With tax revenues in a free fall comparable to the Great Recession and the dot-com bust, California faces a projected $68 billion budget deficit next year that will require spending cuts and reserve funds to close, state finance officials said today.
The new estimate from the nonpartisan Legislative Analyst’s Office, released as Gov. Gavin Newsom finalizes his January budget proposal, reflects a substantially delayed tax-filing period this fall where collections came in far below what lawmakers expected when they adopted a spending plan over the summer.
This projected deficit would be a record for California. But officials noted that it is partly because the budget has grown so much in recent years — the most recent was more than $300 billion — and that the state has closed similar or worse spending gaps, by percentage, in the past.
Legislative analyst Gabriel Petek cautioned that California is better prepared to respond to the situation than during the economic recession 15 years ago, because it has since built several multibillion-dollar rainy-day funds, though the state is also looking at a structural deficit of about $30 billion annually going forward.
“I go with the word ‘serious.’ A serious budget problem,” Petek said during a briefing with journalists. “I would stop short of calling it a crisis.”
H.D. Palmer, a spokesperson for Newsom’s Department of Finance, said the administration will have different numbers when the governor presents his 2024-25 spending plan next month, but Newsom is preparing to address a significant deficit.
“Both the Governor and the Legislature have a substantial challenge before them in closing a very large revenue gap in this budget,” Palmer told CalMatters. “The IRS, with the best of intentions,…
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