report their recommendations to the full committee.  Upon adoption of the budget by the full committee, a recommendation is made to the Floor (full house).  Upon two-thirds vote of the house, the Budget Bill is passed to the other house.  A Budget Conference Committee is then appointed to work out differences between the Senate and Assembly versions of the bill.  Upon completion of action by the Conference Committee and a two-thirds vote, this conference version is then sent to the two houses for approval.

Sometimes the Conference Committee does not reach final resolution on the budget.  This stalemate typically results from non-resolution of a few major issues.  These issues are then resolved by the "Leadership" or "Big 5" (Governor, Speaker of the Assembly, President Pro Tempore, and the minority leaders of both houses).

When the Budget Bill receives a two-thirds vote of each house, it is passed on to the Governor.  The Constitution allows the Governor to reduce or eliminate an item of appropriation.

Although there is no constitutional requirement for passage of a balanced budget, enacted budgets generally project a balanced budget.

The DOF publishes three documents upon enactment of the Budget Act.  The first two are also available from DOF Website.

There are generally budget changes proposed by the Governor or the Legislature which necessitate changes to existing law in order to implement the budget changes.  If this is the case, separate bills are introduced to implement the change.  These budget implementation bills are called "trailer bills" and are heard concurrently with the Budget Bill.  By law, all proposed statutory changes necessary to implement the Governor’s Budget are due to the Legislature by February 1.

6140     ADMINISTRATION 
(New 2/98)

The Budget Act is the primary source for appropriations.  The Constitution, continuous statutory appropriations and special legislation also provide expenditure authority.

Departments have the primary responsibility to operate within budgeted levels and to comply with any restrictions or limitations enacted by the Legislature.  Further, the general expectation is that state agencies comply with the legislative intent.  Although the general expectation is to conform to the enacted budget, the Legislature has recognized a need to establish some flexibility to adjust budgets.  For example, the statutes provide a continuous appropriation for allocations by the Director of Finance to meet expenditures resulting from natural disasters for any emergency proclaimed by the Governor.  The Legislature has also provided provisions in the Budget Act to allow for budget adjustments.  Generally, such authority requires Director of Finance approval; many require a formal notice to the Legislature and a waiting period to provide the opportunity for legislative review and response before final approval.  Budget Act provisions to allow adjustments include authorizations for:

The DOF approves budget changes using Budget Revisions, Executive Orders and letters.  These changes are transmitted to the State Controller's Office (SCO), which maintains the statewide appropriation control accounts.

The Governor has certain powers to adjust expenditures.  Although these powers do not permit for adjustment of appropriations, the expenditure plan may be changed.  For example, past Governors have issued executive orders to implement hiring and equipment purchase freezes and to delay capital expenditures.  Under emergency conditions, the Governor is also authorized to direct state resources to meet emergency needs.

6150     BUDGET PROCESS 
(New 2/98)

As previously mentioned, the dynamic nature of California's budget process results in no single document providing a comprehensive description of the process.  The dynamics require changing instructions, descriptions, forms and procedures, law changes, etc.  In addition to SAM, the following provide information/instructions on the budget process:

Governor's Budget package

Legislative Analyst's "Analysis of the Budget Bill"

Budget Act and Final Budget Summary

Final Change Book

Budget Letters (including Governor's Policy Letter and Price Letter) and budget related Management Memos

Internet:

DOF Website:  http://www.dof.ca.gov/
Budget Letters Website:  http://www.dof.ca.gov/html/budlettr/letters.htm

The annual budget process is displayed in a relatively simple flow chart on the following page, 6150 Illustration.

6210     THE TRADITIONAL CONCEPT  
(Revised 2/98)

Budget formats have become a blend of the traditional and program concepts, a compromise that utilizes the best of both approaches.  Before the adoption of the program budget concept, “traditional” budgets were oriented to show expenditures according to departmental organizational structure or function and line-item objects of expenditures.  The last exclusively traditional budget was in 1969–70.

6220     THE PROGRAM CONCEPT  
(Revised 2/98)

The program concept and structure were adopted to bring forth and emphasize the purpose, meaning, and benefits of the many activities of departments.

Program

A program is a group of closely related and interdependent activities.  Ideally, a program should be clearly delineated, have a minimum of overlap and interaction with other programs, and lend itself to at least partial quantification.  It should be end-product or intermediate-product oriented.  Meaningful programs should be concerned with specific objectives of the department.  Each program should bring together all costs associated with its execution.

It is not uncommon to find different ways to subdivide programs.  In the earlier budget presentations when the program format was adopted, the hierarchy of the program structure was to divide programs into elements, elements into components, and components into tasks.  However, as presentations began to expand and proliferate to the lower levels of the program structure, a general policy was adopted to limit departmental presentations in the Governor's Budget to no lower than the element level.  Departments need to work closely with their DOF budget analyst to determine the format of the program presentation to be included in the Governor's Budget.  Program Objectives Statements, Need, Objectives, Output Authority and General Description are all potential presentations to be included in the budget.

Program Objectives Statement

All the pertinent facts about a program in a department are collected in a Program Objectives Statement.  A department may have one or more program statements.  The complete program statement as described below becomes a tool for the managers at program and departmental levels.  It should be kept up-to-date to reflect executive and legislative action.  Some parts of the program statement may be used in the annual departmental budget.

The Program Objectives Statement typically includes the following information:

Need

Information on the public need or problem which requires government intervention or action is central to program analysis and evaluation.  Frequently, the only way to recognize the extent of the need for a program is to develop a complete picture of the problem and its dimensions.  The adequate and thorough analysis of the need is essential to sound development of program objectives and means of meeting these objectives.  This same prerequisite greatly facilitates the identification of output and program input on the public problem or need.  A good need or problem definition is a major step to effective planning and evaluation.

The approximate quantification in explicit terms is a basic requirement of a good definition.  For example, to say, "great masses live in poverty" does not convey whether the number is near one million or one hundred million, whether they have effective incomes of less than recognized poverty level incomes, whether they live in urban or rural areas, whether they are male or female, or whether they are potentially rehabilitatable or in a permanent state of dependency.

The dimensions of need are many, and to meaningfully cope with the problem, these must be delineated and given estimated relative quantification to facilitate communication of information and improve the decision-making process.  Only then can objectives and work plan be purposefully formulated and pursued.

Objective

An objective is the end product or goal toward which particular program activities are directed.  The end products or goals of each program should relate to a basic mission of the department, thus establishing a direct relationship between the specific products or goals of each program and the overall broad scale objectives of the department, organization, or function.  The objective may or may not cross departmental lines.  It must be compatible with other objectives in other departments.

Many programs have more than one objective, and, conversely, a program may, in some manner, contribute to more than one objective.

Output

A number of measures are in use that relate to the attainment of the objective or that quantify some aspect of the program.

Some objectives are not stated in measurable terms and data that are developed may not relate directly to the accomplishment of the objective.  Such data however, give an indication of the size of some aspect of the program.  Examples follow.

