Newsom Says California Went From Surplus To 'Tens Of Billions In Deficit' In Weeks, Won't Get By Without Federal Help

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by Tyler Durden
Sunday, May 03, 2020 - 04:55 PM

California Governor Gavin Newsom (D) says the nation's most populous state has flipped from 'tens of billions in surplus' to deficits over the course of weeks.

"Last year I did a May revise with a $21.4 billion budget surplus," Newsom said on Friday during his daily coronavirus briefing, according to Bloomberg. "This year I will be doing a May revise looking at tens of billions of dollars in deficit. We just went tens of billions in surplus in just weeks to deficits."

Newsom, a first-term Democrat, is scheduled to revise his budget proposal by May 14 with the latest estimates on revenue and spending. In January, he proposed a $153 billion general-fund budget that increased spending by about 2% from the current year that ends June 30 and socked away about $5 billion more into rainy day funds. -Bloomberg

With 30 million unemployment claims filed since the coronavirus pandemic resulted in the shutdown of broad swaths of the economy, states are reporting that they'll need at least $1 trillion in aid from the federal government - which has already doled out over $2.2 trillion in relief for business loans, stimulus checks, expanded unemployment benefits and small business assistance.

And with a lack of tax revenue, states with bloated budgets and massive entitlement programs are facing significant pain in the months ahead.

"I’m doing everything I can to work with cities and counties, but we are not going to be in a position, even as the nation’s fifth-largest economy, to provide for the needs of all the cities and the counties without federal support," said Newsom.

Meanwhile, in a Thursday memo, Newsom's finance director ordered departments to significantly slash spending immediately using strict measures, including bans on new goods and service contracts.