California Governor Gavin Newsom has revealed that the state is facing a budget deficit of $32 billion.
Newsom attributed the challenges to high inflation and a decision to allow most individuals to delay filing their taxes due to a series of winter storms.
The revised budget proposal, which was announced by Governor Newsom, aims to address the growing deficit.
The new figure of $32 billion is $10 billion higher than the initial estimate made in January.
Newsom pointed out that the state’s progressive tax code, which heavily relies on wealthy taxpayers whose incomes are tied to the stock market’s performance, has contributed to a shortfall in personal income tax revenue.
This shortfall amounts to approximately $3.2 billion, while corporate tax revenue has surprisingly increased by $100 million.
To tackle the deficit, Governor Newsom’s proposal involves shifting $3.3 billion from existing commitments in the General Fund.
This will impact spending on climate change initiatives and college student housing projects.
Additionally, middle-class tax refunds will be reduced, and the state will draw from its safety reserves to cover the shortfall.
The state plans to utilize new bonds and other sources to bridge the budget gap.
California boasts the largest state budget in the country, and it is one of the few states grappling with a significant deficit.
Newsom’s proposal will now be sent to state lawmakers for further consideration and action.