California Faces $25 Billion Deficit in End to Surpluses (2)

California is likely to see a $25 billion deficit in its next fiscal year because of slumping revenue, the state’s nonpartisan budget adviser warned. It’s a stark turnaround from years of staggering surpluses.

The Federal Reserve’s path of interest-rate increases have slowed the economy, resulting in lower stocks, falling home prices, and less demand for items such as cars, the state’s Legislative Analyst’s Office said in a report Wednesday. The drop in stocks likely has led to estimated income tax payments this year being “notably weaker” than the previous year, it said.

The agency is projecting the deficit -- which ...