The shortfall threatens to force the state’s deepest spending cuts in a decade.
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.
Another possible explanation I heard involved the tech sector, which made massive profits at the beginning of COVID and then took a dive afterwards when people started venturing out of the house and using their services less. It’s not the only factor in the revenue loss, of course, but I bet it was a not-insignificant chunk of change.