California Governor Gavin Newsom ordered a spending freeze as the state’s projected budget deficit ballooned to $68 billion for the next fiscal year—almost five times higher than the initial forecast.
State agencies should cut spending on everything from office supplies to computer equipment and halt all non-essential travel, Newsom’s Department of Finance said in a letter posted to its website late Tuesday. The freeze also restricts purchases of new vehicles and other equipment.
Government entities “must take immediate action to reduce expenditures and identify all operational savings achieved,” budget director Joe Stephenshaw said in the letter.
The deficit for the fiscal year that begins in July is tied to the waning fortunes of California’s wealthiest taxpayers, who pay the bulk of personal income levies, the state’s largest revenue source. The shortfall is forcing the government to consider cuts to key services, including schools, and to weigh tapping budget reserves.
“Issuing this letter now gives us a head start on the budget process by using the governor’s executive authority to get agencies to cut back on nonessential spending,” said H.D. Palmer, a spokesman for the state finance department. “We have roughly seven months left in the fiscal year, so by taking this step now and by getting ahead of the process, we can achieve cost savings that will contribute to closing the budget gap.”
The Newsom administration originally projected a $14 billion deficit in the upcoming fiscal year. In January, Newsom will present a detailed budget proposal.
The last time California ordered state agencies to freeze spending was in spring 2020, when the state was concerned that pandemic-related restrictions would reduce tax revenues.
This article was provided by Bloomberg News.