Gavin Newsom's California drowns in $68 BILLION deficit, defaults on $20 billion loan from fed

"It doesn't have to be this way. Well-governed states currently have a surplus," said Republican Congressman Kevin Kiley.

Katie Daviscourt Seattle WA
It has been revealed that California is drowning in a $68 billion budget deficit which has resulted in the state defaulting on a $20 billion loan from the federal government.

The multi-billion dollar deficit comes under Democrat Gov. Gavin Newsom's leadership and is so extreme that Newsom's Department of Finance has called for a spending freeze across state agencies. Newsom's administration has made a similar decision only once before which was at the start of the Covid-19 pandemic when revenue began to plummet, KCRA News reports.

Congressman Kevin Kiley (R-CA) slammed the deficit and claimed that it's the result of severe financial mismanagement.

"It doesn't have to be this way," Kiley wrote on X. "Well-governed states currently have a surplus while also providing a much higher quality of government services."

"California is now facing a $68 billion deficit. It has also defaulted on a $20 billion loan from the federal government. The situation is so dire the state is telling agencies not to replace broken printers or re-stock office supplies. Workers are being stripped of benefits and could face furloughs," Kiley said.

The Republican congressman went into further detail and explained, "This is all happening as the state has spent billions funding High-Speed Rail and expanding Medi-Cal to all undocumented immigrants, while losing billions in tax revenue from people leaving the state."

A letter sent to state agencies from Newsom's Department of Finance issued a set of demands that would hopefully ease the significant budget deficits trajected in fiscal years 2023-24 and 2024-25.

"It is vitally important that state government is efficient, effective, and only expends funds that are necessary to the critical operation and security of the state. As such, all state entities must take immediate action to reduce expenditures and identify all operational savings achieved," the letter reads.

The department's demands include limiting office supplies, vehicle fleet purchases, and travel. The accrued vacation time buy-back program for employees has been canceled, and departments have been directed not to enter into any new contracts unless necessary, to name a few.

In addition, all departments' "Agency Secretaries and Cabinet-level Directors will be required to report monthly to Finance and the Governor’s Office on all approved exemptions as well as achieved savings."

This would be the biggest budget deficit ever recorded in California state history, which has the fifth-largest economy in the world.

Newsom implemented the current budget in June without having a comprehensive understanding of state tax revenues. The filing deadlines for federal and state income tax returns for 2022 were extended from April to November, according to the Washington Examiner.

Tax revenues for the fiscal year ending in June were $26 billion short, according to the Legislative Analyst Office, which projects comparable shortfalls for the current and subsequent fiscal years, the outlet reports.

Last week, the nonpartisan Legislative Analyst Office projected that California's budget deficit would increase to $68 billion due to the state's inability to absorb the rising costs of the majority of goods and services, as well as months of low tax revenues.

According to CBS Sacramento, Jon Coupal, the president of the Howard Jarvis Taxpayers Association, is concerned that the state Legislature would put the cost on taxpayers. Raising taxes in order to balance the budget, he cautions, will simply cause more residents to leave the state.

"We should be lowering taxes, making it easier for people to stay here instead of treating the working poor and middle class as just ATM machines," Coupal said.

Earlier this year, Gov. Newsom made a proposal that included taxing Californians after they had moved out of the state.

In 2022, more than 300,000 California residents fled the state, according to the US Census Bureau. The state experienced the highest number of departures of any state during that time period, according to estimates compiled between July 2021 and July 2022. Among those who fled California were the in-laws of Democratic Governor Gavin Newsom.

According to the Public Policy Institute of California, between 2015 and 2021, 413,000 adults cited housing costs as a primary reason they moved out of the state and the majority of those leaving were middle or low-income residents.
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