5 questions about California’s projected budget deficit

California

FILE – In this file photo taken Tuesday April 14, 2020, California Gov. Gavin Newsom discusses an outline for what it will take to lift coronavirus restrictions during a news conference at the Governor’s Office of Emergency Services in Rancho Cordova, Calif. (AP Photo/Rich Pedroncelli,File)

SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom says the state will have a $54.3 billion budget deficit because of the coronavirus. It would be the largest state shortfall since the Great Recession. Here are five key questions:

WHY DOES CALIFORNIA NOT HAVE ENOUGH MONEY?

California gets most of its money from taxes on retail sales and the income of individuals. But most retail businesses are closed because of the coronavirus pandemic and more than 4 million people have filed for unemployment benefits, meaning they don’t have salaries for the state to tax. Individual tax collections are predicted to fall by more than 25% while sales taxes could fall by more than 27%.

DOES CALIFORNIA HAVE MONEY IN RESERVE TO HELP CUSHION THE BLOW?

Yes, but it’s not nearly enough. The state has $16 billion in its rainy day fund. The projected deficit is nearly $55 billion.

WHAT SERVICES WILL GET CUT?

An updated spending plan is expected next week. But the amount of money lawmakers are required to spend on public schools and community colleges will fall by $18.3 billion.

IS THIS THE LARGEST BUDGET DEFICIT IN STATE HISTORY?

As a percentage of state spending, it is smaller than some of the deficits the state faced during the Great Recession.

HOW DOES UNEMPLOYMENT IN THIS DOWNTURN COMPARE TO THE GREAT RECESSION?

California’s unemployment rate reached 12.3% at the height of the previous downturn. it could reach 18% this time.

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