American States Once Awash In Cash See Their Fortunes Suddenly Reversed
Amanda Albright and Eliyahu Kamisher
Fri, June 30, 2023 at 4:00 AM CDT·6 min read(Bloomberg) -- California Governor Gavin Newsom for years had an enviable problem. His state was awash in cash.
Thanks to the booming tech industry and federal money during the pandemic, California was spending record amounts and still ran a surplus — almost $100 billion last year. That’s when Newsom, a rising star in the Democratic party, sent checks of up to $1,050 to millions of residents. The Los Angeles Times in an editorial declared him the luckiest governor in state history.
Now, following the tech bust and the end of Covid funding, the surplus has been replaced with a $32 billion deficit, forcing lawmakers to trim the state’s lofty climate change program, delay funding and increase internal borrowing.
California is an extreme case of a state that relies heavily on its richest residents for its tax base. But it’s not alone: revenue in 16 other states is down this fiscal year through April, according to the Urban Institute, partly reflecting the volatility in markets and population shifts. Over in Florida and Texas — red states where levies are primarily collected through sales rather than income — it’s a different picture. While the pace of tax collections has slowed, they are among about a dozen states seeing revenue grow 5% or more this year as consumers keep spending.
“You’re starting to see this divergence,” said Emily Mandel, an economist at Moody’s Analytics. “It’s definitely something we’re seeing in the data.”
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https://finance.yahoo.com/news/american-states-once-awash-cash-090000228.html
