The California Legislative Analyst’s Office (LAO) on Tuesday increased this year’s projected state budget shortfall to $73 billion—nearly twice as much as Gov. Gavin Newsom forecasted last month. Ouch. Mr. Newsom has ambitions to reside in Washington, D.C., and based on his deficits it looks like he’d fit right in.
Tech companies based in California have been among the biggest beneficiaries of the bull market. Artificial intelligence chip maker
Nvidia
’s stock price has increased by roughly 50% since November. The top 1% of California taxpayers pay about half of the state’s income taxes, and state revenue usually rises and falls with capital gains.The mystery is why this isn’t happening this year. The LAO notes that tax collections in recent month have deteriorated, rather than improved. “Recent revenue collections data reflect even further weakness relative to [earlier] estimates,” the analyst notes. Corporate tax collections were a third lower in December relative to the year before.