California Faces Record $27.6B Deficit as Governor Proposes Job Cuts, Tax Hikes

According to recent reports, California has a budget deficit of $27.6 billion for the upcoming fiscal year starting in July 2024. Governor Gavin Newsom has proposed cutting 10,000 vacant state jobs and suspending certain business tax deductions as part of his proposed $288 billion state budget. The deficit is larger than previously anticipated due to decreased tax revenue resulting from inflation and a slowdown in the tech industry. This is the second consecutive year the state has faced a significant budget shortfall, with potential future deficits also looming. Governor Newsom’s proposals include cuts to programs such as broadband expansion, water storage improvements, and pandemic-related aid for public health departments, as well as reductions to a scholarship program for middle-class college students pursuing teaching credentials. The state’s progressive tax system leaves it particularly susceptible to fluctuations in the stock market, making accurate revenue projections difficult. Unlike the federal government, California’s constitution requires a balanced budget, which poses challenges when revenue projections are incorrect. Prior to this announcement, Governor Newsom had proposed potentially delaying a minimum wage increase for healthcare workers, although this may change with the release of the non-partisan Legislative Analyst’s Office’s revised estimate, expected next week. The state legislature must pass a budget by June 15th, and Governor Newsom aims to address both the current and following year’s deficits through over $32 billion in cuts.