California Revenues Decline amid Economic Worries

The golden times for California's government may soon come to an end.

The state with the most people recently had so much money that lawmakers could spend it however they pleased. They provided free healthcare to low-income immigrants, paid for every 4-year-old to attend kindergarten, and sent taxpayers more than $21 billion in stimulus checks.

Due to state tax collections that have consistently fallen short of forecasts for four months in a row, that seemingly unending flow of money has begun to slow down. According to the most recent projection from the independent Legislative Analyst's Office, there is now an 80% likelihood that California would fall $8 billion short when its fiscal year concludes next summer.

Although there is yet time for a turnaround, the pattern of falling sales is already having an effect. Last month, Democratic Governor Gavin Newsom used the state's impending shortfall to reject a tax cut for manufacturers, suspend the expansion of full-day kindergarten programmes, and eliminate jobless benefits for immigrants living in the country illegally.

We'll need to make some modifications because not only will there be gaps, but there will be many of them, according to Newsom. "We're currently collaborating with the Legislature to achieve just that."

Despite the deficit, it's unlikely that California will have a cash crunch like the one that overtook the state during the Great Recession more than ten years ago.

At the end of September 2008, California had less than $8 billion available for spending during the Great Recession. California has more than $130 billion in resources this year, $37.2 billion of which are in its various savings accounts.

According to Chris Hoene, executive director of the California Budget & Policy Center, "I think the state is significantly better positioned this time around than it has been in recent history" for a prospective economic slump.