Skip to content
CapRadio

CapRadio

signal status listen live donate
listen live donate signal status
listen live donate signal status
  • News
    • beats
    • State Government
    • Environment
    • Health Care
    • Business
    • Arts and Lifestyle
    • Food and Sustainability
    • PolitiFact California
    • California Dream
    • Videos
    • Photos
  • Music
    • genres
    • Classical
    • Jazz
    • Roots
    • Eclectic
    • Videos
    • Daily Playlist
  • Programs + Podcasts
    • news
    • Morning Edition
    • All Things Considered
    • Marketplace
    • Insight
    • California State of Mind
    • The View From Here
    • music
    • Acid Jazz
    • At the Opera
    • Classical Music
    • Connections
    • Excellence in Jazz
    • Hey, Listen!
    • Insight Music
    • K-ZAP on CapRadio
    • Mick Martin's Blues Party
    • Programs A-Z
    • Podcast Directory
  • Schedules
    • News
    • Music
    • ClassicalStream
    • JazzStream
    • Weekly Schedule
    • Daily Playlist
  • Community
    • Events Calendar
    • CapRadio Garden
    • CapRadio Reads
    • CapRadio Travels
    • Ticket Giveaways
  • Support
    • Evergreen Gift
    • One-Time Gift
    • Corporate Support / Underwriting
    • Vehicle Donation
    • Stock Gift
    • Legacy Gift
    • Endowment Gift
    • Volunteering
    • Benefits
    • Member FAQ
    • e‑Newsletter
    • Drawing Winners
    • Thank You Gifts
  • About Us
  • Contact Us
  • Close Menu
 We Get Support From:
Become a Supporter 
 We Get Support From:
Become a Supporter 
  • State Government
  •  

California Facing Landmark $54.3 Billion Budget Deficit Due To COVID-19 Crisis

  •  Nick Miller 
Thursday, May 7, 2020 | Sacramento, CA
Andrew Nixon / CapRadio

California Gov. Gavin Newsom presents his proposed 2020-2021 budget Jan. 10, 2020.

Andrew Nixon / CapRadio

Updated 3:23 p.m.

California is projecting a $54.3 billion deficit — a landmark shortfall due to the COVID-19 crisis that will reverberate through state budgets for years to come.

"This is, unfortunately, not going to be a one and done,” state deputy director of finance H.D. Palmer told CapRadio. “It’s going to take a long time.”

The forecast, released by the state Department of Finance on Thursday morning, will be reflected in Gov. Gavin Newsom’s “May Revise” budget scheduled to come out next week. 

Revenue projections are dire: a $9.7 billion drop for this year’s budget, and a $32.2 billion projected decline for the 2020-21 fiscal year.

Before the pandemic, California began the year with a $5.6 billion surplus and a projected $21 billion in its “rainy day” fund, reserves that will be wiped-out by the current deficit.

At his daily news conference on Thursday, Gov. Gavin Newsom said he’s confident the state will “get through this,” before adding that “more federal support” is crucial.

“Because of this pandemic, because of what it has done, these revenue shortfalls are bigger than even the state of California,” Newsom added. “We need the federal government to recognize this.”

While the projected budget deficit is modestly less than what the state faced in 2009, it will be more difficult to navigate, according to Palmer. During the Great Recession — which was sparked by a subprime mortgage crisis and collapse of the stock market — people still ate out at restaurants, visited Disneyland and spent money across other sectors, Palmer explained.

“That’s not what’s going on right now. We’ve had wholesale shutdowns of California’s economy that we’ve never seen before,” he said.

In its fiscal update, the Department of Finance says the state’s lower-income residents will bear the brunt of the crisis: “... the impact of these economic losses will be disproportionately borne by low- and middle-income Californians. This is particularly concerning as state median income did not return to the pre-Great Recession level until 2018.”

The 2020 forecast for total wages and salaries is projecting a decline four-times greater than during the Great Recession, and the state anticipates a decline in personal income tax by 25%.

Without federal help, budget experts say California will need to consider major cuts to areas such as K-12 schools and funding for county governments, which rely heavily on state dollars for health programs. 

“The key variable is the federal relief,” said Chris Hoene, executive director of the California Budget and Policy Center, which provides independent analysis and advocates for Californians with middle and low incomes. 

Hoene said those most affected by the cuts would be people of color, low-income residents and undocumented Californians, many of whom are already suffering as a result of the pandemic. 

Compared with the Great Recession, California is in a stronger position to weather the financial challenges of this recession, said Jeff Michael, director of the Center for Business and Policy Research at the University of the Pacific in Stockton.  

The state’s reserve funds are much larger than in the past and it is less reliant on sales tax revenue. 

But Michael said he still expects “significant budget cuts across the board.” 

Assembly Budget Chairman Phil Ting said the current fiscal year’s budget should remain largely intact because the Federal Emergency Management Agency has agreed to reimburse California for many of its COVID-19-related expenses. 

That won’t necessarily be the case in future budgets, he said. 

“It’s devastating,” Ting told reporters on a conference call on Thursday, speaking of the potential spending cuts. “At the time people need government the most, it’s also a time we have limited ability to help.”

Ting says the state should consider extending state unemployment benefits into the fall, beyond the length of time the federal government has promised to help. He said that move would “keep people afloat” in the short-term rather than driving them into poverty.

To ensure greater oversight, Ting said he’s urged the Newsom administration “to stop spending money in an ad hoc way” and to give the Legislature a spending plan.

