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Well, "mandatory" means that there are requirements beyond simply statutory budgeting negotiations that requires the spending. Contracts, the state constitution, etc.
The state constitution has explicit requirements on how much must be spent on certain types of education. Existing contracts require funding pensions at certain levels. Bonds issued have interest payment requirements, etc.
Prisons and universities and such are certainly mandatory from the electorate's point of view. There is just nothing outside the legislative process that dictates exactly how much must be spent.
So it is kind of like saying in your personal budget that the mortgage and electrical bill are mandatory budget items but food is discretionary. You're contractually obligated to spend certain amounts for your mortgage and electricity or go into default. Obviously you eating is mandatory, there's just nothing that says exactly how much you are required to spend doing so (food kitchen or 5-star dining both meed the mandatory part).
The breakdown of the analogy being that you can decide to default on the mortgage in favor of food and the repercussions are relatively minor (credit blemishes, you move into a small apartment in the bad part of town) but if the state government starts defaulting on these obligations the impacts are huge in terms of collateral damage (unfunded pensions means taking money out of people's pockets) and massively expensive (you can stop borrowing money; the state government can't -- even if the budget is balanced -- and so debt defaults will make the cost of future money go up dramatically).
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