California Projecting $26-billion Budget Windfall
Sacramento, CA — When COVID-19 hit, California government leaders were bracing for a $54-billion shortfall.
The state increased taxes, cut spending and borrowed from the rainy-day fund. A new state report now shows that the economic impact, total revenue-wise, was not as bad as anticipated. Following the actions, the non-partisan state Legislative Analyst’s Office says California is now projected to see a $26-billion end of fiscal year surplus.
The state has processed more than 16 million unemployment claims during the COVID-19 pandemic, and the LAO report indicates that business closures imposed by the Governor have most impacted employees making under $20 an hour, like theme park, restaurant, and hospitality workers. The trends show that those making over $60 an hour are more generally still working, and in many cases earning more money.
State leaders were bracing for a 15-percent drop in income tax collections this year due to the pandemic, but instead there has been an increase of 9-percent from a year ago.
The LAO’s Office acknowledges that budget projecting is a difficult task, and the $26-billion overall figure could still go up or down, based on spending trends over the next half year.
Senate GOP leader Jim Nielson has put out a statement in response, “This is the right time to reverse the state’s borrowing from schools, replenish the Rainy Day Fund, pay down debt, and invest in struggling Californians. Mom-and-pop shops are the backbone of our economy. We need to laser focus on stimulating small employers. Small businesses create jobs. They and their employees have been crippled during this pandemic.”