The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff reported in January of this year that, despite having the nation's highest taxes, California has projected a deficit of $22 billion for the 2023-24 fiscal year.
At the time he commented that if the state is running large deficits in a full employment economy, what happens if/when the widely anticipated recession hits and tax revenues nosedive?
But no need to wait for that. By May the deficit projection was raised to $32 billion (links to past deficit stories in the comments section).
This week state budget officials announced the projected deficit for fiscal year 2024-25 has swelled to a record $68 billion.
And this fiscal forecast assumes no recession, so again: where does a record $68 billion deficit go if recession hits and unemployment climbs?
Keep in mind California had a major budget crisis in 2009 when the Great Recession cut into tax revenues. Then governor Arnold Schwarzenegger compromised with legislative Democrats to impose a "temporary" income tax rate hike from 9.3% to a nation's-highest 13.3% (for higher earners) until the crisis was over.
In 2016 California voters agreed with Jerry Brown's recommendation and approved making the tax hike permanent. Liberals predicted/promised that making the wealthy "pay their fair share" would produce balanced budgets and surpluses forever, snidely lecturing skeptics that "see, you need taxes to run a government."
At the time the Correspondent told his conservative friend (the second of only two conservatives in San Francisco) that "when the next recession hits it will be budget deficit crisis again and they'll call for yet another tax hike."
Those predictions have yet to materialize, but with a full-employment deficit projection of a record $68 billion it's pretty much a guarantee that an average to worse-than-average recession will soon-after generate news headlines of budget crisis in California--despite still imposing America's highest income tax rate and highest overall taxes.
Read New York Times: "California Faces $68 Billion Deficit Amid Steep Revenue Decline" at:
ps. Left progressives have been circling the wagons around California yet again with the old "It's the fifth largest economy in the world" line, as if size equals fiscal and economic health (think Japan from 1990 to present-day).
Well California is projected to sink to 6th largest sometime next year, and it wasn't that many years ago that leftists were bragging that California was the world's fourth largest economy. Meanwhile in the same span Texas has silently risen from world's 12th largest economy to 8th (just two spots behind California) despite having only three-quarters the population and a much lower cost-of-living.