Program Size.  This type of data shows the intended magnitude or extent of the program, for example, the size of the target group or the number of classes to be conducted or projects to be done.

Workload.  These data indicate the volume or number of things to be done.  Examples include the number of court cases by type, the number of applications processed or examinations given.

Output.  This figure reports the volume of things (goods and services) produced that are not used internally somewhere else in the program.  Examples include number of court opinions rendered, graduates, permits granted, or trees planted.  Operating efficiency is another statistic that is sometimes used.  This normally takes the form of a ratio of output or program size to a unit of input.  Examples of this might include number of fish planted per hatchery, or number of cases successfully closed per social worker.  Other forms of operating efficiency might include cost of a student per day or the delay time in responding to an emergency (time is the input and has a cost).

Authority

Provide the legal (Constitutional or statutory) or administrative (Executive Order, regulation, SAM, etc.) authority for the program.

General Description

Information on the activities by which the objective is created.

Work Plan

A summary schedule of the outputs or workload (outputs, if possible) of the elements, components, and tasks that show the use and amount of the input and provide information on the magnitude of the program activities.

Input

Provides total cost information by fiscal year.

Resource requirements or input data enumerate the personnel and dollar requirements needed to support the program level specified in the work plan section of the Program Statement.  This information should be aggregated from the resource requirements of elements, components and tasks which make up the program.

Skill and accuracy in estimating future year program costs results from experience and good historical data.  Guides and standards for program cost accounting are combined in SAM Section 9200, et seq.

6300     DEVELOPMENT AND ENACTMENT OF THE ANNUAL FINANCIAL PLAN, THE PROCESS IN BRIEF  
(Revised 2/98)

The annual financial plan consists of the Governor's Budget and Budget Bill, special appropriation bills, and other bills with fiscal or program impact as they are enacted by the Legislature and initiatives.

The Governor has complete and final responsibility for "the Governor's Budget."  However, the budget is actually a product of the entire executive branch.  Although the constitutional officers and the segments of higher education have a certain level of autonomy, the Governor typically requests their cooperation in seeking and establishing the fiscal policies of the Administration.  Decisions, small and large, must be made by many persons.  While legislative and administrative heads make crucial decisions on specific questions raised by the budget process, they are largely dependent on information presented to them.  It is essential therefore that everyone involved in the preparation of the budget try to create a meaningful, well developed and fully justified plan and not expect the budget review process of the Administration to accomplish an impossible task for which it is not designed.

6305     BUDGET POLICY 
(Revised 2/98)

The Governor’s Budget policy provides guidance for the formulation of the budget.  Such guidance may provide specific instructions for the revenue and expenditure programs and for balancing the budget.  The Governor may decide to disseminate budget policy through a formal announcement, through the Agency Secretaries, when applicable, or by instructions issued by DOF.

Budget policy may also be set forth in the control sections of the current Budget Act.  As an example, budgeting for continuance of administratively established positions is regulated by Section 31.

6310     AGENCY HEARINGS AND GOVERNOR’S REVIEW 
(Revised 2/98)

Agency Secretaries assisted by DOF staff schedule and conduct meetings with Agency departments to review proposed budgets and Budget Change Proposals.  For unresolved issues and sensitive and significant budget changes, budget recommendations may be prepared for the Governor's decision/review.  In the same manner, DOF conducts hearings for non-Agency departments and prepares recommendations for the Governor's decision.

6315     PREPARATION AND SUBMITTAL OF BUDGETS  
(Revised 2/98)

Each department is responsible for preparing its own budget in the format required by DOF.  The initial budget prepared by a department is typically a baseline budget; i.e., a budget which reflects the anticipated costs of carrying out the current level of service or activities as authorized by the Legislature.  Departments should submit complete baseline budget galley and supplementary schedules to Agency Secretaries, as applicable, and to DOF during the period from September to October in accordance with a schedule worked out with DOF.  Adjustments required for approved Budget Change Proposals will be made on subsequent galley.

If specific guidelines and sample budget formats do not provide an example for a budget presentation, use last year's printed budget as a format guide.  It is suggested that budget officers preparing departmental budgets meet with the assigned DOF budget analyst to work out difficulties with format.

6320     THE GOVERNOR'S BUDGET—PUBLICATION, DISTRIBUTION, ORDERING, AND PUBLIC SALE 
(Revised 2/98)

The Governor's Budget is printed in quantities sufficient to fill official distribution requirements and orders from state agencies and to provide a limited stock for sale to the public.

The Governor’s Budget, Budget Highlights, Governor’s Budget Summary including the summary schedules are available from DOF Home Page, http://www.dof.ca.gov/.

The Office of State Publishing (OSP)  (A.K.A. Office of State Printing) determines the quantity to be published based on the following:

Departments may reserve copies of the Governor's Budget, or parts of the Budget, by submitting orders as indicated below:

Complete Sets of the Budget

Submit Sub-purchase Order form, STD. 40, to the Legislative Bill Room, no later than October 1, indicating the required number of copies.

Excerpts or Extracts from Volumes of the Budget

Complete sections of agency budgets are printed separately and may be obtained by submitting a Printing Requisition and Invoice form, STD. 67, to OSP no later than October 1.

Members of the public may purchase copies of the budget at the counter of the Legislative Bill Room.

6325     THE BUDGET BILL  
(Revised 2/98)

The Budget Bill is prepared by DOF and is submitted to the Legislature in January accompanying the Governor’s Budget.  The Budget Bill is the Governor’s proposal for spending authorizations needed for the subsequent fiscal year for on-going programs authorized by the Legislature.  Each house has its own bill.  The California Constitution requires the Legislature to pass the Budget Bill and send it by June 15 each year to the Governor for signature.  After signature by the Governor, the Budget Bill becomes the Budget Act.

6330     LEGISLATIVE ANALYST’S “ANALYSIS OF THE BUDGET BILL” 
(Revised 2/98)

The Legislative Analyst prepares an "Analysis of the Budget Bill.”  This report provides for an independent non-partisan review and recommendations on the funding proposed in the Governor’s Budget.  Traditionally, this report is generally issued about the third week of February.  The report can be obtained from the Office of the Legislative Analyst.  They are not stocked by the Legislative Bill Room.

6333     BUDGET ACT 
(Revised 2/98)

A Budget Bill is introduced in each house of the Legislature at the time the Governor presents the proposed budget to the Legislature.  These bills propose the major part of the expenditure authority (appropriations) for the purposes stated in the Governor’s Budget.  The Legislature normally amends, increases, and decreases the proposed Budget Bills.  One of the bills becomes the Budget Act after it is passed by both houses of the Legislature and signed by the Governor.  Items in the Budget Bill may be vetoed or decreased but not increased by the Governor prior to signature.  See SAM Section 6350.

6335     LEGISLATIVE FISCAL COMMITTEE AND FLOOR ACTIONS 
(Revised 2/98)

See SAM Sections 6130 and 6150 (chart) for descriptions of the budget enactment process regarding subcommittee, committee, and floor actions on the Budget Bills.

