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Workshop Memorandum No. 17-075 Page 7 of 18

Appropriations Permitted in Excess of the Limit.

Article XIII B sets forth two circumstances under which governments may make appropriations in
excess of their limits:
 Emergency. Appropriations for declared emergencies do not count towards and may be
made in excess of the limit. Proposition 111 removed the requirement that the limits for
future years must be reduced over a three-year period so that there would be no total
increase in allowable appropriations.
 Voter Approval. Article XIII B permits voters of a jurisdiction to authorize an increase in
the appropriations limit. However, no voter-approved increase may be in effect for more
than four years. At the end of the four-year period, either the voters must approve another
increase or the limit must return to the level it would otherwise have been.

When Revenues Exceed the Appropriations Limit.

A government entity may receive revenues during a fiscal year that exceed its appropriations limit.
Proposition 111 allows governments to average appropriations over a two year period before
becoming subject to the excess revenue provisions of Article XIII B. In other words, a government
entity can offset appropriations that exceeds its appropriations limit in one year of a two-year
period by appropriating less than the limit in the other year. If, after taking this two year averaging
into account, authority to appropriate is not provided by either an emergency declaration or voter
approval, Article XIII B as amended by Propositions 98 and 111 sets forth a process for disposing
of the excess State revenues:
 Education Programs. After the two-year averaging period, 50% of any excess revenues
are transferred to the State School Fund for elementary, secondary and community
college education. A portion of this excess revenue (25%) may effectively be built into the
base used to calculate future funding required by Proposition 98 if the excess funds are
used for a specified purpose. The transfer to education is not required if the state's
average expenditure per student and average class size is equal to or exceeds that of the
ten states with the best performance in these areas.
 Return of Excess. The 50% of excess revenues remaining after the transfer to education
must be returned to taxpayers within the following two years. The return can be made
through a reduction in the tax rate or as a fee reduction.

Sources:
 “Government Appropriations Limit: Article XIII B of the Constitution.” In: Revenue and
Taxation Reference Book 2003. Sacramento: Assembly Revenue and Taxation
Committee, Chapter 5, January 2004, pp. 150-7.
 “Tax and Expenditure Limitation in California: Proposition 13 & Proposition 4”, Institute of
Governmental Studies, University of California at Berkeley
(http://www.igs.berkeley.edu/library/htTaxSpendLimits2003.html)

Yucaipa Valley Water District - May 30, 2017 - Page 86 of 138