In contrast, Florida Gov. DeSantis announces plans to expedite 20 major road projects across Florida using his state’s budget surplus.
Earlier this year, I reported that the fiscal situation is so dire in California that Gov. Gavin Newsom proposes cutting billions of dollars in climate spending and delaying funding of major programs to balance a $22.5 billion budget deficit if tax revenues don’t rebound.
It seems the deficit is even larger than initially projected.
Last month, Newsom announced that California faces a projected budget deficit of $22.5 billion for the coming fiscal year. The figure represented a striking downturn from last year, when the state enjoyed a surplus of about $100 billion due to federal COVID relief and surging capital gains.
While the predicted year-to-year drop-off seemed large, it may not have been large enough.
The California Legislative Analyst’s Office (LAO), a government agency that analyzes the budget for the state legislature, estimates in a report published last week that Newsom’s forecast undershot the mark by about $7 billion, thanks to about $10 billion less in tax revenues than expected.
“In particular, using recent revenue collections and economic data, we estimate there is a two‑in‑three chance that state revenues will be lower than the governor’s budget estimates for 2022‑23 and 2023‑24,” writes Gabe Patek, the legislature’s budget analyst. “Our best estimate is that revenues for these two years will be roughly $10 billion lower — implying a larger budget problem by about $7 billion.”
There are many contributing factors to the plunge in revenues.
California’s top income-tax rate is 13.3% on earners making more than $1 million. The top 0.5% of California taxpayers pay 40% of state income taxes. Volatile equity prices and layoffs at Silicon Valley companies are hitting capital gains. Companies are also cutting bonuses.
Corporate tax revenue came in about 20% lower in January than during the previous year, no doubt in part because of declining profits at big tech companies. But it’s also possible that the accelerating exodus of companies from the state may be contributing.
…The state experienced a historic $102 billion surplus in the last two fiscal years from federal Covid relief and surging capital gains, which it used to expand entitlement programs and increase climate spending. But LAO notes that “while revenues are moderating from the recent peak, they are still above average historical levels” and “even after adjusting for inflation, anticipated revenues for 2023-24 remain about 20 percent higher than before the pandemic.”
In other words, the state doesn’t have a revenue problem. It has a spending problem. There’s nothing new under the Sacramento sun.
The lack of funds may put a damper on the reparations frenzy.
…California Gov. Gavin Newsom (D) created his own Reparations Task Force, which just reached its own recommendations for $223,000 per person. Others have insisted the figure should be $350,000 for individuals and another $250,000 for Black-owned businesses. One California politician insisted the figure needs to be $800,000 per person, reflecting the average cost of a home in the state.
As these numbers rise, so do the calls for payments in both politics and the media. Even Disney has gotten into the act with a controversial children’s episode in which cartoon children demand reparations.
It may also put a damper on Newsom’s presidential aspirations.
DEM Presidential Polling:
Big Village / Feb 17, 2023 / n=437
— Polling USA (@USA_Polling) February 18, 2023
One last note: Newsom likes to contrast himself with Florida Gov. Ron DeSantis. In comparison, DeSantis has recently announced his administration is moving forward with a proposal to expedite 20 major interstate and roadway projects across the state of Florida in the next four years.
DeSantis said the “Moving Florida Forward” initiative will help some projects finish up to 10 years ahead of schedule and will be paid for through Florida’s budget surplus.
Just in this year, we’re going to put in $4 billion from our budget surplus to be in these key projects. We’re also going to dedicate $134 million each year to the State Transportation Work Program to further support and then because we have such a high credit rating, they’re going to be able to leverage that money that we put in for even more so the total is going to be about $7 billion over four years, which is really, really significant,” DeSantis said during a news conference in Polk County.
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