Newsom said the state faced a 2.9 billion dollar deficit back in January. But, state revenues will be much higher than expected thanks to the booming stock market and a flourishing AI industry.
With an additional 16 and a half billion dollars in revenue, the state won’t face a shortfall for the next two years.
Gabe Petek with the LAO says Newsom’s current budget proposal is balanced, but warns California is going to have a bigger budget problem in the years ahead if it doesn’t save money now.
"And so our tax revenues have been surging and that’s not a time when we should not be fully funding our deposits to the state Rainy Day Fund and certainly not using them and that’s what’s happening right now. And so we think that points to an underlying structural problem," Petek warns.
The LAO recommends lawmakers adopt the proposed solutions in Newsom’s May Revise and deposit 20 billion into the state’s Rainy Day Fund.