Analysts: Calif. faces ballooning, $68bil budget deficit

State estimations for tax revenue have fallen far short, leading to a deficit projected in the tens of billions.

Last week, the nonpartisan California Legislative Analyst Office revealed that the state’s tax payments are coming in much worse than expected. 

Thursday, the LAO revealed that the state faces a $68 billion deficit that the state will need to solve in the upcoming budget process. 


The big picture: California likely faces steep budget cuts next summer when the Legislature works through the new budget. 

  • According to the LAO, the deficit is due to the state conforming to federal tax filing extensions, and the actual 2022-2023 revenue will be $26 billion below the budget estimates. 
  • In order to address the deficit, the LAO notes that the state has nearly $24 billion in reserves that could be used. The LAO also points to options to reduce spending on schools and community colleges that would address nearly $17 billion. Reductions in one-time spending could also provide $10 billion in relief. 
  • The LAO says that using general purpose reserves is merited this year because of the serious budget problem, but suggests caution since reserves are unlikely able to cover the state’s multiyear deficits, which average $30 billion per year. 

What they’re saying: Assembly Republicans called on the Legislature to get its act together to fix the budget crisis. 

  • “I have said for years, a slowing California economy coupled with unsustainable spending is a recipe for fiscal disaster,” said Asm. Vince Fong (R–Bakersfield), the Assembly Budget Vice Chair. “No more gimmicks; we must take action now to get our fiscal house in order.”
  • Assembly Republican Leader James Gallagher (R–Yuba City) said the deficit is the result of a checked-out governor who is more interested in the national spotlight than running the state. 
  • “In the last five years, Newsom and legislative Democrats have increased spending by more than 60%. It’s flat-out unsustainable,” Gallagher said. In spite of this outrageous spending, Californians’ quality of life has collapsed. No wonder people are moving to Florida.”
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