California’s budget deficit has skyrocketed to $68 billion mainly due to months of unexpectly low tax revenues, according to a new analysis from the Legislative Analyst’s Office released on Thursday.
The latest deficit figure far exceeds the $14.3 billion estimate from June, according to Politico. The shortfall could potentially lead “Gov. Gavin Newsom and lawmakers to make spending cuts on a scale that few term-limited elected officials in Sacramento have faced” during the next legislative year, the report said.
“California Faces a Serious Deficit,” the report from the Legislative Office said. “While addressing a deficit of this scope will be challenging, the Legislature has a number of options available to do so. In particular, the Legislature has reserves to withdraw, one‑time spending to pull back, and alternative approaches for school funding to consider.”
The LAO report forecasts a $4 billion drop in the funding the state must send to schools and community colleges under Proposition 98. Across the board, analysts also predict that spending will be lowered by $4 billion.
However, the report does outline multiple suggestions the state could take to alleviate the problem, such as withdrawing from the reserves fund, reducing education spending or reducing other one-time spending.
Last year, legislative leadership in Sacramento proposed withdrawing from the reserves, but Newsom rejected that idea, Politico reported.
In January, the governor is slated to release his first budget proposal of the year, which will prompt negotiations on how the state could address its financial problem.
Last year, Newsom made the largest cuts of his time in office after experiencing years of surpluses.