While California may be sitting on close to a $100 billion budget surplus, it's also sitting on an estimated $1.5 trillion in unfunded local and state pension liabilities - which will fall squarely on the shoulders of California taxpayers.
Compounding the situation is an 11% drop in personal income tax revenue than California expected this year, in what may be the new normal as we enter what may be a global recession. And let's not forget - the great migration out of California by residents and companies alike. A net 280,000 people left the state in 2021 for various reasons, which may be setting the state economy up for disaster.
The Golden State's revenue collections through August, the second month of the 2022-2023 fiscal year, came in around 8% less than forecast, according to Bloomberg, citing a bulletin from the California Department of Finance.
"Shortfalls in August continued to be largely driven by lower proceeds from personal income tax, however, the month also saw lower proceeds from sales and corporation taxes," reads the notice, which adds that August typically isn't a significant month for personal income tax collections.
According to an August report from California's Legislative Analyst's Office, tax revenue losses from people leaving the state hit a decade-high in 2020.
The news comes as California-based businesses announce headwinds-related slowdowns.
California is prone to booms and crippling deficits because of its dependence on high-wage earners, and some of the state’s once high-flying companies have been laying off workers as economic headwinds mount.
While Silicon Valley giants such as Apple Inc. and Alphabet Inc. have indicated that they’re slowing their pace of hiring, companies from Netflix Inc. to Lyft Inc. have fired workers as economic headwinds mount. California was also one of 16 states to see its unemployment rate tick up in August, reaching 4.1%, according to US Bureau of Labor Statistics data released on Friday. -Bloomberg
That said, California is setting aside billions to absorb the impact of the next economic downturn - with lawmakers having socked away $37.2 billion into its reserves in its latest spending plan.