California tax forecast falls $58 billion short, signaling cuts

By Eliyahu Kamisher | Bloomberg

California’s tax revenue fell short of forecasts as expectations of a tax windfall late in the year failed to materialize, the nonpartisan budget advisor office said.

The forecast on Friday by the Legislative Analyst’s Office said California’s tax revenue is expected to be $58 billion lower than earlier projections for the current and upcoming fiscal year. The state had expected a surge of tax payments in October and November due to delays in the tax filing deadline caused by natural disasters.

“With the recent receipt of various postponed tax payments, the impact of recent economic weakness and last year’s financial market distress on state revenues has become clearer,” the LAO said. “The postponed payments came in much weaker than anticipated.”

The latest update means California will face another difficult budget year that could force the state to cut back on services and tap into its rainy day fund. In July, California approved a $311 billion budget for the current 2023-24 fiscal year that included $37.8 billion in reserves. The LAO is expected to release another report on the size of California’s budget deficit this month.

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