A short-term budget surplus in California could give way to long term deficits if projections are accurate in a new government report. The Legislative Analyst's Office issued that report on Wednesday, and it shows the state will have a $26 billion surplus this year. The extra money will help shore up next year's budget. However, the severity of the COVID-19 pandemic and slow economic growth means tax revenue may decline by $10 billion in future budgets.
States are required to balance their budgets, so any deficit could mean cuts to government programs, a tax hike, or a combination of both.
Assembly Speaker Anthony Rendon said it should be the California Legislature's priority to restore funds to critical programs that were cut in the Governor's revised May budget and prevent additional cuts.
"Top Assembly priorities will include continued oversight to improve the function of the Employment Development Department, reopen schools safely and bolster worker protections," wrote the Democrat from Lakewood. "In addition, it will be important to work with the Governor to promote a strong vaccine distribution program and continued pandemic response."
Republican Senator Jim Nielsen of Tehama issued his own statement in response to the report.
"This is the right time to reverse the state’s borrowing from schools, replenish the Rainy Day Fund, pay down debt, and invest in struggling Californians," said Nielsen.
"Mom-and-pop shops are the backbone of our economy. We need to laser focus on stimulating small employers. Small businesses create jobs. They and their employees have been crippled during this pandemic."