High Interest Rates, Weak Economy to Blame for California’s Budget Deficit: Legislative Analyst

The exodus of high-income earners also has an impact on the declining state tax revenue, Legislative Analyst Gabriel Petek told The Epoch Times.

The California State Capitol building in Sacramento, Calif., on April 18, 2022. John Fredricks/The Epoch Times

Rising interest rates and a slowing economy contributed to California’s financial swing from a $100 billion record surplus in May 2022 to a $68 billion record deficit announced earlier this month, according to the state’s nonpartisan Legislative Analyst’s Office.

“From our standpoint, it seems like the economy is especially sensitive to interest rates and monetary policy by the Federal Reserve,” Legislative Analyst Gabriel Petek told The Epoch Times. “It’s really hit hard our housing market ... and the high tech sector—where investment through [venture capital] and [initial public offering] type of activity is sensitive to interest rates.”