California lawmakers are being told to brace for a shortfall of at least $10 billion when Gov. Gavin Newsom presents his revised budget next week.
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In January, the state's Department of Finance projected a small surplus this year. But the situation is now very different, due in part to an expected Medi-Cal shortfall.
“Even if we don’t experience softer revenues in the coming year, there is potential for a larger deficit driven primarily on the expenditure side,” said legislative analyst Gabe Petek.
The Trump tariff policies and delayed tax filings from Los Angeles wildfire victims are also putting the state in a worse economic situation than previously anticipated.
“The state’s economy has been pretty stagnant over hotel last year to two years, and when you combine that with the potential for additional stock market volatility, probably caused in part at least by some of the recent federal policy actions, that makes the possibility of lower revenues than even what we are estimating in the coming year very plausible,” Petek said.
The city of Los Angeles is also grappling with a $1 billion budget shortfall for the coming fiscal year.
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