6340     BUDGET COMMITTEE ON CONFERENCE  
(Revised 2/98)

The Joint Rules provide that when the Senate or Assembly refuses to concur in amendments to a bill made by the other, the Senate and the Assembly will each appoint three members to the Budget Committee on Conference.  Generally, the appointees for each house will include two members from the majority party and one from the minority party.  Meetings of the Budget Committee on Conference are held in public.

Passage requires a majority vote of two senators and two assembly members.  A Committee on Conference of the Budget Bill shall only consider differences between the versions of the Budget Bill and shall not approve any item of expenditure which exceeds that contained in one of the two versions.  If the Committee on Conference fails to gain passage, a second Committee on Conference will be selected and the process repeated.  No more than three difference conference committees may be appointed on any one bill.

6345     THE GOVERNOR'S VETO  
(Revised 2/98)

The Governor may reduce or eliminate one or more items of appropriation while approving other portions of a bill.  He/she will then return it with a statement of the items reduced or eliminated with the reasons for his action to the house of origin.  Items reduced or eliminated may be separately reconsidered and may be passed over the Governor's Veto by a two-thirds vote of each house.

6350     THE BUDGET ACT/FINAL BUDGET SUMMARY
(Revised 2/98)

The Budget Bill becomes the Budget Act after it is passed by both houses and signed by the Governor. 

The veto actions of the Governor are listed beginning on the first page.  The veto actions are not amended into each item/section of the Budget Act.  When referring to an item of the Budget Act, be sure to check for possible veto action which may be applicable to the item. 

The DOF also publishes a Final Budget Summary.  This is an annotated version of the Budget Act, showing the Governor’s veto actions by item/section as well as technical corrections/changes.  It also includes fiscal summaries.

6355     THE LIST OF CHANGES TO THE GOVERNOR'S BUDGET, FINAL CHANGE BOOK 
(Revised 2/98)

The list of changes to the Governor's Budget is called the "Final Change Book.”  The Final Change Book is a published document which provides the details of  the actions of the Legislature and the Governor's veto actions.  It contains a detailed list of changes in Budget Act item/section order for the program and traditional formats for state operations and local assistance and changes to projects for capital outlay.  It also includes fiscal summaries.

6400     THE DEPARTMENTAL BUDGET PRESENTATION  
(Revised 2/98)

1. The departmental presentation should be arranged in the order and format prescribed in the current annual budget preparation instructions.  Normally the format will follow the presentation of the latest Governor’s Budget.  The “control proof” copy of the budget galley should be transmitted through the Agency Secretary (if an Agency department) accompanied by a letter of transmittal.

If the department is not assigned to an Agency, the budget galley together with the cover letter should be forwarded directly to DOF.

2. Departmental estimates of expenditures and revenue in the Governor’s Budget should be based on existing law.  No consideration should be given in the budget presentation to proposed changes in laws except for program changes approved by the Administration.

3. It is important that fund balance, revenue, expenditure, and other accounting data included in the past year presentation of the Governor's Budget agree in amount and classification with similar data published in the Annual Report of the State Controller.  Therefore, departments will make certain that data included in budget schedules are identical with their year-end financial reports.  Exceptions may be made where departments believe substantial adjustments require otherwise and DOF budget staff agrees in advance of departmental presentation of budget schedules. 

The following sections of SAM dealing with departmental budget presentations are generally in the order that the development of data is likely to occur.  The first part deals with personal services as the reconciliation of the personnel year base to the legislative authorizations typically is an initial task in building the next budget.  Following are sections dealing with operating expenses and equipment, supplementary schedules, Summary by Object, Reconciliation with Appropriations, Fund Condition Statements, and Schedule 10s.

6403     PERSONAL SERVICES  
(Revised 2/98)

The category of Personal Services includes all payments for personal services except: (1) those obtained under contract; and (2) payments for health and welfare benefits for prevailing rate employees as authorized by Government Code Section 18853.5.  The category contains two objects of expenditure: (1) salaries and wages, which include all direct payments for personal services; and (2) staff benefits, except for those services obtained under contract.  See Government Code Section 19830 and SAM Section 6412 subsection C.

Government Code Sections 19130-19133 provide criteria and procedures regarding the state’s use of personal service contracts.  These provisions basically provide for personal services contracts to achieve savings when specific conditions are met and for the State Personnel Board to review the contracts for compliance with the specified standards.

6406     POSITION/PERSONNEL YEARS/SALARY COST ESTIMATES PRESENTATION 
(Revised 2/98)

The detailed presentation of Authorized Positions and Personnel Years information consists of two major parts: (1) the Salaries and Wages Supplement (Schedule 7A) which is presented as a separate publication; and (2) the Changes in Authorized Positions presentation in the Governor's Budget.

The instructions which follow are for the preparation of the "Changes in Authorized Positions" presentation.  For examples, refer to departmental presentations in the Governor’s Budget.  Position entries should be grouped under the appropriate organizational headings and subheadings as reported in the Salaries and Wages Supplement.  Footnotes may be used to explain action taken for continuously vacant positions per Government Code Section 12439, etc., or to document limited-term positions.

Authorized Positions

This line shows total position/personnel-year count and expenditures and will agree with the corresponding Totals, Authorized Positions shown in the Salaries and Wages Supplement (Schedule 7A).  This total will not include those positions abolished as vacant by the State Controller per Government Code Section 12439.  The number of positions must be reconciled to the number of positions approved in the final budget of the preceding year, less those positions abolished as vacant by the State Controller per Government Code Section 12439.  That is, the total number of authorized positions shown in the Summary by Object is to be reconciled with the total number of positions approved for the current year.  Authorized positions may be established as individual positions or as blanket authorizations (seasonal, temporary help, and overtime, etc.).  See Section 31.00 of the current Budget Act for restrictions on administratively established positions.

Workload and Administrative Adjustments

Under this major heading, list all administrative changes being made to the Totals, Authorized Positions described above.

6409     ESTIMATED SALARY SAVINGS  
(Revised 2/98)

The “Totals, Personal Services” entry in the Summary by Object shows the gross total of the positions and salaries of authorized positions.   In practice, due to leaves of absence, vacancies, downward reclassifications, and turnover (inability to fill a position immediately and at the same step), it is generally not possible to keep all authorized positions filled at the budgeted level for the entire year.

The amount not expended and the number of personnel-years not used are savings which are subtracted from the gross level to reflect the net levels of position usage and dollars that are likely to occur.

The position count shown with salary savings represents estimated vacant position levels only and does not necessarily have a direct relationship to the dollar amounts.  Care should be exercised in computing the personnel-year counts and dollar amounts to avoid erroneous impressions of vacancies and levels of service.

The amount of savings should be estimated on the basis of the past year experience of departments.   Factors to be considered include the experience in the past year in obtaining qualified personnel to fill vacancies, the turnover rate, and the employment conditions.

