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No 'fiscal cliff' budget deal could hit California hard

December 10, 2012 12:00:00 AM PST
As the deadline nears for Washington to come up with a deficit-reduction agreement by the end of the year, it's becoming clear California has a lot at stake if the so-called "fiscal cliff" isn't averted.

More than 200,000 jobs could disappear and the state could lose as much as $4.5 billion in federal funds. The Legislative Analyst Office estimates the state budget may shrink by $11 billion over two years.

"Most people think the economy would be drawn into a recession, and just like in any recession, that would affect the state's economy and revenues and result in billions of dollars of less tax revenue for the state," said Jason Sisney of Legislative Analyst Office.

Southern California, home to most high-value contracts, would be hit especially hard by cuts to defense spending, an estimated loss of 135,000 jobs next year, according to George Mason University.

Because California voters approved Proposition 30 in November, the statewide sales tax will go up 1/4 percent and high-wage earners will have to pay more in state income taxes.

If the Bush-era tax cuts are allowed to expire, a typical family of four's federal income tax liability will also go up another $2,200 a year.

No deal on avoiding the fiscal cliff also means about 400,000 Californians are set to abruptly lose their unemployment benefits extensions. Thousands of low-income families whose programs rely on federal funding could see their services cut, such as Head Start, WIC and domestic violence shelters.

"It's incredible to think what we'll have to do in California, connect the dots for the families that would lose federal benefits," said Jessica Bartholow of the Western Center on Law and Poverty.


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