Newsom expected to announce California’s budget deficit larger than $22.5 billion
Jack Birle
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Gov. Gavin Newsom (D-CA) is widely expected to announce that California‘s budget deficit is larger than the $22.5 billion figure announced in January.
Newsom is likely to announce the increased figure with the May revision to his budget proposal, with the state’s Legislative Analyst’s Office estimating the figure to be $5 billion more than previously reported, according to the Associated Press.
The increased budget deficit is a symptom of the state’s tax code, which relies on high-income taxpayers whose income is dependent on the stock market, according to the report. The constant barrage of rain storms in the Golden State from December 2022 until March 2023 has also affected the deficit.
The IRS approved extensions for Californians affected by the winter storms in March, meaning their tax deadline is now Oct. 16 instead of April 18. Due to the extension for various taxpayers, the state will likely not know how much revenue it is bringing from income tax until far later than usual.
With the increased deficit, Newsom will have to negotiate cuts with the state legislature to various programs before the beginning of the state’s fiscal year on July 1.
Newsom announced on Thursday an additional $290 million to his revised budget, which he says will “support flood response and projects to protect communities from future floods.” With the new spending on flood response projects, he will have to cut funding in other areas.
In his January proposal, Newsom called for a $330 million-per-year extension of the state’s tax credit program for television and film productions from 2025 to 2030. He also pushed to allow the credits to be refundable.
However, the film and television industry may be a future problem for state revenues because Hollywood writers are currently on strike. The 2008 writers strike cost the California economy $2.1 billion, according to the Los Angeles Times.
Another future cost for the state could be the proposed reparations from the state’s task force. The state task force approved a plan for an estimated cost of the reparations is $800 billion to give eligible black residents payments. The final report will be sent to the California legislature by July 1, where it will be up to the legislature and Newsom on whether it gets enacted.
Newsom had remained quiet on the task force as it worked but finally broke his silence this week by saying that the work was more about “dealing with the legacy of slavery” and “is about much more than cash payments.”
“Many of the recommendations put forward by the Task Force are critical action items we’ve already been hard at work addressing: breaking down barriers to vote, bolstering resources to address hate, enacting sweeping law enforcement and justice reforms to build trust and safety, strengthening economic mobility — all while investing billions to root out disparities and improve equity in housing, education, healthcare, and beyond. This work must continue,” Newsom said on Tuesday regarding the task force’s work.
A spokesperson for Newsom further clarified to the Washington Examiner that he had not declined to endorse the reparations payments and would evaluate the final report once it is completed.
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“The governor looks forward to reviewing the final report — and all recommendations — when complete,” the spokesperson said.
Newsom is scheduled to announce his new budget proposal at 10 a.m. PDT on Friday.