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California is facing a record $68 billion budget deficit due to a ‘severe’ revenue decline as residents continue to flee the crime -ridden state. The Golden State is in an ‘unprecedented’ budget crunch, according to a report by the independent Legislative Analyst’s Office. The deficit has ballooned exponentially in a matter of months, up more than $54 billion from $14.3 billion in June.
Poorer than expected economic conditions and a delay in tax collection due to the extreme weather that hit the state earlier this year were blamed for the deficit. The budget problem is the state’s biggest ever in dollar amount although not as a percentage of spending. ‘Specifically, we estimate that 2022-23 revenue will be $26 billion below budget act estimates,’ The LAO said. ‘This creates unique and difficult challenges—including limiting the Legislature’s options for addressing the budget problem.’
Lawmakers have been advised they will need to slash spending on schools and colleges or dip into the state’s $24 billion reserves. However, there were warnings from the LAO that the reserves are ‘unlikely to be sufficient to cover the state’s multiyear deficits’, which average $30 billion per year according to the watchdog. It comes as hundreds of thousands of Californians have fled the state amid soaring crime rates in many major cities.
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Earlier this year it was revealed 500,000 people had left, equivalent to a population of one percent since the start of the pandemic. The LAO report does not link the exodus to the deficit, but instead points to economic headwinds the state faced. Soaring inflation hampered property sales after the Federal Reserve took action to cool it which slowed the economy in a number of ways including jacking up the cost of mortgages. California’s reliance on startups and technology companies also makes it particularly sensitive to financial conditions.
Meanwhile, hundreds of businesses are ditching their cities amid skyrocketing taxes and rampant crime. Top retailers like Nordstrom, H&M, and Gap withdrew from San Francisco in recent months, and 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.
Democrat California Gov. Gavin Newsom, ‘has maintained strict fiscal responsibility since taking office,’ Erin Mellon, his communications director told Fox News Digital. She added this includes building the state’s reserves to the maximum allowed under its constitution and paying down debt.
‘Federal delays in tax collection forced California to pass a budget based on projections instead of actual tax receipts, now that we have a clearer picture of the state’s finances, we must now solve what would have been last year’s problem in this year’s budget,’ she said.
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