California governor slashes budget in COVID-19 economic crisis

Coronavirus-related woes are putting intense pressure on the world’s fifth-largest economy.

California Slashes Budget
Gantry cranes stand above the APM shipping terminal in the Port of Los Angeles in California, the United States, where Governor Gavin Newsom is directing departments to cut spending immediately amid projected deficits of $35bn [File:Patrick T. Fallon/Bloomberg]

California Governor Gavin Newsom on Thursday slashed his proposed budget for the next fiscal year by $19bn, bringing spending below 2019 levels. Coronavirus-related woes putting intense pressure on the state’s economy, which is the fifth-largest in the world.

The revised budget would cut funding for public schools and universities, environmental protection and natural resource management, and dramatically scale back programmes planned when the state – the most populous in the United States – was flush with cash just a few months ago.

State employees will be asked to accept pay cuts of 10 percent, and agencies will be expected to increase efficiency by five percent, Newsom told a news conference in the state capital, Sacramento.

California Slashes Budget

The proposal, which must be approved by the Democratic-controlled state legislature, is meant to help close a $54bn gap in spending over two fiscal years – the current year as well as one beginning July 1.

“We are at a time that is simply unprecedented,” Newsom said.

Newsom started out in January with big ideas, recommending in a proposed $222bn budget for the fiscal year beginning July 1 that the state set up its own generic drug label, expand public preschools, combat homelessness, and spend more on education from elementary school to college.

But the coronavirus has severely weakened California’s once-robust economy. Virus-induced lockdowns have wiped out billions of dollars in anticipated revenue from taxes on income and sales. It has also left the state with a predicted 18 percent unemployment rate for 2020.

Source: Reuters