Name: Coronavirus blows a $54 billion hole in California’s budget. Here are the “jaw-dropping” numbers
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Coronavirus blows a $54 billion hole in California’s budget. Here are the “jaw-dropping” numbers

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By | | Bay Area News GroupCalifornia’s finance department on Thursday put the economic damage of the coronavirus pandemic in stark relief, forecasting a staggering $54.3 billion hole in the state budget that’s nearly three and a half times the size of California’s “rainy day” emergency reserves.The massive deficit marks a historic turnaround from the multi-billion dollar surplus expected at the beginning of the year, when California and the rest of the country rode high in an economy firing on all cylinders.Gov. Gavin Newsom, who ordered the country’s first statewide stay-home order March 19 to slow the virus’ spread, hinted Wednesday at the mounting economic toll of shutting all but essential businesses.“These numbers are jaw-dropping, and it is alarming,” Newsom said in his daily news briefing, recalling that it was just January when he announced a $6 billion budget surplus.Just how alarming? The projected $54.3 billion deficit is almost as much as the $57.1 billion California spent on K-12 schools and community colleges last year. Newsom said it approaches the $60 billion shortfall faced in 2009 with the Great Recession. Among other financial hits:The comes a week before Newsom introduces a revision from his January spending plan.The state’s 3.9% unemployment rate at the beginning of the year was one-third of the 12.3% it had sunk to at the depths of the Great Recession that followed the 2008 mortgage meltdown. The state budget was so flush it began making supplemental payments to its underfunded employee retirement plans.The 2020-21 budget had reflected a $5.6 billion surplus, with a record level of reserves of $21 billion,including $18 billion projected in the state’s Rainy Day Fund.The state had “hit a milestone of 120 consecutive days of job growth,” in January, Newsom said, with the “lowest unemployment in modern California history.”“People were feeling a great amount of optimism,” Newsom said Thursday. “That was 90 days ago. Here we are today.”The state’s projected $41.2 billion revenue drop, combined with $7.1 billion in increases for health and human services programs and other coronavirus costs totaling some $6 billion, add up to “an overall budget deficit of approximately $54.3 billion,” the report said.However, the report concludes that the projected deficit as a percent of general fund spending “is modestly smaller than the budget deficits faced by the state in 2003 and in 2009,” which it attributes to “the state’s prudent fiscal management and strong economic recovery since 2011.”Newsom stressed that the state’s ability to patch the gaping budget holes will depend on federal aid, noting that unlike the federal government, states are required to balance their budgets and don’t have a “printing press” for dollar bills”.“This moment requires a historic partnership between states and our federal government,” Newsom said. “We are very grateful for the support we’ve already received. … But sadly, the enormity of this situation requires even more support.”UC Berkeley labor economist Sylvia A. Allegretto agreed and said President Trump’s recent tweet suggesting that states such as California align with his policies before they qualify for aid could worsen the economic damage by making it hard to keep law enforcement, firefighters, teachers and others on the payroll.“I think the narrative out of Washington, D.C., is unfortunate and wrong,” Allegretto said. “We did bail out bad actors during the Great Recession — banks and those on Wall Street — and that wasn’t a problem. Now we aren’t going to save state budgets?”But Senate Republican Leader Shannon Grove, R-Bakersfield, said “this devastating budget forecast is an unfortunate consequence” of Newsom’s “one size-fits-all” stay-home order “that strangled businesses throughout California.”Economists note that the coronavirus pandemic is a very different hit to the economy than the Great Recession or dot-com bust.Christopher Thornberg, founding partner of Beacon Economics, is more bullish on a quick recovery, noting that businesses were simply told to temporarily stop operating and are not slashing their workforces because they are failing.“In no way, shape or form is the Great Recession a metaphor for what’s happening today,” Thornberg said, noting that in recent months personal savings rates have soared, suggesting “enormous” pent-up demand to spend and re-launch the economy. “It’s not going to be that bad. I think it’s going to be short, but sharp. We’re coming back strong and we’re all going to be fine.”We invite you to use our commenting platform to engage in insightful conversations about issues in our community. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable to us, and to disclose any information necessary to satisfy the law, regulation, or government request. We might permanently block any user who abuses these conditions.Get Morning Report and other email newslettersFollow UsMost PopularClose

By | | Bay Area News GroupCalifornia’s finance department on Thursday put the economic damage of the coronavirus pandemic in stark relief, forecasting a staggering $54.3 billion hole in the state budget that’s nearly three and a half times the size of California’s “rainy day” emergency reserves.The massive deficit marks a historic turnaround from the multi-billion dollar surplus expected at the beginning of the year, when California and the rest of the country rode high in an economy firing on all cylinders.Gov. Gavin Newsom, who ordered the country’s first statewide stay-home order March...

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John Woolfolk

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Coronavirus blows a $54 billion hole in California’s budget. Here are the “jaw-dropping” numbers

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