California projects $54 billion budget deficit amid coronavirus crisis

California projects it will face a $54.3 billion deficit as a result of the economic damage caused by the coronavirus, Gov. Gavin Newsom’s administration announced Thursday.

Why it matters: It's a sign of the massive economic devastation caused by the coronavirus and the stay-at-home orders that have followed, especially when compared to the $21 billion surplus that California ran a year ago, per CNBC.

• The budget deficit means California's required funding level for public schools and community college will drop by $18.3 billion.
• Meanwhile, the state has to pay an extra $7.1 billion due to the surge of residents who have enrolled in social safety net programs.

The big picture: State and local tax revenues across the country have been severely depleted during the pandemic, while states have had to increase their spending because of unemployment and medical obligations.

• The crisis will be at the heart of the federal government's negotiations over the next coronavirus stimulus bill. Democrats are pushing for billions in relief for state and local governments, while some Republicans are resisting — citing poor budget management by some states prior to the pandemic.
• Sens. Bob Menendez (D-N.J.) and Bill Cassidy (R-La.) are proposing a $500 billion fund for state and local governments to be included in Congress' next coronavirus rescue package.

By the numbers: The $54.3 billion deficit dwarfs California's $16 billion "rainy day fund," Newsom said.

• The state also predicted an 18% unemployment, up from 3.9% earlier this year.
• California also projects personal income will fall by close to 9%, while permits for new housing construction will drop more than 21%.

What he's saying: Newsom said in a memo released Thursday that the massive deficit “underscores the necessity of further federal stimulus to help states and local governments," per CNBC.

• “These numbers are jaw-dropping,” Newsom said. “I just hope that people are preparing themselves ... for the effort that we all need to engage together to undertake to unwind that and get back on our feet.”

Go deeper: Cuomo tears into McConnell for suggesting states should declare bankruptcy