California Gov. Gavin Newsom said on Thursday that the state's unemployment rate could reach a peak of 24.5% due to the economic fallout from the coronavirus outbreak as his administration grapples with a budget shortfall of $54.3 billion.
Nearly 4.6 million Californians have filed for unemployment claims since March 12, which is 2.4 million more workers when compared to the peak unemployment level from the fallout of the financial crisis, Newsom said during a press briefing.
"We are projecting in our documents that we're putting out today in our May revise of that January budget that unemployment will peak north of 24.5%. One could argue that we're already there," Newsom said. "We are at a time that's simply unprecedented."
Earlier this year, Newsom's budget reported a $5.6 billion surplus and a record-low 3.9% unemployment rate. However, the economic fallout from the state's stay-at-home orders, which shuttered nonessential businesses throughout the state since mid-March, has forced his administration to fill a shortfall of more than $54 billion.
On Thursday, Newsom revealed a revised budget proposal that reflects a revenue decline of 22.3% from the budget he proposed before the coronavirus outbreak. He said that revenue comes from personal income tax, corporate tax and sales tax.
The sales tax revenue has taken the largest hit, he said, as consumers aren't able to make purchases they once were and begin to spend less.
Newsom said the newest budget proposal, which cancels $6.1 billion in program expansions and spending increases, was designed to protect the state's commitment to public health, public safety and public education, he said.
The state isn't looking to solve the budget deficit "overnight" and will take a multi-year strategy in future budgets to help fill the deficit, Newsom said. His administration will have to pullback a majority of initiatives they sought to fund at the beginning of the year, like expanding child care and health-care coverage, he said.
Newsom praised House Speaker Nancy Pelosi's $3 trillion coronavirus relief bill that would reward nearly $1 trillion in relief for state and local governments.
"While this might be an academic exercise, an intellectual exercise, of balancing a state budget, this translates very differently to the folks watching that are trying simply to pay the bills to keep their lights on, to be able to figure out some semblance of optimism of their capacity to get back to work," Newsom said.
On Wednesday, New York officials said that the state has paid approximately $7.4 billion in unemployment claims in the first seven weeks of the Covid-19 crisis to 1.7 million residents out of work.
Melissa DeRosa, secretary to Gov. Andrew Cuomo, said that is roughly six times the number of claims filed during the 2008 financial crisis when 300,000 New York jobs were lost.