The governor has been warning of a potential budget shortfall for more than a year, and the Legislative Analyst's Office said last in November the shortfall could be around $25 billion.
SACRAMENTO, Calif. — Days after the start of his second term, California Gov. Gavin Newsom on Tuesday will announce his plan to cover a multi-billion dollar budget deficit in what could signal the end of a decade's worth of economic growth in the nation's most populous state.
But he's been unusually quiet in the days leading up to his budget announcement. In years’ past, Newsom would often have news conferences to roll out some of his big new spending programs. But this year, all he has said is he plans to ask lawmakers for an additional $202 million to strengthen levees that protect the state’s cities from flooding — an issue at the forefront this week after multiple powerful storms have caused flooding across the state.
Sine then, lots of economic factors — led by runaway inflation, supply chain disruptions and Russia's invasion of Ukraine — have had a chilling effect on the economy. The S&P 500, a key indicator of the health of U.S. stock markets, has fallen more than 18% since its peak at the end of 2021. Plus, the state has $37.2 billion stored across its various savings accounts, which by itself would be more than enough to cover a $25 billion deficit. Constitutional limits prevent lawmakers from emptying reserves to cover a deficit. And unlike the federal government, California's budget must be balanced. Newsom and lawmakers will have to tighten state spending to cover all of the shortfall — something that Senate Budget Committee chair Nancy Skinner said is doable.
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