State requiring cities to review and report on local Gann limits

Jan 4, 2023

Local governments must report their local Gann limits due to a newly expanded definition of “state subvention” by March 1, 2023

The Gann Limit, the state appropriations limit, is back in the limelight for local governments. The law requires the state to spend any revenue that exceeds a certain limit — adjusted for inflation and population — on K-12 education and colleges or rebates back to taxpayers.

Under a new state policy, local agencies must identify and report any new state subventions — unrestricted money received by a local agency from the state — that would cause them to exceed local appropriations limits. The state will count those amounts at the state level instead.

The new policy is the result of a 2022 legislative maneuver. To avoid exceeding the Gann Limit, the 2022-23 state budget excluded certain local subventions from the state limit. These additional expenditures are counted by local governments towards their local appropriation limits when capacity exists at that level of government.  

Starting with the 2021-22 fiscal year, city governments must include state subventions, as outlined by the California Department of Finance, within their appropriations limits.

Cities are required to review their local Gann limits and report by March 1, 2023

In response to a request for guidance from the League of California Cities, the Department of Finance provided spreadsheets identifying the total dollar value of all subventions that should be included within a city’s appropriations limit for the 2021-22 fiscal year. Following additional advocacy from Cal Cities, the deadline to report this information was extended to March 1, 2023.

If any portion of those values causes a city to exceed its appropriations limit, cities must identify the specific amount attributable to these subventions in excess of their limit and report that information to the Department of Finance. These excess amounts will instead be included within the state’s appropriations limit.

Cities that will not exceed their appropriation limit in the 2021-22 fiscal year do not need to report to the Department of Finance. If the Department of Finance has not identified a city in the spreadsheet, no action is required.

Cities may submit their information via email to Susan Wekanda and Matt Westbrook at the Department of Finance.

Additional details about the dollar value attributable to each subvention can be found in the “City Programs” tab of the spreadsheets. Please contact Cal Cities Legislative Representative Nick Romo if you have any questions.