California is in a budget hole, its depth measured not in feet, but in dollars.
How deep? A projected $38 billion deficit, according to Gov. Gavin Newsom, who said Wednesday he will declare a fiscal emergency if necessary and unveiled his initial plan to dig the state out of a fiscal chasm for the second year in a row.
But Newsom painted it as a return to a more normal budget, after recent spikes in revenue. He called it “a story of correction, a story of normalization after a period of tremendous amount of distortion.”
His deficit projection is far less dire than last month’s outlook from the nonpartisan legislative analysts, who projected that the state is eyeing a $68 billion deficit for the 2024-25 fiscal year, which starts July 1.
Crucially, Newsom’s team is assuming $15 billion more in revenues than the legislative analysts, explaining much of the difference in forecasts, based on the resilience of the economy.
“We’re just a little less pessimistic,” said Newsom, who repeatedly criticized the news media’s reporting on the Legislative Analyst’s Office’s figure. Basically, the administration is less concerned than the analyst’s office about an impending recession, added Joe Stephenshaw, Newsom’s budget director.
Newsom’s plan to close the deficit includes:
- Withdrawing $13.1 billion from the budget stabilization and safety net reserve accounts;
- Cutting $8.5 billion from existing programs and services, including climate, housing and education;
- Delaying $5.1 billion worth of spending, including on transit;
- And deferring another $2.1 billion to 2025-26, including about $500 million in additional funding for University of…
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