Blaming COVID-19, California Governor Gavin Newsom on Thursday declared a budget emergency as the state tries to come up with a balanced budget by July 1. By making the declaration, the governor opens the door to tapping the state’s rainy day fund to help defray the expected $54-billion hole in the budget, but they’ve got a long way to go.
California expects to use $16 billion from the rainy day fund over three years, which is a good boost, but won’t fill the gap left by the expected 25% decline in personal income tax, the 27% decline in sales tax, and the 23% decline in corporate tax.
And as if falling revenue wasn’t enough, the state anticipates spending about $13 billion more on unexpected expenses related to the pandemic.
California isn’t alone. States across the nation expect the fiscal year coming to an end on June 30 and the next one to be financially challenging, which means one thing. Many will come knocking on Uncle Sam’s door, looking for a federal bailout.
Hold onto your wallet. This could get really expensive.