California is suffering from the major financial impact of people and businesses fleeing the Democrat-led state.
As the mass exodus to red states continues, California is now faced with a devastating budget crisis caused by the “severe revenue decline.”
Under Democrat Gov. Gavin Newsom’s watch, California now has a record $68 billion budget deficit.
Worryingly, Newsom believes that California should be a blueprint for how the rest of the country should be run.
The state’s budget deficit has grown exponentially in just a few months’ time, according to California’s non-partisan Legislative Analyst’s Office (LAO) report released Thursday.
The deficit has soared by more than $54 billion from just $14.3 billion in June.
And while the deficit isn’t the largest to ever face the state as a percentage of overall spending, 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.
However, the report did say that 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.
California lost $29 billion in tax revenue in 2021 after suffering a loss of $18 billion in 2020, according to IRS data reported by CNBC in May.
The LAO suggests that the state dip into its $24 billion in cash reserves as a remedy to the ballooning deficit.
It also recommends reducing spending on schools and community colleges.
Additionally, the report points 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.
Erin Mellon, the communications director for Democrat California Gov. Gavin Newsom, said in a statement that the governor “has maintained strict fiscal responsibility since taking office.”
“Federal delays in tax collection forced California to pass a budget based on projections instead of actual tax receipts,” she said.
“Now that we have a clearer picture of the state’s finances, we must now solve what would have been last year’s problem in this year’s budget.
“In January, the governor will introduce a balanced budget proposal that addresses our challenges, protects vital services and public safety, and brings increased focus on how the state’s investments are being implemented, while ensuring accountability and judicious use of taxpayer money,” she added.
