California Cities, Counties Bracing for Impact of State’s Record Budget Deficit

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California Cities, Counties Bracing for Impact of State’s Record Budget Deficit

The California State Capitol building in Sacramento, Calif., on March 11, 2023. (John Fredricks/The Epoch Times)

Travis Gillmore

Travis Gillmore

12/26/2023

Updated: 12/30/2023

With California facing a $68 billion budget deficit, local governments are preparing to re-evaluate their spending, anticipating funding cuts from state agencies. 
Part of the issue is expected tax revenue was far less than anticipated, which could deepen the deficit to $155 billion by 2025, the state’s Legislative Analyst reported earlier this month.
Facing back-to-back years of a deficit, spending cuts are expected statewide. 
Exactly what the repercussions of such will be, no one is sure right now. 
“Until we see the numbers put forward by the governor in January, it’s difficult to project the impact to counties,” Rachel Serrao, public affairs manager for the California State Association of Counties, told The Epoch Times Dec. 22. 
The state’s 2024–25 fiscal year budget discussions will resume when the Legislature reconvenes in the new year, kicked off by the release of Gov. Gavin Newsom’s so-called budget proposal, due Jan. 10.
“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,” Erin Mellon , communications director for the governor’s office, told The Epoch Times by email. 
With problems now arising in earnest at the state level, it remains to be seen how deep spending cuts will be, and how they will affect local governments. Counties, for example, rely on state funding for about one-third of their revenue, according to research and analysis nonprofit California Budget and Policy Center. 
Many counties are worried, according to various budget reports across the state, including that for Los Angeles County, saying ongoing inflation and high interest rates could only worsen things. 
Analysts have also said that the cost to borrow money has slowed real estate and investments in new companies and businesses, which impact the state’s revenue. 
Others point to the exodus of high-income earners who fled the state in record numbers in recent years. 
Personal income tax collected for the most recent fiscal year was 28 percent below what was expected while corporate tax revenues were off by 43 percent, according to a Dec. 15 Department of Finance report. 
Tasked with overcoming an unprecedented budget crisis, officials will need to increase revenues, decrease spending, or a combination of the two to resolve the budget problem.
Some local leaders, including London Breed, mayor of San Francisco—saddled with a looming budget deficit of more than $500 million—noted the need for fiscal prudence during the San Francisco Board of Supervisors meeting Dec. 12.
“In light of where we are, with a significant budget deficit, we need to start thinking about how we are going to start cutting costs on issues that impact our overall spending,” Ms. Breed said during the meeting. “We’ve spent a lot of money during good times and have enjoyed good times in order to do major projects ... but we’re going to have to rethink projects that are not already started.” 
Travis Gillmore

Travis Gillmore

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Travis Gillmore is an avid reader and journalism connoisseur based in California covering finance, politics, the State Capitol, and breaking news for The Epoch Times.

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