The Governor of California, Gavin Newsom, has ordered a halt to the state’s spending. This comes as the state’s projected budget deficit rose to $68 billion for the following year. This is nearly five times more than the initial forecast.
Newsom’s Department of Finance posted a letter on its website last Tuesday. It said that state agencies needed to cut down on spending on everything, such as office supplies, computer equipment, and nonessential travel. Additionally, the spending cuts affect purchases and other items.
“It is vitally important that the state government is efficient, effective, and only expends funds that are necessary to the critical operation and security of the state. As such, all state entities must take immediate action to reduce expenditures and identify all operational savings achieved,” the letter said.
In the letter, the budget director, Joe Stephenshaw, said government bodies “must take immediate action to reduce expenditures and identify all operational savings achieved.” The deficit for the 2024 fiscal year begins in July. It is linked to the dwindling fortunes of the wealthiest taxpayers in California. The current trend forces the state to consider cutting spending on vital services and reaching into budget reserves.
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“Issuing this letter now gives us a head start on the budget process by using the governor’s executive authority to get agencies to cut back on nonessential spending,” said H.D. Palmer, a spokesman for the state finance department. “We have roughly seven months left in the fiscal year, so by taking this step now and by getting ahead of the process, we can achieve cost savings that will contribute to closing the budget gap.”
The state government initially projected a $14 billion deficit in the upcoming 2024 fiscal year. Gov. Newsom is set to present a detailed budget proposal in January. The last time California had to cut spending was in 2020, when the state was dealing with the pandemic.
POLL—Should the Government Increase Taxes on the Wealthy To Reduce Economic Inequality?
California’s revenue system depends a lot on income taxes. Many analysts and budget watchers anticipated some wealthy people and large organizations would file their income taxes by the deadline in November. Unfortunately, that didn’t happen.
Senator Roger Niello, the vice-chair of the Senate Budget Committee, highlighted several ways spending cuts could happen. This included a more carefully considered spending on homelessness.
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“While the state grapples with its budget deficit, we cannot let that slow us down from delivering the critical services our residents need and rely on every day,” said Carolyn Coleman, executive director and CEO of the League of California Cities. “… we will push back on any efforts to raid funding for local programs to make up for the deficit.”
Nonetheless, California is in a better position to deal with the deficit than previous years. The state has managed to close similar funding gaps in the past and still has over $90 billion in unused borrowed funds.
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