The governor is still finalizing his May revision budget, according to Palmer. It’s due a week from Thursday.

“By definition these are going to be extremely difficult decisions to put on the table,” Palmer said. “We’ve got a lot of difficult decisions that need to be made in a short amount of time.”

California’s constitutional deadline to pass a budget is June 15.

The Department of Finance report suggests that federal stimulus money will be necessary for this budget crisis. 

That was echoed by Newsom, who in a letter to Speaker of the House Nancy Pelosi on April 8 requested Congress to appropriate $1 trillion to state and local governments for COVID-19 fiscal relief.

CapRadio's Chris Nichols contributed to this story.


Follow us for more stories like this

CapRadio provides a trusted source of news because of you.  As a nonprofit organization, donations from people like you sustain the journalism that allows us to discover stories that are important to our audience. If you believe in what we do and support our mission, please donate today.

Donate Today  

    More about Coronavirus

  • NIAID-RML via AP

    Coronavirus In California: Latest Updates And Resources

    The coronavirus has impacted nearly every aspect of life in California and around the world. Here are resources and all our coverage at CapRadio and NPR.

    More about California Budget 2020

  • Andrew Nixon / Capital Public Radio

    California Budget 2020

    Complete coverage of California's budgeting process for the year 2020-2021 — from Gov. Gavin Newsom's initial and revised proposals, to expert analysis and lawmaker reactions, to debate, revisions and eventual passage.

    Related Stories

  • Rich Pedroncelli / AP Photo

    California Budget And Coronavirus Updates

    Monday, June 8, 2020
    California is seeing a budget deficit after COVID-19 shuttered businesses across the state. CapRadio’s Politics Reporter Nicole Nixon joins us with the latest on how Gov. Gavin Newsom plans to meet this moment.
  • Andrew Nixon / CapRadio

    Coronavirus Complicates The Budget Picture For California Lawmakers

    Friday, March 27, 2020
    There are a lot of uncertainties over the coronavirus, but for California lawmakers, one thing remains the same: Their constitutional mandate to pass a budget by June 15.

 CoronavirusCalifornia Budget 2020

Nick Miller

Managing Editor, News and Information

Nick Miller is an award-winning editor with more than 15 years of newsroom experience. Previously he was editor-in-chief of the East Bay Express in Oakland, and worked as an editor for 12 years at the Sacramento News & Review.  Read Full Bio 

 @NickMiller510 Email Nick Miller

Coronavirus Newsletter

Get answers to your questions, the latest updates and easy access to the resources you need, delivered to your inbox.

 

Want to know what to expect? Here's a recent newsletter.

Thanks for subscribing!

We'll send you weekly emails so you can stay informed about the coronavirus in California.

Browse all newsletters

More State Government Stories

AP Photo/Marcio Jose Sanchez

Newsom, Lawmakers Reach Deal Incentivizing Schools To Reopen By April

March 1, 2021

AP Photo/Jae C. Hong

As Newsom Pushes To Extend Emergency Spending Authority During Pandemic, Lobbyist Influence Remains Opaque

March 3, 2021

AP Photo/Jeff Chiu

California Will Soon Tie Reopening To Vaccination Equity Rates, Dedicate 40% Of Doses To Low-Income Communities

March 3, 2021

Most Viewed

When Can I Get A COVID-19 Vaccine? How Will I Find Out? Answers To Your California Vaccine Questions.

California Coronavirus Updates: Gov. Newsom Signs Bill Incentivizing Schools To Reopen

California Coronavirus Updates: State Lawmakers Approve $2 Billion Incentive For Schools To Reopen

California To Allow Limited Attendance At Outdoor Stadiums, Theme Parks

California To Expand COVID-19 Vaccine Eligibility To Residents With Severe Health Conditions, Disabilities

We Get Support From:
Become a Supporter

Most Viewed

When Can I Get A COVID-19 Vaccine? How Will I Find Out? Answers To Your California Vaccine Questions.

California Coronavirus Updates: Gov. Newsom Signs Bill Incentivizing Schools To Reopen

California Coronavirus Updates: State Lawmakers Approve $2 Billion Incentive For Schools To Reopen

California To Allow Limited Attendance At Outdoor Stadiums, Theme Parks

California To Expand COVID-19 Vaccine Eligibility To Residents With Severe Health Conditions, Disabilities

Back to Top

  • CapRadio

    7055 Folsom Boulevard
    Sacramento, CA 95826-2625

    • (916) 278-8900
    • Toll-free (877) 480-5900
    • Email Us
    • Submit a News Tip
  • Contact Us

  • About Us

    • Contact Us / Feedback
    • Coverage
    • Directions
    • Jobs & Internships
    • Mission / Vision / Core Values
    • Press
    • Staff Directory
    • Board of Directors
  • Listening Options

    • Mobile App
    • On Air Schedules
    • Smart Speakers
    • Playlist
    • Podcasts
    • RSS
  • Connect With Us

    •  Facebook
    •  Twitter
    •  Instagram
    •  YouTube
  • Donate

  • Listen

  • Newsletters

CapRadio stations are licensed to California State University, Sacramento. © 2021, Capital Public Radio. All Rights Reserved. Privacy Policy | Website Feedback FCC Public Files: KXJZ KKTO KUOP KQNC KXPR KXSR KXJS. For assistance accessing our public files, please call 916-278-8900 or email us.