California began a new fiscal year on July 1 without a budget (again).   The California Constitution (Art. IV, Sec. 12(c)(3)) is very clear:  "The Legislature shall pass the budget bill by midnight on June 15, of each year."

In order for the state to spend money, two conditions must be satisfied.  First, there must be legal authority (i.e., an appropriation).  The Budget Act is the primary source of appropriations.   Second, there must be a source of funds.  Currently, the state's general fund account cash balance is zero.   However, the state is able to meet its obligations by borrowing from its special funds.    A special fund is a fund created by statute, or administratively pursuant to Government Code Section 13306.  The state uses special funds to budget and account for taxes, licenses, and fees that are restricted by law for particular activities of the government. The Department of Corporations is a special fund department.

Of course, there are consequences to not having a budget.  One is that if the state owes you money, you may not get paid until a budget is enacted.   Controller John Chiang has posted this list of the payments his office can and cannot make during July.   Salaries and per diem of state elected officials and their appointed staff are listed in the "cannot pay" category.  Perhaps this will help focus the legislators' attention on completing a budget before Labor Day.

The new fiscal year has brought at least one benefit.  For nearly a year, the Department of Corporations has been closed on the first three Fridays of each month pursuant to Governor Schwarzenegger's executive order.  The executive order expired at the end of the fiscal year and the Department is open on Fridays again (for now).