California’s nonpartisan Legislative Analyst’s Office reported Thursday that the state faces a whopping $68 billion budget deficit as a result of a late and “unprecedented” decline in tax revenues.
The office, which which serves as the official “eyes and ears” for the state Legislature, warned that Gov. Gavin Newsom would likely have to declare a budget emergency to make sufficient spending cuts.
The state budget assumed a deficit of $14 billion when it was approved in June, but the shortfall will actually be much higher.
“With the state’s conformity to federal actions postponing deadlines for tax payments on investment and business income for much of the past year, the state adopted the 2023‑24 budget without a clear picture of the impact of recent economic weakness on state revenues,” the LAO said.
The LAO said the state can draw on $24 billion in reserves, but will need to lower school spending to the Constitutional minimum, and halt funding that is committed but not spent to close the gap.
“Given the scale of the budget problem, we suggest the Legislature immediately begin evaluating past spending to find monies that have been committed but not yet distributed,” the LAO said.
The prospect of a major deficit has been known for some time, and legislative leaders have received advance estimates, but the LAO report was not publicly released until Thursday.
“The LAO’s Fiscal Outlook includes challenging news,” said state Senate President Pro Tem Toni Atkins of San Diego. “We can withstand this, but we will need to be cautious and mindful as we approach our budgeting and legislation next year and in the years to come. “
“Our record reserves and other budgeting tools will help us weather this shortfall, while at the same time protecting middle class taxpayers and the programs and resources that help Californians and families,” she added.
Senate Minority Leader Brian Jones of Santee blamed the problem on overspending by the Democratic majority.
“Governor Newsom and Democrat lawmakers turned a $100 billion surplus into a $68 billion deficit in just two years,” he said. “California built up significant budget reserves under the requirements of a bipartisan 2014 initiative, but Democrats have managed to outspend even what the reserves can cover.”
“Hopefully, the supermajority will see it is time for a more realistic budget strategy, instead of throwing money at a laundry list of projects that sounds nice on the national television debate stage,” he added.
Updated at 1:45 p.m., Thursday, Dec. 7, 2023
