State analyst says budget deficit even worse than initial projections

Instead of moving closer to what Gov. Gavin Newsom proposed, the Legislative Analyst’s Office said this week that the budget deficit is moving the other way.

California’s budget deficit issue has grown in just a matter of months, according to an update from the nonpartisan Legislative Analyst’s Office. 

The deficit is now projected to be close to double what Gov. Gavin Newsom said it would be under his budget proposal. 


The backstory: Last month the LAO estimated a $58 billion deficit under the Newsom Administration’s revenue forecast after Newsom proposed his budget. 

  • On the other hand, Newsom said the deficit was actually projected to be $37.9 billion. 
  • The LAO called Newsom’s projection as “plausible, but optimistic” at the time. 

The big picture: Recent state revenue collections are below even what the LAO projected earlier in the year, with the LAO now forecasting its own projections $24 billion below Newsom’s budget across 2022-2023 to 2024-2025. 

  • The $24 billion erosion in revenues corresponds to a $15 billion increase in the budget problem. 
  • That would expand the $58 billion estimated deceit to $73 billion, per the LAO’s updated forecast. 

LAO’s recommendations: The LAO recommends that California lawmakers reduce one-time and temporary spending. 

  • Specifically, the LAO estimates the state could pull back and reduce one-time and temporary spending by $6.4 billion in 2023-2024, $4.1 billion in 2024-2025 and $5.1 billion in 2025-2026. 
  • Those cuts would come from allocations for business, labor, criminal justice, education, health and human services, housing and homelessness, resources and environment, transportation and other areas.
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