California just revealed a $54.3 billion deficit — signaling deep cuts ahead

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California finance officials revealed a $54.3 billion deficit today in the first economic assessment of the coronavirus pandemic’s devastating blow to the fifth-largest economy in the world.

That figure is higher than the deficit during the Great Recession and obliterates the state’s once-healthy reserves.

Without sugar-coating how hard the prolonged shutdown of businesses and job losses will hit the state, Gov. Gavin Newsom’s administration released bleak projections on key statewide indicators: 18% unemployment rate for the year, 21% drop in new housing permits and nearly 9% decline in California personal income. 

The California numbers signal a financial tsunami and cuts to schools, health care and safety-net programs, as state and local governments turn to the federal government for additional stimulus support. In one example, California’s public school system, including K-12 and community colleges, will lose $18 billion in the state’s minimum-funding guarantee, setting back years of striving to reach adequate education funding. 

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Newsom today stressed once again that California had balanced its budget and headed into this year with a huge surplus — all undone by the pandemic. He said the state is resilient and can rebound, with a caveat.

“My optimism is conditioned on this — more federal support. We’re seeing economic numbers, unemployment numbers, more acute than anything we’ve seen in modern times,” he said. “We need the federal government to recognize this. We really need the federal government to do more.”

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