California Legislative Analyst’s Office Revises Projected Budget Deficit to $73 Billion

The ongoing debate between California Governor Gavin Newsom and the nonpartisan Legislative Analyst’s Office (LAO) over the state’s budget deficit has taken a new turn, with the LAO announcing a revised shortfall of $73 billion. This figure represents a $15 billion increase from the previous forecast and is significantly higher than the $38 billion gap estimated by Governor Newsom.

According to the LAO, recent revenue collection data indicate further weakness in the state's financial outlook, leading to the revised deficit projection. The report stated that the actual budget shortfall will be influenced by various factors, including mandatory Proposition 98 spending on education.

The LAO emphasized that the budget problem is expected to be higher when Governor Newsom presents his revised projection of the state’s finances in May. This situation means that lawmakers will need to seek new budget solutions to ensure a balanced budget for the 2024-25 fiscal year. The LAO suggested that these solutions could involve increasing revenue, reducing spending (both one-time and ongoing), and considering cost shifts or the use of reserves.

Reports of LAO

In its report, the LAO outlined several areas where cuts could be made, identifying approximately $16 billion in one-time and temporary spending that could be reduced. These areas include business and labor, criminal justice, education, health and human services, housing and homelessness, resources and environment, and transportation.

Senate Republicans have expressed concern about the handling of the budget by Governor Newsom and the Democratic supermajority-controlled Legislature. Senator Roger Niello, Vice-Chair of the Senate Budget and Fiscal Review Committee, criticized the unchecked spending and called for a "course correction" and a "renewed commitment" to a responsible budget.

Senate Minority Leader Brian Jones criticized Governor Newsom for allegedly downplaying the deficit, stating, "How are we supposed to balance the budget when our governor can’t even admit the true size of the deficit his administration racked up?"

With the revised deficit projection, California faces a significant budgetary challenge that will require careful deliberation and decisive action from state lawmakers. As the situation continues to unfold, stakeholders eagerly await Governor Newsom's updated projection of the state's finances in May and the subsequent budget decisions that will shape California's fiscal future.