California doom: Staggering $54 billion budget deficit looms

SACRAMENTO, Calif. (AP) — California will have a budget shortfall of $54.3 billion because of the economic devastation wrought by the coronavirus, Gov. Gavin Newsom's administration announced Thursday, a stunning reversal for a state that had a $21 billion surplus a year ago.

The state has been under a mandatory stay-at-home order since mid-March, forcing nonessential businesses to close and prompting more than 4 million Californians to file for unemployment benefits. After recording record low unemployment of 3.9% at the start of the year, the Newsom administration now predicts a jobless rate of 18% for the nation's most populous state — 46% higher than the height of the Great Recession a decade ago.

Newsom hinted at the bleak numbers on Wednesday when he called the unemployment figures “Depression-era numbers.”

“These numbers are jaw dropping,” Newsom said. “I just hope that people are preparing themselves ... for the effort that we all need to engage together to undertake to unwind that and get back on our feet.”

It’s not yet clear what state programs will be cut or by how much. Newsom is scheduled to reveal his new spending proposal next week. But the revenue shortfall means the state’s constitutionally required funding level for public schools and community colleges will fall by $18.3 billion.

The virus-induced business closures, unemployed workers and cratering of the restaurant, tourism and entertainment industries has resulted in a staggering loss of tax revenue for California. The Newsom administration projects personal income will fall by close to 9% for the state's nearly 40 million residents while permits for new housing construction — a key measure of the economy's health — will drop more than 21%.

After facing budget deficits of more than $40 billion following the Great...