US: Calif. predicts major budget deficit, unemployment

California Gov. Gavin Newsom says the state will have a $54.3 billion budget deficit because of the coronavirus. It would be the largest state shortfall since the Great Recession.

California gets most of its money from taxes on retail sales and the income of individuals. But most retail businesses are closed because of the coronavirus pandemic and more than 4 million people have filed for unemployment benefits, meaning they don't have salaries for the state to tax. Individual tax collections are predicted to fall by more than 25% while sales taxes could fall by more than 27%.

The state has $16 billion in its rainy day fund. The projected deficit is nearly $55 billion.

An updated spending plan is expected next week. But the amount of money lawmakers are required to spend on public schools and community colleges will fall by $18.3 billion.

California's unemployment rate reached 12.3% at the height of the previous downturn. it could reach 18% this time.

(Representative Image)