Gavin Newsom didn’t just do poorly in his debate with Florida governor Ron DeSantis, he’s also having a hard time keeping California from not falling to pieces. Particularly, California’s tax revenue is in freefall as the mass exodus from the state continues and mountains of economic activity leave the state, likely for good.
In fact, unexpectedly low revenues meant that California’s budget deficit has swelled to a record $68 billion, potentially prompting drastic tax cuts and showing how far the state’s fortunes have fallen. This budgetary shortfall is California’s largest ever in dollar terms, though not as a percentage of overall spending.
The problem is not only severe, but came upon California quickly. According to the Golden State’s non-partisan Legislative Analyst’s Office, which released the report about the budget shortfall, the state’s budget deficit grew dramatically over the past few months, moving up more than $54 billion from just $14.3 billion in June of this year.
While the Legislative Analyst’s Office did not mention the mass exodus of people and businesses from California, instead pinning the issue on a change to the state’s tax filing deadlines and worse than expected economic conditions, many on the right argued that the budget issues were due, at least in part, to the many people and businesses that have left California over its high taxes and declining quality of life.
Officials are doing their best to appear unconcerned. Legislative Analyst Gabriel Petek, speaking to reporters about the issue, said, “The state remains in a good cash position, and that really wasn’t the case back at the start of the Great Recession. We don’t face the same kind of liquidity challenges that we had at that time, and so I would stop short of describing it as a crisis.”
Department of Finance spokesperson HD Palmer, for his part, said, “Both the Governor and the Legislature face a significant challenge with the 2024 budget.” He continued, “The Administration will present its plan to close the budget gap when the Governor sends his proposal to the Legislature next month.”
Similarly, California Senate President Pro Tempore Toni Atkins said, “Our economy is still good, but what we need to do is be incredibly cautious here. We are in a deficit, and therefore, new programs, new spending — in fact, existing spending — we’re going to have to slow down over time.”
Joining was Erin Mellon, communications director for Governor Gavin Newsom, who said, “Federal delays in tax collection forced California to pass a budget based on projections instead of actual tax receipts. Now that we have a clearer picture of the state’s finances, we must now solve what would have been last year’s problem in this year’s budget.”
She continued, “In January, the Governor will introduce a balanced budget proposal that addresses our challenges, protects vital services and public safety, and brings increased focus on how the state’s investments are being implemented, while ensuring accountability and judicious use of taxpayer money.”
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