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Economy

California Faces $25 Billion Deficit in End to Surpluses

  • Deficit would be first for the Golden State since 2018
  • State budget adviser says recession would make shortfall worse
Pedestrians cross a street in San Francisco, California.

Pedestrians cross a street in San Francisco, California.

Photographer: David Paul Morris/Bloomberg
Updated on

California is likely to see a $25 billion deficit in its next fiscal year because of slumping revenue, the state’s nonpartisan budget adviser warned. It’s a stark turnaround from years of staggering surpluses.

The Federal Reserve’s path of interest-rate increases have slowed the economy, resulting in lower stocks, falling home prices, and less demand for items such as cars, the state’s Legislative Analyst’s Office said in a report Wednesday. The drop in stocks likely has led to estimated income tax payments this year being “notably weaker” than the previous year, it said.