SACRAMENTO, Calif. (AP) — California will likely have a $25 billion budget deficit next year, state officials announced Wednesday, ending a run of historic surpluses and acting as a warning to other states about a potential recession.

Democratic-controlled California taxes rich people more than other states, meaning most of its drop in revenue is because the uber-wealthy aren't making as much money as they used to. That's why California is often one of the first states to have budget problems when the economy starts to falter.

The S&P 500, a key indicator of the health of the stock market that drives the income of the superrich, has fallen more than 17% since its peak in January. State revenues are now $41 billion below expectations, according to an outlook published Wednesday by the nonpartisan Legislative Analyst's Office. The estimated deficit is lower because some of those revenue losses were offset by lower spending in other parts of the budget.

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