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California budget is $12 billion in the red amid Trump tariffs and rising costs

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California is experiencing unexpectedly shaky economic conditions, as health care costs rise and Trump's tariffs create ongoing uncertainty.
California's budget deficit has escalated to $12 billion, a significant increase from the $6.7 billion projected in January, primarily due to a decline in tax revenues and the economic impacts of former President Donald Trump's tariffs. The state's Legislative Analyst's Office (LAO) attributes this shortfall to lower-than-expected personal income tax collections and a general economic slowdown, exacerbated by global trade tensions and rising costs. Governor Gavin Newsom and state lawmakers are now faced with the challenge of addressing this deficit, which could involve cutting spending, raising taxes, or dipping into the state's reserves. The situation underscores the broader economic challenges facing the state, including the effects of inflation and the ongoing recovery from the economic impacts of the global health crisis.

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