California legislators have been told to expect a deficit of $10 billion or more even if revenues do not fall due to higher than anticipated spending, reports Politico.
Critics note that the $10 billion figure matches estimated costs of the state’s expansion of eligibility for Medi-Cal, the state’s taxpayer-financed health care system, to all income-qualifying illegal immigrants.
“What a fiscal coincidence: precisely the estimated cost of Gavin Newsom’s plan to extend state Medi-Cal to illegal immigrants,” said Will Swaim, president of the conservative California Policy Center on X.
Earlier this week, the state-funded Legislative Analyst’s Office warned the state’s economy is “stagnant” and “fragile” and that the budget is reliant on an “unsustainable” stock market. Earlier Friday, the LAO urged lawmakers to consider the possible negative downturn that tends to but does not always accompany significant decreases in consumer sentiment.
“If hard economic data fall in-line with worrisome economic indicators, the state’s revenue outlook will turn more negative; however, recent history suggests this outcome is far from certain,” wrote the LAO. “As such, we urge policymakers to weigh the risks of both the possibility of a further downturn and of better than expected growth when making budget decisions.”
Last year, the state narrowly closed a $73 billion deficit through a combination of spending cuts, deferrals, shifts, and reserve withdrawals.
Now, even if state tax revenue remains steady, rising non-discretionary spending, such as from Medi-Cal, combined with possible cuts or funding withholding at the federal level could leave the state billions of dollars short yet again.
Federal spending in California is set to be $171 billion this year.
In February, state officials said California had spent $9.5 billion thus far on Medi-Cal services for illegal immigrants, The Center Square first reported, resulting in California Gov. Gavin Newsom requesting a $6.4 billion emergency bailout to fund the program for the remainder of the fiscal year.
In April, Newsom bragged about the strength of the California economy, sharing it’s now the world’ fourth-largest economy in U.S. dollars — due to the relative decline of the Japanese yen to the dollar. After accounting for the high cost of goods and services, California only barely edges out low-performing Italy, and the state has shed hundreds of thousands of private sector jobs amid lower projected sales and corporate tax revenue.
