Regardless of which scenario pans out, California’s economy is likely to be better off than the national one, according to the report, which cited increased demand for software and defense goods, areas in which California is a leader. Mr. Nickelsburg also said the state’s rainy-day fund was healthy enough to withstand the decline in tax revenues.
But that shortfall could complicate the speed at which Mr. Newsom can carry out some of his ambitious, progressive policies. In announcing the deficit, Mr. Newsom scaled back funding for climate proposals to $48 billion, from $54 billion.
The fiscal outlook also casts a cloud over progressive proposals, widely supported by Democrats, who have a supermajority in the Legislature.
A state panel that has been debating reparations for Black Californians is set to release its final report by midyear. Economists have projected that reparations could cost $800 billion to compensate for overpolicing, housing discrimination and disproportionate incarceration rates. Once the panel releases its report, it will be up to lawmakers in Sacramento to decide how much state revenue would support reparations — a concept that Mr. Newsom has endorsed.
Through all this, one thing has remained constant: Many Californians say their biggest economic concern is housing costs.
The median value for a single-family home in California is about $719,000 — up nearly 1 percent from last year, according to Zillow — and recent census data shows that some of the state’s biggest metro areas, including Los Angeles and San Francisco Counties, have continued to shrink. (In Texas, where many Californians have relocated, the median home value is about $289,000.)
Still, some Californians remain optimistic.
Zeeshan Haque, a former software engineer at Google, learned in January that he was being laid off. His last day was March 31.
