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Gov’t Shutdown Could Harm California’s Recovering Economy

California programs and services wouldn’t take a big hit from a federal government shutdown, at least not at first. But state budget watchers still say California has a lot to lose from the standoff in Washington.

California's gradually recovering economy could suffer a big setback, depending on how the budget standoff in Washington plays out over the next several weeks.

This week's battle over the government shutdown and the upcoming fight over the debt ceiling later this month could halt California's recovery — and hurt the state's budget revenues as well.

Jason Sisney with California's non-partisan Legislative Analyst's office said he's especially worried about what would happen if the U.S. were to default on its debt.

"We've had shutdowns in the past — in the mid-90s. They may be disruptive; they may affect consumer confidence. But the effect of the federal government not reaching agreement on the debt ceiling could be much greater," Sisney explained.

California's budget relies disproportionately on capital gains taxes on the top one percent of earners. They're the most likely to be hurt by a prolonged budget battle that rattles the stock markets and shakes consumer confidence.

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