California budget deficit soars to $68 billion as tax revenues fall
Eden Villalovas
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California’s budget deficit is expected to soar to $68 billion as income tax revenues fall behind with a slow-growing economy.
The latest calculated figures from the state’s nonpartisan Legislative Analyst’s Office predict California “will face a serious deficit” of $68 billion, a massive increase from the $14 billion predicted in June. The LAO suggested a number of possible cuts state lawmakers could look into to lower the estimates.
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“While addressing a deficit of this scope will be challenging, the Legislature has a number of options available to do so,” according to the LAO website.
The state could look into $24 billion in reserves and possibly reduce funding for schools and community colleges, saving $17 billion, according to the LAO. Reducing “one‑time spending” could also give the state “at least an additional $10 billion.”
However, the LAO predicted the state’s reserves likely are not sufficient to cover the state’s deficits over the years, which will average $30 billion per year under the office’s estimate.
“These deficits likely necessitate ongoing spending reductions, revenue increases, or both,” according to the LAO. “As a result, preserving a substantial portion—potentially up to half—of reserves would provide a helpful cushion in light of the anticipated shortfalls that lie ahead.”
Under Proposition 98, which requires a minimum funding guarantee for public education, an automatic reduction is about $4 billion, but the state could reduce the general fund by $21 billion if lawmakers approved.
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“These options and some others, like cost shifts, would allow the Legislature to solve most of the deficit largely without impacting the state’s core ongoing service level,” according to the LAO.
In June, Gov. Gavin Newsom (D-CA) signed the $310 billion 2023-24 state budget, covering a $30 billion-plus deficit. Newsom is set to release his proposed 2024-25 budget in January, followed by a revision in May. The legislature and the governor will need to take into account the state’s multi-billion dollar budget deficit before the former approves the budget for the fiscal year, which begins July 1.