Until the end of February, California was at its zenith, reinforced by a surplus "History Of $ 28 billion (25.9 billion euros). On January 10, Governor Gavin Newsom presented a budget of $ 222 billion for the 2020-2021 fiscal year – with a projected surplus of $ 5.6 billion. He had planned investments to solve the housing crisis and the issue of the homeless, the two most urgent subjects in a state which has both 165 billionaires – third in the world – and 20% of inhabitants who live in the poverty – one of the highest rates in the country.
On Thursday May 14, Mr. Newsom shared the bad news with his fellow citizens: " It will hurt. " After eight surplus years, California returns to deficit. In 100 days, the surplus was swallowed up by the new coronavirus, and replaced by an equally historic hole. "In recent times, no economic collapse has happened so quickly", summarized the Los Angeles Times.
The governor has estimated the deficit for 2021 at 54.3 billion. This is three and a half times the amount of the state’s special reserve, the "Rainy day fund", which was formed under the leadership of its predecessor Jerry Brown, a veteran of public affairs, who arrived in 2011 when California was on the verge of bankruptcy with a deficit of 27 billion, and who feared the return of the years of recession . Last year California just finished paying what Mr. Brown called "The wall of debt".
"Catastrophic" cuts
When the Covid-19 hit, finances were healthy, said Gavin Newsom: “We are in a much better situation than during previous recessions. " But he made no secret of the fact that without the help of the federal government, the state would not escape cuts "Catastrophic".
The deficit comes from 41 billion less in fiscal resources, due to the paralysis of the economy; $ 7 billion increase in health care, mainly for Medi-Cal, California’s health insurance program for the disadvantaged, more generous than the national program. In addition, there are 6 billion extraordinary expenses due to the pandemic. The state predicts that the unemployment rate could rise to 24.5% to stabilize around 18% at the end of the year. At the height of the previous recession, 2.2 million Californians were unemployed. Since March 12, 4.6 million residents have registered as unemployed.
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