New positions for the budget year are reflected in the salaries and wages totals at the full salary level.  A salary savings adjustment for new positions must be incorporated in the estimated salary savings entry based on the time each new position is expected to be vacant. 

Five percent is generally acceptable as a minimum dollar value for salary savings on new positions if the position is to be authorized on July 1.

If a department is proposing additional funding due to a high budgeted salary savings amount, they must submit a BCP to explain the basis for their salary savings estimate to DOF.  The justification should include documentation of turnover experience, leaves of absence, projected retirements, vacancies, and any other factors which are expected to have an impact on the departmental hiring plan.

6412     STAFF BENEFITS
(Revised 2/98)

State contributions to the Public Employees' Retirement Fund, Old Age and Survivor Insurance, State Employees' Health Benefits, and Worker's Compensation for state officers and employees will be combined and entered immediately following "Net Totals, Salaries and Wages" in the "Summary by Object."  The item will be entitled "Staff Benefits" and will show the total contributions by year.  Estimates will be prepared in accordance with instructions in the Annual Price Letter.  For the past year, the amount of actual contributions may be taken from the appropriate allotment expenditure account.

State entities that carry Worker's Compensation policies with the State Compensation Insurance fund will not budget additional funds for Worker's Compensation benefits.  They will continue to budget funds for payments of premiums that will be included as a part of Staff Benefits.

Because of the nature of this type of expense, some agencies may have to rely upon certain subjective factors in computing requirements.  Departments should prepare estimates taking into consideration all pertinent factors, particularly those which might result in a difference in cost from that experienced in past years.  Accident and injury experience loss rates, changes in working conditions affecting risk exposure, changes in number of employees and salary rates are examples of areas that can fluctuate yearly.
 
If a department is proposing additional funding for staff benefits, a BCP must be submitted to DOF.  If no variation is expected, the following method may be used in computing Workers' Compensation Insurance expense:

6415     SCHEDULE 7A—BUDGET SUPPLEMENT OF AUTHORIZED SALARIES AND WAGES (STATE CONTROLLER’S ROLE) 
(Revised 2/98)

The Uniform State Payroll System records maintained by SCO are used as the basis for the automated preparation of the Salaries and Wages Supplement.  The OSP will use SCO’s information (tapes) to produce Schedule 7A galley proofs, as of July 1 for each department served by the Uniform State Payroll System.  Manual preparation will be necessary for those departments not included in the Uniform State Payroll System.

As the cut-off date for the Schedule 7A is the same as for the Schedule 8 tabulation (SAM Sections 6424–6429), the position data will be the same. 

The Schedule 7A galley proof and the Schedule 8 tabulation are both prepared from SCO’s payroll records of "Established Positions."  The difference between the two is in the arrangement of the data and the information presented.  Essentially, the 7A galley proof is a summary of the more detailed information included in the Schedule 8 tabulation.

Generally, the same adjustments will be required to bring the payroll-based data to authorized levels in both the Schedule 7A and Schedule 8.  If the adjustments required are different from those in the Schedule 8 tabulation, they should be explained fully on the galley proof by footnote.  Adjustments may be required to bring the department's and SCO records into agreement.  Differences may arise due to problems with position documentation, timing or error.  If the State Controller has erroneously abolished a position pursuant to Government Code Section 12439 criteria—a position actually filled by a department but not recorded in SCO records—the error may be corrected by amending the position into the Schedule 7A.  If a position is properly abolished under the criteria of Government Code Section 12439 and the department wishes to retain it, the department must include it in a BCP as a proposed new position.  See SAM Section 6406.
 
Analysis of the Schedule 7A galley proof should be facilitated by reference to the Conversion Code Listing.  See SAM Section 6430.

The Schedule 7A galley is distributed to departments with a cover Budget Letter, usually in August.  Departments should carefully review the instructions provided in the Budget Letter.

6418     SCHEDULE 7A—BUDGET SUPPLEMENT OF AUTHORIZED SALARIES AND WAGES (PROCESSING) 
(Revised 2/98)

The OSP will use SCO tapes to produce the Schedule 7A galleys.  The Schedule 7A galley is distributed to departments with a cover Budget Letter, usually in August.  Departments should carefully review the instructions provided in the Budget Letter.  It is important that all changes made to galleys by departments be clearly marked so that OSP computer files can be accurately updated.  Inserts may be used for changes.  The Schedule 7A must be used unless approval has been received from DOF.

When departments are combined, there is a major reorganization of a department, or a new department is created, the Schedule 7A as received may not be usable because of the great number of changes to be reported.  It may be necessary to prepare a Schedule 7A manually in accordance with the following instructions.

This schedule can be prepared manually on the Standard Budget Schedule form, STD. 31, or such other form approved by DOF budget analyst.

Only the important and significant programs or subfunctions which are necessary to an understanding of the agency's organization or operations should be presented.  Insignificant subfunctions should not be shown separately even though they may have been separately shown on the Schedule 8 tabulation.  Change the arrangement in the latest salary supplement only after consulting with DOF.

Within each such significant expenditure class or subclass, combine all full-time positions of exactly the same classification regardless of differences in pay rates or other factors.  Part-time or part-salary positions of the same class are combined irrespective of the fraction of time.  Position classifications are listed in descending order of salary range.

Under "Number of Positions" column show for each year the number of positions in each classification or title.  Positions should be shown with the net personnel-year count based on establishment or abolishment dates, and whether or not they are limited-term or temporary.  Blanket position personnel-year counts are shown for temporary help but not for overtime. Dollar amounts for both are to be reported to the nearest dollar.  All permanent positions approved in the final budget are to be included.  For the past year, positions are counted on an actual basis.  The changes in the position complement authorized by the Legislature in the approved budget ("Workload and Administrative Adjustments" and "Proposed New Positions" as amended by the Final Change Book) should be posted and documents (STD. 607's) should be sent to SCO.  Do not make any proposed staff changes directly to the Schedule 7A galley.  Such changes will be reported in the "Changes in Authorized Positions" presentation under "Workload and Administrative Adjustments and Proposed New Positions.”  See SAM Section 6406.  A position count for blanket positions (seasonal, temporary help, or terminal-pay positions) is included in totals.  For the past year, enter actual personnel years of employment.  For the current and budget years enter the exact number of personnel years authorized by the Legislature.  The necessary changes in blanket positions will be reported under "Workload and Administrative Adjustments" or "Proposed New Positions" in the "Changes in Authorized Positions" presentation.  The number of positions reported must be fully reconciled with the number of positions approved in the latest enacted  budget.  The number of positions is to be reconciled with the number approved by the Legislature.
 
The SALARY RANGE column will show for each classification the established minimum and maximum rates of the approved monthly salary range as of July 1, current year; or, if appropriate, show the established flat monthly rate (e.g., $1,430-2,138; or $5,648).  Flat rate salaries fixed by Constitution or statute on an annual basis are shown on the annual basis.

