REPORT: Coronavirus threatens to wipe out California’s $21-billion surplus

MARCH 25, 2020

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For more than six years, through two governors and hundreds of lawmakers’ votes, California’s state government slowly built the largest cash reserve in its history — projected to total $21 billion by next summer. But there are growing fears that the fast-moving crisis sparked by the coronavirus pandemic could force it to be spent in a matter of months.

A number of the state’s most experienced budget watchers now expect that California might need to use the entire cash surplus, and possibly much more money, to prop up vital government services that could be severely underfunded by a quickly collapsing economy.

“This is a sudden downturn unlike anything we’ve seen,” said Gabriel Petek, the state’s legislative analyst. “We’re kind of flying blind at this point.”

California is notorious for suffering from budget deficits. Three significant economic downturns over the past quarter-century triggered sharp drops in tax revenue. Of these three, two occurred in a single decade. The resulting events were historic: state government paymasters issued IOUs, vital services and school functions were slashed. As a result, fed up voters removed Gov. Gray Davis from office in a 2003 special election.

But each prior collapse in government funding was a relatively slow-moving disaster. Even the global recession that began in 2008, generally seen as the most quickly unfolding crisis, gave lawmakers time to take corrective measures. Early indications are they will have to act much more quickly to address the COVID-19 emergency — assuming that health concerns eventually lessen and allow legislators to return to Sacramento. And as financial markets shrink and jobless claims grow, the state’s budget situation could deteriorate much faster.

***LATEST UPDATE:

*Coronavirus cases worldwide: 440,145

*Total confirmed deaths: 19,751

*Recovered patients: 111,942

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