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California’s Budget Deficit Hits Record $68 Billion as Tax Revenue Falls

California’s Budget Deficit Hits Record $68 Billion as Tax Revenue Falls

Blame “Bidenomics.” California’s economic downturn has been worse than expected.

Last May, I reported that instead of a surplus, California was facing a budget deficit of $30.5 billion.

As we wrap up another spectacular year of Left Coast failure, that deficit is now over twice that amount.

California’s budget deficit has swelled to a record $68 billion after months of unexpectedly low tax revenues, a shortfall that could prompt the state’s deepest spending cuts since the Great Recession.

The latest deficit figure — calculated by the nonpartisan Legislative Analyst’s Office and released Thursday — far exceeds the $14.3 billion estimate from June. The shortfall, which is the highest in dollar terms but not as a percentage of overall spending, threatens to upend the upcoming legislative year by forcing Gov. Gavin Newsom and lawmakers to make spending cuts on a scale few term-limited elected officials in Sacramento have faced.

While not minimizing the shortfall, state budget analysts said California has options to address the deficit — including the use of cash reserves, one-time cuts in spending and changes to the way it funds education — that it didn’t have in previous downturns.

The explanation of why the early projection of the deficit was so off can best be explained by “Bidenomics”—California’s economic downturn has been worse than expected.

A series of damaging storms last winter have made the problem worse. The storms were so bad that state officials decided to give people and businesses more time to pay their taxes this year. Californians did not have to pay their 2022 taxes until November of this year. That meant Newsom and the Legislature had to come up with a budget over the summer without knowing how much money the state had to spend.

It turns out that they badly misjudged how much taxes people and businesses would pay. The nonpartisan Legislative Analyst Office said tax collections were off by $26 billion, a major driver of the deficit. When combined with the economic slowdown California has been facing since last year, it leads to a predicted deficit of $68 billion, Legislative Analyst Gabriel Petek announced Thursday.

The end of the Covid-fiscal-sugar-high and rising interest rates are also contributing factors.

The analyst’s office said some of the decline in revenues is an expected falloff from abnormally strong revenue growth in prior years when federal COVID-19 stimulus funding artificially boosted income tax revenues, resulting in a record state surplus.

Analysts also blamed the Federal Reserve for raising interest rates, some of the effects of which “have an outsized importance to California,” the report stated. Investments in California startups and the tech industry dropped significantly, with 80% fewer companies going public in 2022 and 2023 compared with 2021, for example.

California entered an economic downturn in 2022, with the number of unemployed workers rising nearly 200,000 since the summer of last year, according to the report.

The Legislative Analyst’s Office said conditions exist for Newsom to declare a fiscal emergency to dip into budget reserves to cover some of the shortfall. Analysts laid out other maneuvers that could be used to reduce the deficit, including saving $16.7 billion by reducing education funding under Proposition 98 to the constitutional minimum.

Of course, the spread of crime and chaos have contributed to the exodus of businesses and taxpayers.

Top retailers like Nordstrom, H&M and Gap withdrew from San Francisco in recent months and while the owner of two major hotels, including the largest in San Francisco, announced it will also quit the city.

While in Oakland, restaurateurs revealed that spiraling crime had forced them to shut their doors as diners were being robbed and carjacked mid-meal.

Last, but not least, some blame resides with politicians who put virtue-signaling ahead of civic responsibilities.

Newsom is fortunate this report was not issued prior to his debate with Florida Gov. Ron DeSantis. Otherwise, it would have led to another incredibly awkward moment.


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more chickens coming home to roost

ThePrimordialOrderedPair | December 9, 2023 at 4:46 pm

California’s budget deficit has swelled to a record $68 billion after months of unexpectedly low tax revenues, a shortfall that could prompt the state’s deepest spending cuts since the Great Recession.

The only solution to this is …


It’s the wave of the future.