For each blanket position (or authorization) show the actual amounts used in the past year in parenthesis.  For the current and budget years enter the position and dollar amounts authorized by the Legislature increased to include any general or special salary range changes.  If general salary increases are not effective at the start of the current fiscal year, it may not be included in Schedules 7A and 8.  In this case, the increases will be reflected in a single line entry “salary adjustment” in the Summary by Object.  These amounts must include any changes authorized by the Legislature in the approved budget under "Workload and Administrative Adjustment" and "Proposed New Positions."  All other changes proposed for blanket positions must first be approved by the Legislature as "Workload and Administrative Adjustments" or "Proposed New Positions" before being included in the Salary Supplement.  When the Salary Supplement is prepared in this fashion, no additional explanation or justification of blanket positions is required.

If an administratively authorized position has been established and has been paid from blanket funds, the position will terminate on June 30 of the current year.  However, it may be reestablished upon approval of DOF, provided it is included in the budget being submitted to the Legislature as described previously, and provided that this does not result in the establishment of positions deleted by the Legislature.  See Section 31.00 of the Budget Act.

For a more complete definition and description of blanket positions, see SAM Section 6518.

Changes because positions were reclassified, filled, or vacant are reported per SAM Section 6406.

Reclassifications of trainee positions to the next higher grade are shown as existing positions.  Show both class titles.  In the "Salary Range" column give the minimum of the trainee range and the maximum of the range for the higher class.  Combine reclassifications in this manner only when the class specifications clearly provide that upgrading is intended after completion of a training period.  Amounts requested will include the total amount required for the entrance class as well as for the reclassification.  Give complete information.

For example:

	Salary Range	Current Year	Budget Year
Accountant I - Accounting Officer	$2,239–3,602	$26,868	$35,952

The “Totals, Authorized Positions" line shows the personnel-year count of positions filled and actual amount expended for the past year and the number of positions and amounts approved by the Legislature in the approved budget for the current and budget years.

6419     SUBMITTAL OF SCHEDULE 7A GALLEY PROOF TO DOF 
(Revised 2/98)

Upon completion, the galley is to be submitted to DOF.  Do not contact OSP; instead contact DOF on inquiries pertaining to the Schedule 7A.

The "as of" date of the reconciled Schedule 7A and the Schedule 8 tabulation is July 1.  The Schedule 7A will summarize the information presented in detail in the Schedule 8.  The totals for the current and budget years must reconcile to the legislatively authorized positions as reduced by vacant positions abolished by the State Controller pursuant to Government Code Section 12439.  The general rule is that the July 1 current year positions should equal those proposed in the Governor’s Budget adjusted for changes reflected in the Final Change Book.  Any exception should be footnoted at the end of the Schedule 7A.

6421     CONTROLLER'S TABULATIONS (OTHER THAN SCHEDULE 7A) 
(Revised 2/98)

The SCO prepares several reports to assist in preparation of budget and encumbrance information for the Salary Supplement.  More detailed explanations of the specific tabulations follow.

6424     SCHEDULE 8 TABULATION  
(Revised 2/98)

In the latter part of July, SCO will prepare a Schedule 8 report from the position and payroll rosters of all positions existing on June 30 of each fiscal year which are maintained by that office. The "as of" date for this report will be July 1 of the current year.  The report is then distributed to departments.

No transactions effective July 1 or later will be included with the following exceptions:

Salary changes effective July 1 will be included if approval is completed by the salary setting and approval authorities prior to mid-July.

A reorganization effective July 1 which has prior approval of SCO and DOF will be included.

Continuously vacant positions which are to be abolished under Government Code Section 12439 will not be included in SCO tabulation.

New permanent positions (full time or fractional) to become effective on July 1 (this does not include California State University positions).

6427     DESCRIPTION OF SCHEDULE 8 TABULATION  
(Revised 2/98)

The SCO will prepare a schedule in quadruplicate of established positions (excluding blanket and other positions having serial numbers in the 900 series) as of June 30 of the past year which are authorized to extend beyond June 30, indicating the following for each budget function, in numerical order of budget function code:

The SCO tabulation will also include totals of personnel-years and amounts expended by reporting unit (or budget function) within agency and a grand total for each agency code.

6429     VERIFICATION AND COMPLETION OF SCHEDULE 8 TABULATION  
(Revised 2/98)

Each department will proceed as follows, with clear entries made on all copies:

6430     CONVERSION CODE LISTING  
(Revised 2/98)

The Finance Conversion Code (FCC) listing provides the detailed instructions to the State Controller so that the information in the records of the Uniform State Payroll System can be arranged in the format of the Salaries and Wages Supplement by the computer.  The listing includes budgetary descriptions, codes, and sequence used to prepare the Schedule 7A galley proofs.

The FCC listing must be amended if the format for the Salaries and Wages Supplement needs to be changed.  This could be true if the format of the Salaries and Wages Supplement in the preceding year had to be changed by hand, if new reporting units have been added or deleted, or if a reorganization is to be reflected in the Salaries and Wages Supplement presentation.  If such amendments are not made to the listing, they will then have to be made manually to the Schedule 7A.

The FCC listing will consist of four columns: from left to right, the Finance Conversion Code, Agency Code, Department Reporting Unit Codes, and Budgetary Description.

The FCC is used as the key for the organizational structure which a department wishes to present in the Salaries and Wages Supplement.  The code controls the order and indentation of the budgetary description.  Also, it provides for the inclusion of reporting units under a budgetary description.  In addition, it indicates where subtotals and totals of personnel years and dollar amounts will be taken.  Totals will be provided at the end of the department and to no more than two subdepartmental levels.

The Budget Description entry becomes the title of the organizational unit or program as it will appear in the Schedule 7A galley proof.  The description will be limited to 35 characters for all subdepartmental levels.

The Agency Code is to identify the department from which the salaries in the reporting unit are to be paid.

The Reporting Unit Codes identify the reporting unit or units which are to be collated under the particular Budget Description entry.  All positions in the reporting units listed under a particular Budget Description entry should be a part of the unit described by the title listed in the Conversion Code Listing.

The SCO will print the FCC Listing used in preparing the Schedule 7A in the preceding year and send it in duplicate in May to each department for review and amendment.  The SCO also publishes a Payroll Letter giving specific instructions for amending and processing the listing and setting a date for its return to the SCO.  As the sole purpose of the FCC Listing is to control the array and detail in the Schedule 7A galley proof (which becomes the Salaries and Wages Supplement), its careful review and amendment can reduce the necessity for making changes manually at a later date.

In the review of the FCC Listing the following points should be checked.

As significant organizational changes to be proposed to the Salaries and Wages Supplement may have a major impact to a department’s operations/budget presentation, any substantive changes or changes in politically sensitive programs must be cleared with DOF before the listing is released to SCO.

6436     EXPIRING FILLED POSITIONS
(Revised 2/98)

The SCO will prepare a separate listing (titled “Report for Schedule 8—Supplementary Tabulation”) for all appointments which are authorized to continue beyond June 30 of the past year, but for which there are no approved positions which continue beyond June 30.  This listing is for the purpose of reminding the department that these employees should have been separated or placed in an authorized position, and of furnishing the department with the extensions of the present salary for the current and budget years.

