California revenues decline amid economic worries

SACRAMENTO, Calif. (AP) — The good times might soon be over for California's government.

The nation's most populous state has had so much cash lately that lawmakers have spent freely — handing out free health care to low-income immigrants, paying for every 4-year-old to attend kindergarten and sending more than $21 billion in stimulus checks to taxpayers over the past two years.

That seemingly endless flow of money has started to dry up as state tax collections have fallen below expectations for four months in a row. There's now an 80% chance California will be about $8 billion short when its fiscal year ends next summer, according to the latest estimate from the nonpartisan Legislative Analyst's Office.

There's still plenty of time for a comeback, but the trend of declining revenues is already having an impact. Last month, Democratic Gov. Gavin Newsom blocked a tax cut for manufacturers, halted an expansion of full-day kindergarten programs and nixed unemployment benefits for immigrants living in the country without legal permission — all while citing the state's potential shortfall.

“Those shortfalls not only will be coming, they will be ample and we'll have to make some adjustments,” Newsom said. “We're working with the Legislature right now to do just that.”

Despite the shortfall, California is likely not headed toward another cash crisis like the one that engulfed the state during the Great Recession more than a decade ago. California had less than $8 billion available to spend at the end of September 2008 during the Great Recession. This year, California has more than $130 billion available, including $37.2 billion in its various savings accounts.

“I think the state is far better positioned for a potential economic downturn this time around than it has been in...