As I have predicted 2-3 years ago what would happen with Gov Newsom's wasted spending...
California’s budget deficit swells to record $68B as tax revenue falls. California’s budget deficit has swelled to a record $68 billion after months of unexpectedly low tax revenues, a shortfall that could prompt the state’s deepest spending cuts since the Great Recession.
The latest deficit figure — calculated by the nonpartisan Legislative Analyst’s Office and released Thursday — far exceeds the $14.3 billion estimate from June. The shortfall, which is the highest in dollar terms but not as a percentage of overall spending, threatens to upend the upcoming legislative year by forcing Gov. Gavin Newsom and lawmakers to make spending cuts on a scale few term-limited elected officials in Sacramento have faced.
While not minimizing the shortfall, state budget analysts said California has options to address the deficit — including the use of cash reserves, one-time cuts in spending and changes to the way it funds education — that it didn’t have in previous downturns.
“The state remains in a good cash position, and that really wasn’t the case back at the start of the Great Recession,” Gabriel Petek, an LAO analyst, told reporters. “We don’t face the same kind of liquidity challenges that we had at that time, and so I would stop short of describing it as a crisis.”
The LAO forecasts a $4 billion drop in the amount of funding the state is required to send to schools and community colleges under Proposition 98, adding education to a list of possible targets for reductions that also includes climate and health care.
Analysts suggested legislators could ease the situation with one-time cuts, reducing school funding or tapping into the around $30 billion in reserves. Legislative leadership floated drawing from its savings last year, but Newsom opposed that move and the money was left alone. Debates over the use of reserve funds will likely intensify next year, given the size of the shortfall.
Analysts have also projected annual $30 billion deficits in future years. The LAO recommended leaving up to half of the state’s reserves intact to help mitigate those future shortfalls.
