Shock: California Projects $25 Billion Deficit — After $98 Billion Surplus

The State of California will suffer a $25 billion deficit in 2023-2024, despite enjoying a record-setting $98 billion budget surplus this year, according to new analysis from the nonpartisan Legislative Analyst’s Office.

The new projections, released Wednesday, come just over a week after elections in which Democrats, including Gov. Gavin Newsom (D), were reelected to every statewide office after a year of lavish public spending.

The Legislative Analyst’s Office explained that the deficit could be even worse, if a recession is particularly bad (original emphasis):

Under our outlook, the Legislature would face a budget problem of $25 billion in 2023‑24. (A budget problem—also called a deficit—occurs when resources for the upcoming fiscal year are insufficient to cover the costs of currently authorized services.) The budget problem is mainly attributable to lower revenue estimates, which are lower than budget act projections from 2021‑22 through 2023‑24 by $41 billion. Revenue losses are offset by lower spending in certain areas. Over the subsequent years of the forecast, annual deficits would decline from $17 billion to $8 billion.

…

The $25 billion budget problem in 2023‑24 is roughly equivalent to the amount of general‑purpose reserves that the Legislature could have available to allocate to General Fund programs ($23 billion). While our lower revenue estimates incorporate the risk of a recession, they do not reflect a recession scenario. Based on historical experience, should a recession occur soon, revenues could be $30 billion to $50 billion below our revenue outlook in the budget window.

California’s revenues soared in the past two years, thanks to a speedy economic recovery that began under President Donald Trump, and massive transfers from the federal government under President Joe Biden.

The state was so flush with cash that Newsom sent lower-income households a “Golden State Stimulus” before his recall election last year, and sent them $400 checks to offset higher fuel costs before this year’s election.

However, California’s state budget is exceptionally sensitive to shifts in the national economic outlook, as it depends heavily on tax revenues from a very small group of high earners in Silicon Valley and Hollywood.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the recent e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. His recent book, RED NOVEMBER, tells the story of the 2020 Democratic presidential primary from a conservative perspective. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.