California's Record $68 Billion Budget Deficit Threatens State's Finances

California is facing a $68 billion budget deficit, the largest in its history, due to a steep decline in revenue similar to that seen during the Great Recession and dot-com bust. The state's heavy reliance on capital gains taxation and the personal income of high earners, coupled with the Federal Reserve's efforts to control inflation, has contributed to the financial challenge. The deficit is likely to result in significant cuts in an election year and poses a challenge to California's national image as the fifth-largest economy in the world. Governor Gavin Newsom and his fellow Democrats in the Legislature will need to make difficult choices and rely on reserves to cover the shortfall.