6439     BLANKET POSITIONS  
(Revised 2/98)

The SCO will also prepare a separate listing of actual expenditures from blanket positions (temporary, seasonal, and overtime) for the past year.  This will include expenditures of the past year posted through July 1 of the current year.  These expenditures will need to be added to the Schedule 7A.

6445     VACANT POSITIONS REPORT 
(Revised 06/08)

Chapter 1124, Statutes of 2002, as amended by Chapter 227, Statutes of 2004, made major changes to Government Code Section 12439 relating to the abolishment of vacant positions.  The major changes include:

• State Controller's Office (SCO) to identify and abolish vacant positions that are vacant for six consecutive monthly pay periods, during the fiscal year or between two consecutive fiscal years.  The rolling six months began July 1, 2002.
• A mechanism for departments to self-certify re-establishments by August 15 for positions that meet specified conditions during the vacancy period. 
• Prohibits departments from executing any personnel transactions for the purpose of circumventing the provisions of the Section, e.g., 120 transactions.
• Each department is required to include a section discussing its compliance with this section when it prepares its report pursuant to Section 13405.

On July 1 of each year, the SCO will abolish the continuously vacant position(s).  These abolished positions will not appear on the Schedule 8 or 7A.  The SCO will generate an initial listing for departments by mid-July.  The positions can be eliminated from the abolishment listing for any SCO technical errors, departmental self-certifications of positions to be exempted from the abolishment, or any Department of Finance authorized reestablishments meeting specified criteria.

Technical errors.  Departments are responsible for reviewing the listing and resolving any discrepancies or errors, e.g., late document submittal by departments or late processing of personnel documents by the SCO.  Departments are to work directly with the SCO to resolve the discrepancies, without Finance approval, between July and August 15.  If the position(s) are not to be abolished, the departments must add the positions back on the Schedules 8 and 7A, and report the adjustments on the Schedule 8 Summary.  See SAM Section 6448. 

If departments miss the August 15 deadline, they may submit Change in Established Positions, STD 607 forms, to the Department of Finance between August 15 and September 10 to obtain approval to reestablish technical correction positions.  Requests must include complete justification for late technical changes.  These STD 607s must include the letter "X" preceding the document number.

Department's Self Certification Criteria.  The SCO will reestablish positions when the Director of a department certifies by August 15, one or more of the following criteria existed during part or all of the six consecutive pay periods for the abolished position(s):

• Directly provides 24-hour care in an institution operated by the State.
• Necessary for the State to satisfy any licensing requirements adopted by a local, State, or federal licensing or other regulatory agency.
• Directly involved in services for public health, public safety, or homeland security.
• Held vacant because the previous incumbent is eligible to exercise mandatory right of return from a leave of absence as may be required by any provision of law including, but not limited to, leaves for industrial disability, non-industrial disability, military service, pregnancy, childbirth, or care of a newborn infant.
• Held vacant because a department granted the previous incumbent a permissive leave of absence as may be authorized by any provision of law including, but not limited to leaves for adoption of a child, education, civilian military work, or to assume a temporary assignment in another agency.
• Directly reduces State revenues or other income by more than would be saved by the elimination of the position.
• Positions established and funded from moneys appropriated pursuant to Sections 221 and 221.1 of the Food and Agriculture Code which directly respond to unforeseen agricultural circumstances requiring the relative expertise that the position provides.

Departments must prepare a Change in Established Positions, STD 607 form, for each position to be reestablished for one or more of the above criteria. The SCO must receive the STD 607 form no later than 5:00 p.m. on August 15.   STD 607 forms received after August 15 will be returned to the department instructing them to obtain approval to reestablish the position(s) from Finance.  These documents must be received in Finance by September 10. 

STD 607 documents submitted from July 1 through August 15 to reestablish self certified positions must include the alpha letter "Z" preceding the document number. 

Departments must add the approved position(s) back on the Schedule 8 and 7A that are self certified positions that are reestablished by SCO or subsequently approved by Finance.

In addition, each department shall maintain for future independent audit, all records on which the department relied in determining that any position or positions satisfied one or more of the criteria specified above.

After August 15, the SCO will update its position control system and prepare and submit a preliminary Abolished Vacant Position Report to the Department of Finance by September 10. 

Additional reestablishment circumstances.  Upon written request by departments, Finance may also approve the reestablishment of positions in the following circumstances:

• A hiring freeze was in effect during part or all of the six consecutive pay periods.
• The department has diligently attempted to fill the position, but was unable to fill within six months.
• The position is designated as a management position and was held vacant pending the appointment of the director, or other chief executive officer, as part of the transition from one Governor to the succeeding Governor.
• The classification of the position is determined to be hard-to-fill.
• Late budget enactment contributed to the delay in filling of the positions.

Departments may submit a STD 607 at any time during the year to their Finance budget analyst requesting reestablishment of a position under one or more of the above.   The request must include complete justification regarding the specifics of the circumstances surrounding the abolishment of the position and rationale/need for reestablishment.  Departments must not send any request to reestablish positions directly to the SCO when Finance approval is required.

All STD 607 forms must be processed by Finance to SCO prior to September 30 in order for the SCO to include the corrections in the Final Abolished Vacant Position Report that is submitted to the Legislature and Finance by October 15.

Positions abolished by the SCO under the provisions of Government Code Section 12439 are not "authorized" and are not to appear on the Schedule 8 and 7A, unless specifically approved by Finance.  Departments are to display the abolished positions at the end of the Schedule 7A after the "Totals, Authorized Positions" line.  Arrange the positions in the same order they would have appeared in the Schedule 7A and under the appropriate organizational headings.  The title to be used is "Continuously Vacant Positions Abolished by SCO per Government Code Section 12439."

6448     PREPARATION OF SCHEDULE 8 SUMMARY  
(Revised 2/98)

The Schedule 8 consists of two parts, the summary and detailed tabulation.  The instructions for the detailed listing are found in SAM Sections 6424, 6427, and 6429.  The instructions for preparing the summary are included in this section.  The Schedule 8 acts as a payroll authorization for the current year, and an encumbrance document for posting to salaries and wages allotments as well as a source of information for Schedule 7A.  See SAM Section 6521.

6451     OPERATING EXPENSES AND EQUIPMENT
(Revised 2/98)

Each department must prepare departmental supplementary schedules of the various items of operating expenses and equipment needed to support the proposed program of the department.

Although supplemental information is not printed in the budget, schedules must be prepared and sent to DOF per instructions issued in Budget Letters.  Legible reproductions of working papers or automated tabulations may be used.  Departments should refer to the state’s Uniform Codes Manual (UCM) for the standard objects of expenditures.  The Supplementary Schedule of Operating Expenses and Equipment, Schedule 11 (DF 300), and the Supplementary Schedule of Equipment, Schedule 9 (DF 302), are required from each department.

