(Daily360.com) – According to a report released last Thursday by a legal analyst, California may see its largest budget deficit since the Great Recession of 2008 as it climbs to $68 billion.
Last week, a nonpartisan Legislative Analyst Office (LAO) released calculations showing that the latest deficit in California is far beyond the estimated $14.3 billion calculated back in June.
Democratic Gov. Gavin Newsom and California lawmakers may be forced to make serious spending cuts not seen in Sacramento by most elected officials since they’ve been in office.
Some of the options raised by state budget analysts to address the deficit include using California’s cash reserves, changes in education funding, and one-time spending cuts. One LAO analyst told reporters that California “remains in a good cash position” which “wasn’t the case” back in 2008 when the Great Recession began. Although they don’t want to minimize the possible disaster implied by the shortfall, the analysts believe there’s hope that it won’t hit the Golden State as badly as in the past.
The LAO analyst, Gabriel Petek, said he “would stop short of describing it as a crisis” because the state isn’t facing “the same kind of liquidity challenges” as in 2008. They are forecasting a $4 billion decline in required state funding for community colleges and local schools under Proposition 98. Other possible areas for reductions include health care and climate programs.
The analysts also suggested one-time cuts could be considered by legislators to ease the deficit impact. Another option suggested is the $30 billion in reserves which the state could tap into that would lessen the impact. Officials floated the idea of using California’s savings last year, an idea Newsome opposed. Whether or not that money should be accessed will become heavily debated in 2024.
The state’s Department of Finance warned earlier in the year that the revenue downturn was likely to continue in California due to soaring interest rates, declines in the stock market, and inflation.
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