California is facing a major budget crisis due to a “severe revenue decline,” and a record $68 billion budget deficit, likely forcing Democrats running the state to cut spending as the mass exodus of people and businesses moving to Republican-run states continues.
According to California’s non-partisan Legislative Analyst’s Office (LAO) report released Thursday, the state’s budget deficit has grown exponentially in just a few months’ time, up more than $54 billion from just $14.3 billion in June.
The deficit isn’t the largest to ever face the state as a percentage of overall spending, but it is the largest in terms of real dollars.
The LAO’s report made no mention of the billions in tax revenue lost by California due to the exodus of its people and businesses, but said the massive deficit increase and lower revenues were largely driven by a change to the state’s tax filing deadline and poorer than expected economic conditions.
According to IRS data reported by CNBC in May, California lost $29 billion in tax revenue in 2021 after suffering a loss of $18 billion in 2020.
As a remedy to the ballooning deficit, the LAO suggested the state dip into its $24 billion in cash reserves, as well as reduce spending on schools and community colleges. It also pointed to one-time spending cuts and shifting costs without impacting core services.
It added that the legislature should “exercise some caution” should it take such measures, and noted that the cash reserves would likely be insufficient to cover what it said were California’s multi-year $30 billion average deficits.
It went on to suggest a long term fix would be to either increase revenue, cut more spending, or both.
California saw its first-ever population decline in 2020 when the state imposed rigid lockdowns during the COVID-19 pandemic. From January 2020 to July 2022, the state lost well over half a million people, with the number of residents leaving surpassing those moving in by almost 700,000.
Fox News Digital has reached out to Democrat California Gov. Gavin Newsom’s office for comment.
Fox News’ Nikolas Lanum contributed to this report.
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