California's $15.7 billion deficit is about 30 percent of the total gap all states face in the coming fiscal year, Standard & Poor's said in a report on Monday, saying the state likely will have to cut spending further to balance the 2013 fiscal budget.
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State spending as a share of California's total economy is the lowest in 39 years. But the state's tax revenue system is "dysfunctional" and California relies heavily on volatile personal income tax collections, which are expected to total 63 percent of general fund revenue in 2013, S&P said.
California's economy "remains depressed and its revenue recovery is sluggish" three years after the Great Recession ended, the credit agency added.