California is Broke According to a Recently Published Audit

By: Ben Campbell | Published: Apr 24, 2024

California finally released its financial statement for the fiscal year 2021-2022, revealing that the state’s economic situation is worse than once feared. 

The statement was filed almost a year after its due date. It reveals California is facing a significant financial shortfall, with $55 billion more owed than what’s available in the state’s funds. The disclosure showcases the challenges the state is set to face in an attempt to rectify its current financial problems.

Unemployment Fraud Has Severe Impact on California Finances

The audit highlighted a shocking financial mishap: COVID-era unemployment fraud cost the state a staggering $29 billion.

Man is stopped during a COVID-19 check at the height of the pandemic

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Unfortunately for California, this exorbitant fee will need to be paid back to the federal government, marking a significant blow to the state’s financial stability.

California’s Financial Health Isn’t Looking Good

While California reported significant job growth in the high-earning tech field and impressive stock market gains during 2022, the state’s financial health says otherwise. 

An image of an economist checking figures on a sheet of paper

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According to a report released by California officials, the state revealed it had $256 billion more in liabilities than in unrestricted resources for the year 2022, which suggests a discrepancy between its economic prosperity and fiscal management.

Budget Concerns and Economic Challenges

Financial experts have scrutinized California’s budgetary planning after it was revealed the state allowed spending of $234 billion during the FY 2021-2022 despite only bringing in around $220 billion in revenue. 

An economist stares at a chart on his tablet showing predictions for the financial year ahead

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The discrepancy points to the challenges officials face in balancing California’s budget during periods of economic prosperity, which ultimately resulted in a significant financial shortfall. 

The Growing Budget Deficit

As things stand, projections have suggested that California will face a daunting $73 billion deficit for the 2024-2025 fiscal year. 

A woman and a man sat looking at some pieces of paper. There is a laptop in front of them and the woman is holding a pen in her hand.

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In response, the Democratic legislature has proposed cutting this year’s budget by $2.1 billion and plans to spend around $12 billion, or half of California’s entire rainy day fund, in an attempt to rectify this deficit.