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State Finance Office Warns of Higher Budget Deficits

California's projected $22.5 billion budget deficit could triple in size if a recession hits, state financial officials warned state lawmakers on Wednesday. Offifcials with the Department of Finance, told the State Senate Budget Committee the governor's proposed spending plan does not forecast a recession but said there are risks that still remain on the horizon. include rising inflation and further increases of interest rates by the Federal Reserve. The Report says if the state enters into a mild recession, the projected $22.5 billion dollar budget deficit the governor is bracing for could grow an additional $20 billion to $40 billion. If a moderate to severe recession hits, that number could swell to over $60 billion, Li said. Newsom's administration has said it does not plan to tap into the state's reserves which hold $35.6 billion, and instead will wait until this spring to determine if doing so will be necessary.