California Faces $22.5 Billion Deficit: Governor’s budget plan includes $297 billion in spending
California Gov. Gavin Newsom is leading a state that relies heavily on personal income taxes. PHOTO: JOSÉ LUIS VILLEGAS/ASSOCIATED PRESS By Christine Mai-Duc Jan. 10, 2023 1:06 pm ET California is facing an estimated $22.5 billion budget shortfall in the coming fiscal year, according to a spending plan released Tuesday by Gov. Gavin Newsom. The proposal includes $297 billion in spending, an $11 billion decrease from the current year. The proposal comes just months after the Democrat signed a record-busting $308 billion budget, buoyed by a more than $100 billion surplus. Mr. Newsom said that the whiplash demonstrates the effects of California’s progressive tax system on the volatility of state revenues. The state relies heavily on personal income taxes, especially on profits generated from initial public offerings, stocks and home sales by the ultrawealthy. NEWSLETTER SIGN-UP The 10-Point. A personal, guided tour to the best scoops and stories every day in The Wall Street Journal. SUBSCRIBE NOW According to the state department of finance, roughly 49% of personal income tax collected by California in 2020 came from just 1% of tax filers. Mr. Newsom opened the briefing with a chart showing that capital gains as a percentage of personal income in California was down to 5.52%, down from nearly 10% in the 2022-2023 budget year. Mr. Newsom’s proposed spending plan includes $223 billion in general fund expenditures, $70.4 billion in special fund spending and another $3 billion in bond money. Write to Christine Mai-Duc at christine.maiduc@wsj.com