Pandemic yields historic state budget deficit

Rebecca Neipp

News Review Staff Writer

Pandemic yields historic state budget deficitCalifornia is facing the highest unemployment rate and the largest budget deficit since the Great Depression — and it could get worse, as financial hardship associated with COVID-19 continues on an unknown timeline.

The historic crash comes on the heels of a high-flying economy, which reportedly posed a $21.4-billion surplus at this time last year.

In January Gov. Gavin Newsom projected a $6-billion surplus for this year. The state was the “Tentpole of the U.S. Economy,” outperforming every state in the nation for growth. We had a record-low unemployment and record-high reserves.

Now, the state faces a $54-billion deficit (representing nearly a fourth of the total state budget) and unemployment that continues to climb above 20 percent. Newsom noted that it may reach 25 percent in the coming months.

“Just to reinforce the current status, those numbers are now completely flipped,” said Newsom. He attributed the recession to closures and efforts relating to fighting COVID-19.

Since March 12, 4.5 million Californians have filed for unemployment insurance. Some $13.1 billion has been distributed. “This challenge is enormous … and shared by state across the nation,” said the governor.

He has joined a pact with other western states seeking federal assistance for California.

However, Kern County representatives in the state legislature have opposed Newsom’s approach to the pandemic, predicting devastating economic losses that open our state up to other vulnerabilities.

“The announcement of a projected $54-billion shortfall reflects a grim new economy reality,” said State Senate Republican Leader Shannon Grove. “We are faced with a catastrophic budget deficit. The governor must prioritize the budget to meet the immediate needs of our citizens and eliminate funding for pet projects. This devastating budget forecast is an unfortunate consequence of his decision to create a one-size-fits-all ‘new normal’ that strangled businesses throughout California.”

She said that the needs of Kern County communities were different from those of major metropolitan areas, and that local governments needed a more flexible approach to reopen the commercial sector.

“Many regions in California continue to see major progress in flattening the curve, and some communities have had no positive cases at all.”

Assemblyman Vince Fong agreed that the deficit “is a sobering reality that reminds us that reigniting our economy is absolutely critical.”

He said that the state must provide regulatory relief through a moratorium on any pending regulations not relating to COVID-19. “We must also stop any proposals to raise taxes and fees that will continue to bleed our economy. It is vital that we take immediate action to reduce the burdens on our state’s small businesses and entrepreneurs right now to create the stage for our economy to recover.”

The governor’s office was expected to release its “May Revise” after the News Review went to press, but analysts have speculated that even those adjustments would be a shot in the dark until the magnitude of revenue shortfalls and unbudgeted expenditures can be calculated in the coming months.

That could mean deep cuts in state funding to services, including the Sierra Sands Unified School District.

Dr. David Ostash, superintendent of SSUSD, told his board at last month’s meeting that the scope of the fiscal impact remained unknown, but he expected that the district would not receive full funding for contracts that have already been negotiated.

“All public school districts will undergo a significant review of the impending budget crisis,” said Ostash.

Following guidance from the May Revise, “we hope to gain insight as to specific areas of budget reduction so that we can take appropriate action. In the meantime, our budget committee is proactively analyzing all areas of expenditures and preparing multiple scenarios of action.”

Story First Published: 2020-05-15