6453     SPACE ACTION REQUESTS (STD. 9) 
(Revised 2/98)

Departments use the Space Action Request form, STD. 9, to request:

New or additional space (including swing space), lease extensions, or renewals desired by an agency in noninstitutional buildings—whether state-owned or state-leased, Relocatable buildings, and Trailers.

Instructions for STD. 9 are provided in SAM Section 1405; additional information on preparation is available from DGS, Professional Services Branch of the Real Estate Services Division.

DOF’s Review Requirements.  Space action requests are submitted to DGS.  The DGS forwards a copy of the request to DOF Capital Outlay Unit for approval if any one of the following conditions exist:

Whenever STD. 9 is submitted to DOF, it must be accompanied with a Estimate of Occupancy Costs form, STD. 10, prepared by DGS and reflecting DGS’ recommended space strategy.  The STD. 10 provides a clear synopsis of the reasons for the recommended move or other action; how the action is consistent with approved asset management plans; a schedule of estimated costs for each year of the expected term of the lease and a detailed breakdown of the estimated one-time costs and/or savings associated with the action; and any rent overlaps expected.  In addition, an OREDS 4083 must be submitted which provides information on employee classifications for the tenant department, type of space, and specifics on specialized space needs. 

For certain requests, DGS also prepares a separate economic analysis for DOF verifying that the selected method of procuring space (lease, lease-purchase, lease with purchase option) is the most cost effective, including a comparison with state construction.  The conditions of this analysis (i.e., for which projects, and the content) are set by memorandum of understanding between DGS and DOF.

The DOF Capital Outlay unit coordinates this review.  The normal time frame for DOF review is 30 days.  Questions on the status of any space action request which has been forwarded to DOF should be directed to this unit. 

The DOF’s approval of STD. 9 does not constitute approval of additional funding for any future rental increase or other costs related to the Form 9.  Department may wish to coordinate the timing of space action requests with the budget process to avoid making commitments to new space prior to budgetary approval.  Requests for a budget adjustment must be submitted as part of the normal budget preparation process.  Requirements are reviewed below.

Coordination of STD. 9s with Support Budget Change Proposals (BCPs).  The BCPs are required for any request to increase support budget funding for new or additional space, rent increases on an existing lease, furniture (such as modular), or costs associated with moving.  The BCP must be submitted with a copy of the space request package previously approved by DOF.  If a final version of this package is not available because the leasing transaction is still under development, DOF will base its review of the BCP on the department’s initial estimate on draft version of the package.  However, the department is still required to complete the space action request approval process by having DGS submit a final set of forms STD. 9 and 10 and OREDS 4083, with complete data, for approval to DOF.  As appropriate, DOF may adjust any prior budget decisions to conform with the final space action.

It is not necessary to coordinate the BCP process with the STD. 9 process if the BCP is requesting facility funding as a per-position complement.  For example, the department may requests 5 new positions for a program, with a per-position facility component.  However, such complements are usually adequate only for marginal adjustments of staff.  Therefore, departments are cautioned against using per-position complements if large numbers of staff are being added or specialized space is required.  Additional facility funding may not be provided later to correct budget shortfalls.

Coordination of STD. 9s with Capital Outlay Budget Change Proposals (COBCPs).  Informational COBCPs are required for proposals to enter in the budget year into a lease-purchase agreement, lease with purchase option, or any other lease which meets the definition of a capital lease, as described in the “Capitalized Assets” Chapter (Capital Outlay Section) of SAM.  The opportunity to enter into such a lease may arise, on an unplanned basis, off-cycle with the budget process.  The DOF may waive the formal COBCP requirement in this situation, but the client department and DGS must nonetheless provide the same information as well as the economic analysis referred to above as part of STD. 9 approval package.

6454     PREPARATION OF SUPPLEMENTARY SCHEDULE OF OPERATING EXPENSES AND EQUIPMENT, SCHEDULE 11 
(Revised 2/98)

This schedule (form DF 300) is designed for summarizing the operating expense requirements of the department as well as reporting items of expense which vary with changes in population, enrollment, or price.  If another variable such as workload change or program change is involved, the "other" column may be used and an explanation attached.  Submit the preliminary schedule with your budget.  The final schedule must be prepared after all decisions are made, per the timeframe set forth in Budget Letters.

The schedule should list the items of operating expense in the order of UCM coding.  Expenditures for the past, current and budget years are to be shown in three columns with totals.  The totals must be carried forward to the Summary by Object in the departmental budget presentation.

6457     BUDGET FOR EQUIPMENT
(Revised 2/98)

Each department must prepare a Supplementary Schedule of Equipment, DF 302, Schedule 9.  A preliminary schedule should be forwarded with the initial baseline budget package.  A final schedule must be prepared after all budget decisions are made, per the timeframe set forth in Budget Letters.

For uniformity in budgeting, accounting, and purchasing, the definition of equipment in SAM Section 8602 governs whether equipment/personal property will be budgeted and reported as equipment on Schedule 9.  Some expenditures for equipment may be budgeted as capital outlay if purchased as an initial complement of equipment.

Departments should work with their DOF budget analyst if they wish to develop and use internal equipment request forms in preparing the supplemental schedule.

6460     SUPPLEMENTARY SCHEDULE OF FEDERAL FUNDS  
(New 2/98)

Budget submissions are required to include a Supplementary Schedule of Federal Funds.  The total amount on the Supplementary Schedule of Federal Funds must correspond to the amount shown as federal funds in the “Reconciliation(s) with Appropriations” in each department's budget.  Federal funds are all monies received by a department directly from an agency of the federal government.

The information will be prepared on Supplementary Schedule of Federal Funds/Reimbursements, DF 301, or such other format approved by the DOF budget analyst.  Each grant (project) must be listed separately by departmental program.  Separate listings will be prepared for each character of expenditure.

For each grant, include the following: (1) the title or popular descriptive name as listed in the Catalog of Federal Domestic Assistance; (2) the federal catalog number; (3) the date, if applicable, the grant was approved by the Legislature (i.e., Section 28 authorization date or authorizing chapter by number and date enacted, except that the Budget Act should include only the citation "BA 98"); and (4) the dollars for the past, current, and budget year.  Each page should be numbered for ready reference.  Instructions for preparation of DF 301 are included on the second page of the form.

If changes have been made during the budget preparation process before submittal of the Governor's Budget to the Legislature which affects this schedule, a final submission of the affected schedule must be made by the originating department to agree with the printed budget and returned to the DOF by the timeframe specified in a Budget Letter.

6463     REIMBURSEMENTS
(Revised 2/98)

A reimbursement is cash or other assets received as repayment for the cost of work or services performed, or for other expenditures made for or on behalf and for the convenience of another governmental unit, fund, or department, or for an individual, firm, or corporation.  There should be a very positive, direct relationship of the charge to the cost of the particular services performed for an individual or entity before one should consider a receipt to be reimbursement.  Reimbursements represent the recovery of an expenditure and are shown in the budget as a reduction of the expenditures of a program or agency and are indicated by a minus (-) sign immediately before the dollar amounts.

