UNITED STATES NEWS

California’s nonpartisan legislative analyst says state faces record $68 billion budget deficit

Dec 7, 2023, 10:33 AM | Updated: 10:46 am

SACRAMENTO, Calif. (AP) — California is facing a $68 billion budget deficit, the nonpartisan Legislative Analyst’s Office said Thursday.

Most of the deficit comes from lower than expected tax revenues this year, the office said.

California delayed its tax filing deadline to November this year because a series of damaging storms. That forced Democratic Gov. Gavin Newsom to come up with a spending plan without knowing how much money the state would have.

The Legislative Analyst’s Office says revenues for the 2022-23 budget year ended up $26 billion below previous estimates. The office says the state could cut spending on education and take money from the state’s savings account to help balance the budget.

The state’s budget topped $300 billion last year.

The projected $68 billion deficit is a record in terms of a dollar figure. But the state has seen deficits that represent a larger share of the budget in the past.

It’s the second year in a row tax collections in the nation’s most populous state likely won’t be enough to cover expenses — potentially leading to some hard choices for Newsom and his allies in the Legislature.

The problem is inflation and how the U.S. government is trying to control it. The Federal Reserve has been increasing a key interest rate that makes it more expensive for people and businesses to borrow money. That means fewer people are buying homes and fewer businesses are hiring workers.

In California, that means the number of unemployed workers has risen by nearly 200,000 since last year, enough to increase the state’s unemployment rate to 4.8% from 3.8%. The national unemployment rate is 3.9%

Layoffs have hit the tech sector particularly hard, which has an outsized impact on California given the industry’s concentration in Silicon Valley. IT has been the backbone of the state’s economic growth and revenue, said Sung Won Sohn, an economics professor at Loyola Marymount University.

“They expanded greatly during the pandemic and now they are finding that they have too many people and they need to cut back expenses,” Sohn said.

Home sales in California have been cut in half compared to two years ago as average monthly mortgage payments have jumped to more than $5,500 from $3,700, according to Oscar Wei, deputy chief economist for the California Association of Realtors.

Wei said he expects interest rates to fall slightly in 2024 to around 6.5% — still well above the 3% rates seen during the pandemic.

“We’re still going to have higher mortgage payments for many of the homebuyers,” he said.

California revenues soared to record highs during the pandemic on the back of a strong stock market. The state had budget surpluses in excess of $100 billion, allowing Democratic leaders to greatly expand government services — including guaranteeing free lunch for all public school students and offering government-funded health insurance to all eligible adults regardless of their immigration status.

That revenue growth stopped last year as the state had a $32 billion budget deficit. Newsom and the Democrats who control the state Legislature covered that shortfall through a combination of delaying some spending, cutting some spending and borrowing.

Still, Newsom and legislative Democrats continued to expand government. In October, Newsom signed a law to gradually raise the minimum wage for health care workers to $25 per hour. That law will cost the state about $2 billion this year in increased labor costs and Medicaid payments to hospitals.

United States News

Associated Press

Missing teen with autism found in New Mexico, about 200 miles away from his Arizona home

DEMING, N.M. (AP) — A missing teen with autism has been found in New Mexico — about 200 miles away from his home in southern Arizona, according to New Mexico State Police. The 13-year-old turned up at a Walmart in Deming on Tuesday after going missing the night before from his family’s home in Tucson. […]

1 hour ago

Associated Press

UN appeals for $674 million as gang violence in Haiti escalates with killings and sexual violence

UNITED NATIONS (AP) — Indiscriminate violence in Haiti is escalating — especially in the capital and surrounding region — with armed gangs carrying out killings and acts of sexual violence, the United Nations humanitarian coordinator in the conflict-wracked Caribbean nation said Wednesday. Ulrika Richardson told U.N. reporters in a virtual press conference from the Haitian […]

2 hours ago

New York Gov. Kathy Hochul holds up a phone that displays a map of illegal cannabis stores as entre...

Associated Press

Struggling to stop illegal cannabis stores, New York governor asks online sites to hide them

NEW YORK (AP) — After failing to wipe illegal cannabis dispensaries off the map, New York is asking online sites to hide them. Since the state legalized marijuana in 2021, unlicensed pot shops have proliferated across New York City, with limited pushback from authorities. On Tuesday, Gov. Kathy Hochul called on online map and social […]

3 hours ago

Associated Press

Honolulu bribery trial won’t be postponed despite an investigation into a threat against a US judge

HONOLULU (AP) — An upcoming bribery trial against Honolulu’s former top prosecutor won’t be delayed despite an ongoing investigation that one of the defendants in the case allegedly threatened the safety of the judge who had been presiding over the case, which prompted his unexpected recusal last month. The new judge ruled Wednesday there will […]

3 hours ago

Associated Press

Anheuser-Busch, Teamsters reach labor agreement that avoids US strike

Budweiser brewer Anheuser-Busch has reached a contract agreement with the Teamsters union that avoids a strike at its U.S. plants. The union had threatened a strike at the brewer’s 12 U.S. plants if an agreement on a new five-year contract wasn’t reached by 11:59 p.m. EST Thursday. The Teamsters union represents 5,000 Anheuser-Busch workers who […]

3 hours ago

Associated Press

Legislation allowing recreational marijuana sales in Virginia heads to GOP Gov. Glenn Youngkin

RICHMOND, Va. (AP) — Virginia lawmakers passed legislation Wednesday that if approved by Republican Gov. Glenn Youngkin would allow recreational retail sales of marijuana to begin next year. Under the bills, the state would start taking applications on Sept. 1 for cultivating, testing, processing and selling the drug in preparation for the market to open […]

3 hours ago

Sponsored Articles

...

Collins Comfort Masters

Avoid a potential emergency and get your home’s heating and furnace safety checked

With the weather getting colder throughout the Valley, the best time to make sure your heating is all up to date is now. 

...

Sanderson Ford

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

...

Canvas Annuity

Interest rates may have peaked. Should you buy a CD, high-yield savings account, or a fixed annuity?

Interest rates are the highest they’ve been in decades, and it looks like the Fed has paused hikes. This may be the best time to lock in rates for long-term, low-risk financial products like fixed annuities.

California’s nonpartisan legislative analyst says state faces record $68 billion budget deficit