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

‘Catch and kill’ will be described to jurors in Donald Trump’s hush money trial as testimony resumes

NEW YORK (AP) — A longtime tabloid publisher was expected Tuesday to tell jurors about his efforts to help Donald Trump stifle unflattering stories during the 2016 campaign as testimony resumes in the historic hush money trial of the former president. David Pecker, the former National Enquirer publisher who prosecutors say worked with Trump and […]

8 hours ago

Associated Press

America’s child care crisis is holding back moms without college degrees

AUBURN, Wash. (AP) — After a series of lower-paying jobs, Nicole Slemp finally landed one she loved. She was a secretary for Washington’s child services department, a job that came with her own cubicle, and she had a knack for working with families in difficult situations. Slemp expected to return to work after having her […]

8 hours ago

Several hundred students and pro-Palestinian supporters rally at the intersection of Grove and Coll...

Associated Press

Pro-Palestinian protests sweep US college campuses following mass arrests at Columbia

NEW YORK (AP) — Columbia canceled in-person classes, dozens of protesters were arrested at New York University and Yale, and the gates to Harvard Yard were closed to the public Monday as some of the most prestigious U.S. universities sought to defuse campus tensions over Israel’s war with Hamas. More than 100 pro-Palestinian demonstrators who […]

10 hours ago

Ban on sleeping outdoors under consideration in Supreme Court...

Associated Press

With homelessness on the rise, the Supreme Court weighs bans on sleeping outdoors

The Supreme Court is wrestling with major questions about the growing issue of homelessness as it considers a ban on sleeping outdoors.

11 hours ago

Arizona judge declares mistrial in case of rancher who shot migrant...

Associated Press

Arizona judge declares mistrial in the case of a rancher accused of fatally shooting a migrant

An Arizona judge declared a mistrial in the case of rancher accused of killing a Mexican man on his property near the U.S.-Mexico border.

12 hours ago

Associated Press

Trial opens for former Virginia hospital medical director accused of sexual abuse of ex-patients

NEW KENT, Va. (AP) — The former longtime medical director of a Virginia hospital that serves vulnerable children used physical examinations as a “ruse” to sexually abuse two teenage patients, a prosecutor said Monday, while the physician’s attorney “adamantly” denied any inappropriate conduct. The trial of Daniel N. Davidow of Richmond, who for decades served […]

12 hours ago

Sponsored Articles

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

...

Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

...

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. 

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