California Gov. Gavin Newsom (D) has turned to climate change to explain how the state went from a $100 billion surplus two years ago to a $28 billion deficit, which would have been even higher prior to drastic actions last month.
As CalMatters noted, deficit estimates ranged from $38 billion to $73 billion:
That prompted Newsom and the Legislature to take “early action” last month to reduce the deficit by more than $17 billion ahead of the regular budget process. Their plan included some program cuts, but mostly relied on new revenue, internal borrowing and funding delays and shifts for savings, earning criticism from Republican lawmakers for being “gimmicky” and “balanced on hopes and prayers.”
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Why does California have such a financial problem? The reasons go back two years. A downturn in the stock market in 2022 hit capital gains, while high inflation pinched the housing market and the tech industry pulled back on initial public offerings as investments dropped. Those blows have continued as wealthy taxpayers carried forward their losses.
But the drops in revenue were not fully reflected in the spending plan that Newsom and legislators adopted last summer. Severe winter storms prompted the federal government to delay the income tax filing deadline for most Californians from April until November, and the state followed suit, giving an incomplete picture during the budget process. The state committed to funding programs that it subsequently realized it cannot afford.
Newsom noted the severe storms in answering a question from a reporter at a press conference on Friday.
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Author: Dillon B
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