SACRAMENTO, California — California Gov. Gavin Newsom is navigating one of his biggest budget shortfalls since taking office in 2019.

Tackling the state’s finances – with an economy that is the fifth largest in the world – is a tall order and Newsom is at the threshold of a critical moment in his political journey, a sliver of time that will be closely watched to see how the governor threads the needle as he oversees this year’s budget.

The current deficit, ranging anywhere from $38 billion to $73 billion, stems from a revenue decline in fiscal year 2022-23, with the latest state tax receipts bringing in revenues below the expectations of Newsom’s Department of Finance. Looking at how the governor has handled previous budgets is instructive.

The governor is set to present his budget revisions Friday. He and lawmakers have already agreed to shave $17.3 billion off the original deficit figures, with the Legislature approving a bill with $1.6 billion in budget fixes.

The task of balancing this year’s budget “will be the steepest hill to climb in four years,” says H.D. Palmer, a Department of Finance spokesman. “The Legislature and the governor have made significant progress by their adoption of the early action package.”

To be sure, Newsom has been there before. So, let’s rewind.

Previous deficit

In 2020, in just his second year in office, with the coronavirus pandemic in full swing wreaking havoc on the economy, California faced a $54 billion shortfall.

Lawmakers avoided deep cuts in sending Newsom a $202.1 billion budget just months after the governor issued his stay-at-home order to slow the spread of the virus.

The blow dealt by the economic slowdown in California, the country and the globe eviscerated a projected state $5.6 billion surplus in January 2020 and turned it into the $54 billion deficit.

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