CALIFORNIA, USA — Expectations for California's budget deficit have gone up and down over the past few months, with some calculations putting it at a historic level... but California's Legislative Analyst's Office (LAO) says it might be worse than that.
In December, the LAO said California would likely need to solve a budget problem of $68 billion. It came as a result of severe and unprecedented revenue drops in 2022-23. Officials said tax receipts were lower than expected and victims of flooding after back-to-back winter storms were given until October to file their taxes.
However, that number for the deficit has been up for debate. In January, the number from LAO was dropped to $58 billion under the Newsom administration's revenue forecast at the time, but the governor's office has put it around $38 billion.
Under the latest update from LAO, the deficit is up to $73 billion — a $15 billion increase from their last projection.
That being said, the Department of Finance said there could still be some other factors impacting those numbers.
"From now through April, more than $51 billion in income and corporate tax receipts are forecast to come in," said H.D. Palmer, deputy director for the Department of Finance. "No one can say today with certainty how those numbers may change the budget estimate of a $38 billion shortfall. A responsible step would be for the Legislature to act now on the early action budget measures needed for $8 billion in solutions to help close this gap."
If things go as projected, the analyst's office said solutions could include revenue increases and spending reduction, from both one-time and ongoing sources, but other tools like reserves and cost shifts could play a role too.
Some of the possible reductions identified by the LAO could impact programs in areas like housing and homelessness, environment, transportation, education and more over three years.
Senate Budget Committee Vice Chair Roger Niello (R-Fair Oaks) referred to the state's deficit as fiscal irresponsibility.
"Democratic legislators and the governor’s continued fiscal irresponsibility is troubling, as evidenced by their unchecked spending and the alarming growth of the state's budget problem,” said Niello. “Californians deserve better than the reckless approach we've seen in recent years. It's time for a course correction and a renewed commitment to responsible budgeting that puts the needs of our residents first."
For the full report from the LAO, click HERE.