All federal funds received directly by a department and not via another state department will be reported as Federal Fund expenditures.  Federal funds received from another agency for the cost of work or services performed will be treated as reimbursements.

6466     SUPPLEMENTARY SCHEDULE OF REIMBURSEMENTS  
(Revised 2/98)

Budget submissions are required to include a Supplementary Schedule of Reimbursements. The information will be prepared on Supplementary Schedule of Federal Funds/Reimbursement, DF 301 or such other format approved by the DOF budget analyst.  For a definition of "reimbursement,” see SAM Section 6463.  Any changes are subject to the provisions of Section 28.00 or Section 28.50, as appropriate, of the Budget Act.  The Schedule will include the following: (1) descriptive title; (2) reimbursement period or term when funds are available; (3) source of funds; and (4) the past, current, and budget year.  Each page should be numbered for ready reference.  Instructions for preparation of DF 301 are included on the second page of the form.

If changes have been made during the budget preparation process before submittal of the Governor's Budget to the Legislature which affects this schedule, a final submission of the affected schedule must be made by the originating department to agree with the printed budget and returned to the DOF by the timeframe specified in a Budget Letter.

6469     SPECIAL ITEMS OF EXPENSE  
(Revised 2/98)

Special items of expense are those non-recurring large expenditures or special purpose expenditures that normally require a separate appropriation or schedule to present a clearer fiscal picture.

This class of expenditure appears in the "Summary by Object.”

The explanatory title will indicate the purpose for which the expenditure is made.

6472     TORT LIABILITY BUDGET PROCEDURE  
(Revised 2/98)

The Governor's Budget, Equity Claims of Board of Control and Settlements and Judgments by Department of Justice (Budget No. 9670), includes a display of costs for the administration, investigation, adjustments, defense, and payment of tort liability claims, settlements, and judgments against the state, its officers, and employees.  The display also includes costs for special insurance policies.  This display and the appropriation item language and amount are prepared by DOF with the assistance of the Department of Justice (DOJ), Board of Control (BOC), Department of Transportation (DOT), and Department of General Services (DGS).  The information to be provided by each of these agencies is discussed below.

By separate Budget Act item, a specific amount is appropriated from the General Fund to pay claims against General Fund supported agencies; and unspecified amounts from each special fund are appropriated to pay claims for agencies supported from those funds.  The appropriation is for expenditure by the DOJ, subject to the discretionary approval of the DOF.  In accordance with SAM Section 8712, DOF approval is required for all claims in excess of $35,000.

By October 1 of each year, DOJ, DOT and the BOC shall submit reports to DOF providing actual cost data for the prior fiscal year.  Such data is to include the following:

1. Claim payment expenditures by fund.

2. Staff services expenditures by fund.

Although the state no longer carries general tort liability insurance, several departments and agencies carry specialized insurance policies for specific purposes, e.g., Cal Expo and water project bond programs.  The DGS Insurance Office shall submit to DOF by October 1 of each year, for all departments and agencies, actual prior year, estimated current year, and anticipated budget year expenditures for tort liability insurance premiums.

6475     SUMMARY BY OBJECT  
(Revised 2/98)

A "Summary by Object" is prepared at the end of the program presentation.  Separate “Summary by Object" presentations are required for State Operations and Local Assistance expenditures.  The following comments address State Operations since Local Assistance is less complex.  The personnel-years count and the amount of expenditures are shown under the headings "Authorized Positions," "Total Adjustments,” "Estimated Salary Savings," "Net Totals, Salaries and Wages," and "Totals, Personal Services." 

“Operating Expenses and Equipment” are reported as a single line entry.  Details are provided in supplementary schedules.  See SAM Section 6451.

If there are "Special Items of Expense" which cannot be included in Operating Expenses and Equipment (SAM Sections 6451 and 6457), they are reported as a single line entry following Operating Expenses and equipment.

"Totals, Expenditures" represent the sum of the gross expenditures.

6478     RECONCILIATION WITH APPROPRIATIONS 
(Revised 2/98)

This section of the budget presentation sets forth the source and amount of appropriations available for the department and the disposition of such appropriated funds between expenditures and unexpended balances.  A "Supplementary Schedule of Appropriations" (Schedule 10) provides the information used in this reconciliation.  See SAM Section 6484.

The order, wording, and meaning of the various entries in each reconciliation are set forth below.  Omit entries which are not needed.  If additional entries are necessary, coordinate the addition with DOF analyst.

6481     FUND CONDITION STATEMENTS 
(Revised 2/98)

The Fund Condition Statement presents the summary of the operations of a fund for the past, current and budget years.  This statement is prepared for all special funds and special accounts within the General Fund.  Fund Condition Statements are also prepared for other funds which are of special interest to the Legislature or the Administration.  In those cases where a number of departments receive appropriations from one special fund, DOF will normally finalize the Fund Condition Statement.

The body of the statement should include the following information, as applicable, in the order indicated below:

The Fund Condition Statement printed in the previous Governor's Budget should always be reviewed before preparation of the new statement.  The starting fund balance for the past year must agree with the ending fund balance for the past year as shown in the previous Governor's Budget.

The department's year-end accounting reports should provide most of the information needed to prepare the past year portion of the Fund Condition Statement.  However, when there are differences between budgeting and accounting treatment of transactions, the budgeting treatment of the transactions should generally be used.

6484     SUPPLEMENTARY SCHEDULE OF APPROPRIATIONS—SCHEDULE 10  
(Revised 2/98)

The Supplementary Schedule of Appropriations is a control document that is essential to the budget process.  As a source of verification, this schedule lists all appropriations and allocations of funds available for expenditure during each of the three fiscal years reported in the budget.  For each fiscal year, separate sets of schedules are prepared for state operations, local assistance, and capital outlay budgets.  The amounts, by fund and character, in the Schedule 10 must equal the corresponding amounts in the following documents:

Reconciliation with Appropriations                        SAM Section 6478
Summary by Object                                                SAM Section 6475
Summary of Program Requirements                      See Governor’s Budget (departmental presentation)

To aid in the development of the Governor's Budget, DOF provides agencies with computer-generated Schedule 10s for the past, current, and budget years.  Instructions are issued in Budget Letters used to transmit the Schedule 10s.  The DOF will not provide Schedule 10s for new departments and new budgets because data has not yet been entered in the appropriation database.  In these instances, a Schedule 10 Missing Records Report, Form DF-38, needs to be prepared for the appropriation record to be established.

6500     ADMINISTRATION OF THE OPERATING BUDGET 
(Revised 2/98)

The system for budget administration and control is legally grounded in the State Constitution, Government Code provisions, and a number of sections of the Budget Act.  The system also adheres to the Attorney General’s opinions.

The operating budget is the total of all the expenditure authorizations provided by law.  This includes the Budget Act, continuing authorizations provided by the Constitution and statutory law, separate appropriation measures enacted by the Legislature, plus initiatives.

No single document is produced to represent a Final