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Decoding California’s Financial Jigsaw: High Living Costs, Soaring Debt, and Looming Budget Deficits

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Californians are grappling with a financial puzzle as they face challenges like high living costs, elevated poverty rates, and substantial debt, setting the stage for crucial budget debates. Forbes reports that California has the third-highest living costs in the U.S., trailing behind Hawaii and Massachusetts. This includes an average annual household spending of $53,171 on housing, health care, taxes, food, and transportation. The state also ranks fourth in income disparity, leading to the highest poverty levels when considering the cost of living.

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Battling Poverty, Safeguarding Safety Nets, and Confronting Looming Budget Deficits

Public Policy Institute of California (PPIC) highlights that nearly a third of Californians are either in poverty or near-poverty. Safety net programs enacted by Gov. Gavin Newsom and the Democratic Legislature have prevented a further increase in the poverty rate. However, the state still faces significant looming budget deficits due to a plateau in revenues that can’t match increased spending.

Advocates for the poor urge Newsom and legislators to shield safety net programs from cuts, but they face competition from other well-supported spending categories like K-12 education, higher education, and prisons.

Adding to the financial complexity is the often-overlooked aspect of high personal debt. Californians carry a significant burden, contributing to the state holding the highest debt in the U.S. According to CreditDonkey, Californians’ average mortgage is $422,909, making housing costs a major driver of the state’s $2.5 to $3 trillion debt.

READ ALSO: Canada Announces $500 Boost In Climate Action Incentive: February Carbon Tax Rebate Increase Explained

Balancing Act Amidst Rent Struggles, Personal Debt, and Looming Budget Deficits

While Californians manage their debt relatively well, with a personal bankruptcy rate below the national average, a million of the state’s 9 million renters are reportedly behind on rent, according to PPIC census data.

California’s unique mix of high living costs, poverty, and debt turns the state into a personal finance experiment. The real test will come during the next recession, revealing how well Californians navigate the financial challenges ahead. This echoes past experiences during the Great Recession when the state grappled with high mortgage defaults and repossessions, impacting the housing industry for years. The looming budget deficits remain a central concern in these uncertain financial times.

READ ALSO: $2400 Stimulus Checks Set To Roll Out In February 2024! Check Eligibility, Next Stimulus Dates, And How To Verify Your Payment Status

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