To address California’s projected $68 billion budget deficit, Gov. Gavin Newsom’s (D-CA) Department of Finance requested a spending freeze for state agencies.
In a memo sent to all six state agencies this week, Director of California’s Department of Finance Joe Stephenshaw wrote, “It is vitally important that state government is efficient, effective, and only expends funds that are necessary to the critical operation and security of the state.”
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Stephenshaw instructed departments not to enter into any new contracts or make changes to existing contracts that would increase costs and avoid buying new equipment, goods, and services. All nonessential IT purchases and planned vehicle replacements should be stopped, and Stephenshaw encouraged departments to use all office supplies before ordering extra. Stephenshaw also told the agencies to cancel all plans for nonessential travel and canceled the buy-back program allowing workers to trade in their accrued vacation or leave for 2023-24.
Stephenshaw said all departments' “Agency Secretaries and Cabinet-level Directors will be required to report monthly to Finance and the Governor’s Office on all approved exemptions as well as achieved savings.”
The nonpartisan Legislative Analyst Office estimated last week that California’s budget deficit will rise to $68 billion after months of low tax revenues because the state has been struggling to accommodate the rising prices of most goods and services.
The current budget was enacted in June by Newsom without the full knowledge of state tax revenues. Federal and state deadlines to file 2022 income tax returns were extended from April to November.
The Legislative Analyst Office said tax collections were off by $26 billion in the fiscal year that ended in June, and the office predicts similar deficits this year and the following.
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California, the nation's most populous state with the fifth-largest economy in the world, is now facing the biggest budget deficit in state history.
Starting next month, California will begin its budget process when Newsom releases his proposed 2024-25 budget, followed by a revision in May. California’s legislature and Newsom will need to take into account the state's multibillion-dollar budget deficit before the former approves the budget for the fiscal year that starts July 1.