“California’s budget deficit has swelled to a record $68 billion …”

I’ll say it again: This is a feature, not a bug. The goal is insolvency with a plea for a bailout from the feds. And since the feds can print money at will, the feds will agree. This would make the nation’s largest state a ward of the federal govt. thereby effectively killing California as a sovereign state. This blue print would then be foisted upon other states, until the USA no longer has a federal govt., but a national government. This is key to abolishing the electoral college.

(btw: your ‘budget deficit of $30.5 billion’ goes to a current post about Fetterman.)

    bev in reply to LB1901. | December 9, 2023 at 6:10 pm

    So, is this a good time to talk about reparations?

    bev in reply to LB1901. | December 9, 2023 at 6:11 pm

    Sorry, my comment was not intended to be a reply. Sorry!

    Lucifer Morningstar in reply to LB1901. | December 9, 2023 at 7:59 pm

    Well then its a darn good thing such a plan cannot work in the state I live in. If for any reason the tax revenue comes in short of what is predicted then by Constitutional mandate our legislature must reconvene and adjust/cut the budget so that there will not be a budgetary deficit. And there is nothing anyone can do about it unless they want to try and amend the state constitution. Which isn’t likely to happen.

    JimWoo in reply to LB1901. | December 10, 2023 at 2:53 pm

    If the feds prop up the failed CA govt they should demand radical changes to their spending habits. I don’t feel generous to see my tax dollars supporting their lunacy.

You can bet that at Newsome’s next debate extravaganza with whomever, he will spin this budget deficit fact by saying it’s not true. To him, revenue losses and bottom-line deficits are only transitory and California is better than Florida, Texas, or Tennessee because he says so! See how that works?

Gee, who’d have thought? Communism really doesn’t work

    #FJB <-- Disco Stu_ in reply to Ironclaw. | December 9, 2023 at 7:38 pm

    I was immediately thinking of inserting between a few of the above paragraphs:

    No DUH, leftist fool! Duh … duh … DUH!

    LeftWingLock in reply to Ironclaw. | December 10, 2023 at 8:12 am

    Ironclad– I hope we can all agree that true communism works great. California’s problem is the state is a hybrid of capitalism and communism. Get rid of the capitalism and the communist part will prosper. Let a thousand flowers bloom

Subotai Bahadur | December 9, 2023 at 6:33 pm

1) Y’all don’t know how happy I am that those member of my immediate family who lived in California [and ran a profitable business there] moved back to America.

2) They keep saying that it will force them to make spending cuts. Seriously, is California not allowed to run a deficit and debt? It seems so un-Democrat for a state that has been completely ruled by them for generations.

3) I rather expect that they will try again to tax those persons and businesses who have left the state.

Subotai Bahadur

    BierceAmbrose in reply to Subotai Bahadur. | December 10, 2023 at 12:37 am

    “3) I rather expect that they will try again to tax those persons and businesses who have left the state.”

    They’re behind the curve. NY State already does that. One of the few ways in which The Imperial State is actually *more* progressive than Cali, vs.#2.

Let’s hope that this pathetic stooge is now approaching a free fall into oblivion.

Next job: selling used EVs.


CA under one party rule dem super majority. Nothing will change there. With skilled knowledge workers moving out, and homeless junkies moving in. Is CA in for lost decade?

Too bad the grasshoppers didn’t save for a rainy day…

JackinSilverSpring | December 10, 2023 at 12:33 am

We should not blame the politicians. They’re only doing what the voters put them there to do, which is to destroy California.

    healthguyfsu in reply to JackinSilverSpring. | December 10, 2023 at 2:35 am

    It’s okay to blame both. They pitched and implemented the ideas of “the people”. That’s like saying Hitler only did what all of the anti-semitic Germans wanted him to do.

OMG- how will this affect reparations?

California believes in living beyond its means. California has been great NOT because of leftist progressive policies. It could have been a leader like in the ’60’s but took the cushy spend spend spend road to utopia. As VDH sees it… a neo-feudal state of super rich and poor lower class.