Gov. Gray Davis' administration is letting its top officials know that if they break their budgets, the money could come out of their own pockets.

A recent directive from the Department of Finance reminds managers of a longstanding law that makes them personally liable if they overrun their budgets.

The law has not been used in recent memory, and state managers have heard the warning before, but the letter this month cited it -- twice, in bold face -- in reminding department heads and agency secretaries that the state will no longer tolerate failing to stay within budget.

It also stressed that the newly approved state budget requires that state operations be slashed by 16 percent. It notes that departments are in danger of running out of money if they don't act to curb costs, and points out the personal liability provision.

"We're in a time when everyone needs to take this seriously," said Department of Finance spokeswoman Anita Gore.

The Aug. 8 letter from the Department of Finance informs departments that, in light of the state fiscal crisis, they won't be able to seek more money for any but "critical and unanticipated" needs.

Departments that spend money not authorized in the budget would be forced to find it from within their own operations, or try to get the Legislature to approve it -- a daunting prospect in the current fiscal environment.

Officials "must explain, in detail, why advance notice was not made and can be held personally liable for the amount of such unlawful indebtedness/expenditures," according to the letter, signed by Kathryn Radtkey-Gaither, the department's assistant director.

The law has been on the books for a long time, Gore said -- although she could not say exactly how long. It also allows the state to recover money from bonds posted by the officials. It's unknown how many agency secretaries and department heads -- if any -- carry such bonds, which are not required.

Davis' Cabinet includes 13 officials, mostly agency secretaries. In total, there are more than 30 state departments with directors. These officials -- and some who head boards and other entities -- are subject to the law.

They get paid well: Cabinet secretaries pull down $131,412 a year, while directors of midsize departments get a little more than $100,000.

But those healthy salaries wouldn't mean much if the officials had to cover overruns in the state's $99 billion budget, in which a fiscal hiccup can add up to millions.

The Department of Corrections has consistently overspent its budget and sought hundreds of millions of dollars from the Legislature after the start of the fiscal year. Corrections officials say that the Legislature has failed to provide enough money for routine operations.

The Aug. 8 letter has been duly noted at the Department of Corrections, said Steve Green, assistant secretary of the California Youth and Adult Correctional Agency. Green would not be liable, but his boss, Director Edward Alameida, is subject to the law.

"People take it very seriously," Green said. "One of the problems with this is that there are circumstances beyond our control."

Green said the department has faced a spike in gasoline prices and a court order that requires the department to hold an initial hearing within 10 days of revoking parole. If the department fails to provide enough workers to hold the hearings on time, a judge would find it in contempt, Green said.

"Maybe we can talk the judge into holding Finance in contempt," he said.

The Department of Finance has left open the door to paying for costs that could not be foreseen when the budget was passed, and Green said that talks between the two departments are likely.

Andy Kotch, a spokesman for Secretary of Veterans Affairs Maurice Johannessen, said his boss, "like every other department person, would watch the budget so he wouldn't get into that situation. I don't think anyone wants to overextend themselves."

The Department of Finance has traditionally played the heavy with other state operations, calling departments on the carpet to justify their spending.

In recent years, the inherent tensions have grown as dollars became scarce. In recent weeks, Finance and other departments have haggled over how to save more than $1 billion in payroll costs from layoffs and wage concessions by public employee unions. Delays in implementing plans could cause departments to bust their budgets -- and presumably make top officials liable.