California to see record budget deficit of 73 bln USD in coming year

SACRAMENTO, the United States, Feb. 21 (Xinhua) -- The U.S. state of California could face a record budget deficit of 73 billion U.S. dollars for the 2024-25 fiscal year, the state budget advisor's latest projection showed.

The new projection means an increase of 15 billion dollars, or 26 percent, from the previous estimate of 58 billion dollars, according to a report released Tuesday by California's Legislative Analyst's Office (LAO).

The office's earlier estimates were based on California Governor Gavin Newsom's revenue forecast when he presented his initial budget proposal of 292 billion dollars in January.

"However, recent revenue collections data reflect even further weakness relative to those (previous) estimates," wrote the LAO in the report.

The state's traditional corporate tax collections declined by more than one-third in December from the year before, and similarly, both income tax withholding and estimated payments have been "fairly weak" recently, the report explained.

Newsom will deliver a revised budget in May. The LAO said that "the budget problem is likely to be higher at the time of the May Revision."

The LAO's revised deficit is nearly double the estimate of Newsom, who pegged California's deficit at 37.9 billion dollars last month.

The governor's budget called for 8.5 billion dollars in cuts from existing programs and services, including climate change initiatives, housing, and education.

He also planned to delay 5.1 billion dollars' worth of spending and 5.7 billion dollars in internal borrowing from special funds to support the tax on healthcare providers.

"If the budget problem increases by 15 billion dollars, the Legislature will need to find a like amount of new budget solutions to ensure the budget is balanced for 2024 to 2025," said the LAO report.

It recommends an additional reduction of 16 billion dollars in one-time or temporary spending in areas such as education, environment, housing and homelessness, health and human services, and transportation.

California isn't alone facing a significant budget deficit, as state budget problems are spreading across the United States.

About half of Americans live in states now grappling with budget gaps, ongoing deficits, or both, according to a January analysis by The Pew Charitable Trusts, based on data states published in late 2023.