California Narrowly Dodges a Budget Shortfall
The New York Times
Lawmakers struck a deal to close a state deficit estimated at $47 billion. State finances have fluctuated wildly in recent years.
Slammed by a post-pandemic drop in state revenue projections, California lawmakers on Saturday announced a deal to close a state deficit estimated at $47 billion, paving the way for a nearly $300 billion state budget for the next fiscal year.
The budget, which has vexed the state’s Democratic leaders for months, was announced just days before the state’s legal deadline and after weeks of negotiation.
It will tap reserves, delay a planned increase in the minimum wage for health workers, suspend some tax breaks for businesses and cut or postpone billions of dollars in state spending, state finance officials said.
“This agreement sets the state on a path for long-term fiscal stability — addressing the current shortfall and strengthening budget resilience down the road,” Gov. Gavin Newsom said in a statement.
The moves are just part of a two-year effort that was launched after lawmakers realized they had significantly underestimated a projected shortfall. Such budgetary issues have become common in California, even though the state reported a record surplus just two years ago.
California’s budget dwarfs the gross domestic products of some countries, underpinning the nation’s most populous state and the world’s fifth-largest economy. But when Golden State finances swing, they have an impact — and they can swing wildly.
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