California is facing a significant budget deficit due to a decrease in traditional tax revenue sources. The state heavily relies on sin taxes, such as those on fuel, cigarettes, and alcohol, which are now at risk.

The decline in fuel-tax revenues is expected as more drivers switch to electric vehicles. Cigarette tax revenues have already dropped by 29% since 2017, resulting in a loss of $500 million. Additionally, alcohol tax revenues are decreasing, which raises concerns about the sustainability of funding for higher education. Currently, almost half of the higher education budget relies on these taxes.

This situation presents a challenge for California lawmakers as they strive to stabilize the state's finances amidst changing consumer behaviors.