July 18, 2025 Breaking News, Latest News, and Videos

Get Ready For Biggest Budget Crunch In 12 Years

As of the end of last year, California’s budgetary rainy day fund amounted to about $20 billion. That sounds like a lot, and the last two governors both put more cash than legally required into the fund.

Now the rainy day has arrived. Skies are dark, figurative rain clouds loom over the Sierra Nevada and other mountain ranges. It’s almost time to tap into the rainy day fund. But it would be unwise to take all the money at once, just as no family should exhaust all its savings in one fell swoop, if at all possible.

For the coronavirus pandemic, now about six weeks old in California, brought with it enormous personal and corporate financial losses, which will soon translate into vastly lowered revenues for state government. That may last awhile.

Personal income taxes for 2020, mostly to be paid next year, will be much lower than this year’s and last year’s unless the stock market rockets back up at the same extended record pace it has lost ground over the last two months. With most businesses shuttered and restaurants, bars, sports teams and their arenas all idled to avoid disease contagion, corporate taxes will also skid. Income tax revenues will fall, too, because of the layoffs and unemployment the closures have brought.

The last time anything like this happened to California, in the fiscal crisis of 2008-11, these same types of tax receipts nose-dived, and quickly. In 2007, for one example, the state took in $11 billion worth of capital gains taxes. The very next year, capital gains tax receipts came to just $2.3 billion, a drop of about 80 percent.

Capital gains taxes paid to the state were about 50 percent higher in 2018 and 2019 than in 2007. They will likely come to about $15 billion this year. But they will certainly drop in 2021, and by at least as much as in 2008, barring a miracle stock market recovery.

The rainy day fund can make up some of this, but not all. And that won’t account for the anticipated income and corporate tax dollars the state will not be getting.

All of which means anyone or any program dependent on state budget support needs to get set right now for serious belt-tightening on a scale unseen in more than a decade. The days of relatively easy money are over.

This means the $2 billion Gov. Gavin Newsom promised to contribute toward housing the homeless probably will be cut or will simply evaporate. It means plans for the massive tunnel the governor would like to bore beneath the Delta of the Sacramento and San Joaquin rivers may not advance nearly as fast as expected. It means schools must prepare to spend far less in the 2021-2022 academic year than they have lately. It could mean a big cut in state support for the University of California and the Cal State system, both of which saw such backing sliced dramatically during the last fiscal crisis.

Many more programs and proposals will also be affected, but it’s hard to pinpoint Newsom’s priorities and the Legislature’s.

They probably don’t even know those priorities today, and will likely spend months hashing it out. If Newsom is wise, the scheduled May revision of his proposed 2020-21 budget will slash many categories even if the state begins to pull out of immediate crisis mode by then.

That way, state government could spread the harm from the coronavirus financial crisis over at least two or three years, rather than imposing all the needed cuts at once a year from now. Yes, this would be bitter medicine for a state already disrupted by the pandemic, but it would be easier to take than the kind of massive slashing that would come next year if everything is left intact in budget negotiations this spring and summer.

All of which means that anyone who thought the far-reaching ripples of the viral threat were already pretty bad now needs to get ready for further crises to come.

<>Related Posts

Man Arrested in Brentwood for Impersonating Firefighter During Palisades Fire

July 18, 2025

July 18, 2025

The suspect faces at least 28 criminal counts—including 23 felonies—spanning incidents from 2023 to May 2025 Federal and local law...

West Coast Premiere of ‘The Opposite of Love’ Opens at Hudson Backstage Theatre

July 18, 2025

July 18, 2025

Produced by Neil Gooding Productions, behind shows like Back to the Future: The Musical, the play runs Thursdays through Saturdays at...

Study Highlights Economic Impact of Cap-and-Trade Extension in Los Angeles

July 18, 2025

July 18, 2025

Governor Gavin Newsom and legislative leaders are pushing to reauthorize the program this year, citing its role in generating 287,000...

Film Review: Superman

July 17, 2025

July 17, 2025

“This movie is packed with storyline, Superman lore, meaningful objects, and action.” writes Kathryn Whitney Boole Rated PG-13129 MinutesReleased July...

Multiple Drug Arrests Reported in Palisades Park in Recent Weeks

July 17, 2025

July 17, 2025

SMPD Reported Several of the Arrests Between June 29 and July 5 The Santa Monica Police Department reported several drug-related...

(Video) Did You Know Emma Chamberlain’s Coffee Shop is in Century City?

July 17, 2025

July 17, 2025

The outpost is a first for the popular influencer Did You Know Emma Chamberlain’s Coffee Shop is in Century City?...

Mayor Bass Hails National Guard Withdrawal as Victory for Unity

July 17, 2025

July 17, 2025

The Pentagon’s decision to reduce the troop presence follows weeks of legal challenges and public demonstrations Mayor Karen Bass celebrated...

DUI Checkpoints to be Conducted Across LA This Weekend

July 16, 2025

July 16, 2025

The LAPD selects checkpoint sites based on data indicating high incidents of impaired driving-related crashes and arrests The Los Angeles...

SMPD to Conduct Bicycle and Pedestrian Safety Operation on Friday

July 16, 2025

July 16, 2025

The focus will be on speeding, illegal turns, failing to yield or provide right of way to cyclists or walkers,...

Dodgers to Host Back to School Bash for Fire-Affected Families

July 16, 2025

July 16, 2025

The free event will offer free groceries, school supplies, outfits, haircuts, medical screenings, and carnival rides The Los Angeles Dodgers...

LA Sees Second Straight Year of Homelessness Decline, Leaders Celebrate Progress

July 16, 2025

July 16, 2025

The survey, designed by the University of Southern California, reported a 17.5% drop—the largest two-year decrease on record The Los...

LAPD Seeks Missing 63-Year-Old Man Known to Frequent Playa Vista

July 15, 2025

July 15, 2025

His family last heard from him via a group text on June 22 The Los Angeles Police Department’s Missing Persons...

Santa Monica Offers City-Owned Properties for Affordable Housing Development

July 15, 2025

July 15, 2025

The move aims to address the city’s Regional Housing Need Assessment of 8,895 units, with a goal of producing at...

California Hits Two-Thirds Clean Energy Milestone

July 15, 2025

July 15, 2025

This year, clean energy has powered the state for an average of seven hours daily, with over 90% of days...

Venice Beach to Host First Medal at 2028 Olympics

July 15, 2025

July 15, 2025

Venice Beach, known for its vibrant boardwalk, will kick off the 844 ticketed events, hosting the triathlon along its coastline...