SACRAMENTO, Calif. — California has a budget deficit of $27.6 billion, Gov. Gavin Newsom announced Friday — a gap so wide that he's proposing cutting 10,000 vacant state jobs and suspending some widely used business tax deductions.
The deficit is smaller than the $38 billion Newsom predicted in January, but that's because it doesn’t include $17.3 billion in cuts and other actions he and lawmakers already agreed on to help close it. Otherwise, it would be closer to $45 billion. Newsom and the non-partisan Legislative Analyst’s Office have disagreed on the true size of the state’s deficit this year. The LAO said in January that the deficit was actually $58 billion when including some reductions in public education spending. The LAO will release its own new estimate next week, and it will likely be larger.
State budgeting is a guessing game, particularly in California, where a progressive tax system means the state gets the bulk of its tax collections from rich people. About half of the state's income tax collections came from just 1% of the population in 2021. This makes the state more vulnerable to swings in the stock market.
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