California has a staggering $75.7B budget surplus

SACRAMENTO — California expects a staggering $75.7 billion surplus despite a year of pandemic closures — an amount that surpasses most states’ annual spending and prompted Gov. Gavin Newsom on Monday to propose sending cash back to residents as he faces a recall election.

California’s coffers are bulging thanks to the high-flying Silicon Valley, surging stock market and a large share of professionals who were able to continue working remotely during Covid-19. The state has a progressive income tax structure that leans heavily on top earners, allowing the state to enjoy record revenues despite widespread job losses in the travel and service industries that have kept California’s unemployment rate among the nation’s highest.

The Democratic governor provided the surplus figure Monday as he proposed $600 checks for middle-income residents along with $500 payments to families with dependents. California in February enacted an initial round of payments for its lowest-income residents, supplementing two rounds of similar checks from the federal government. All told, the state would give back nearly $12 billion this year if state lawmakers approve Newsom’s plan.

“We believe people are better suited than we are to make determinations for themselves on how best to use these dollars,” Newsom said in a line more often expressed by Republicans.

It didn’t take long for the eye-popping surplus figure to get notice from congressional Republicans, who argued for a smaller federal stimulus package this winter and pointed to California as a poster child for why some states don’t need assistance. California is due to receive $26 billion in direct federal aid, and Newsom has included that amount in a $100 billion package he’s dubbing the “California Comeback Plan” as he campaigns against the recall.

“This is one more reason why borrowing and sending tens of billions to California was a crying shame — and why every Republican in Congress opposed it,” Sen. Mitt Romney (R-Utah) said on Twitter.

Newsom officials said they are not using any of their $26 billion in federal dollars to provide tax rebates. The American Rescue Plan Act of 2021 generally forbid states from cutting taxes, but the Biden administration on Monday cleared the way for California to do so with new guidance that said states could as long as they could prove they were relying on their own revenues driven by economic growth.

Newsom is touring the state ahead of his May budget revision later this week, which will set in motion negotiations with state lawmakers before a June 15 deadline. The governor’s budget will show a $75.7 billion general fund surplus across two fiscal years — the current one plus the year that starts July 1. That’s equal to nearly half of the $164.5 billion general fund budget that Newsom proposed in January.

The governor said nearly $27 billion of the surplus will go to K-12 schools and community colleges under state requirements, while $11 billion will go toward reserves and debt payments. He is proposing that the remaining $38 billion boost other programs. Legislative Democrats are calling for Newsom to provide Medicaid for all undocumented immigrants, increase support for homeless residents, expand child care and bolster social services that were cut in the Great Recession.

“People were talking last year about a $54 billion shortfall; to then go to a $75 billion surplus is surreal,” said Anthony Wright, executive director for Health Access California, which has called on Newsom to support health care for undocumented residents. “It’s even more surreal for those of us who have been around for a couple of decades and have experienced a lot more lows than highs with regard to the budget cycles.”

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Gov. Gavin Newsom speaks during a news conference.
California Gov. Gavin Newsom speaks during a news conference on March 19, 2021 in San Francisco, Calif. | Justin Sullivan/Getty Images

SACRAMENTO — California expects a staggering $75.7 billion surplus despite a year of pandemic closures — an amount that surpasses most states’ annual spending and prompted Gov. Gavin Newsom on Monday to propose sending cash back to residents as he faces a recall election.

California’s coffers are bulging thanks to the high-flying Silicon Valley, surging stock market and a large share of professionals who were able to continue working remotely during Covid-19. The state has a progressive income tax structure that leans heavily on top earners, allowing the state to enjoy record revenues despite widespread job losses in the travel and service industries that have kept California’s unemployment rate among the nation’s highest.

The Democratic governor provided the surplus figure Monday as he proposed $600 checks for middle-income residents along with $500 payments to families with dependents. California in February enacted an initial round of payments for its lowest-income residents, supplementing two rounds of similar checks from the federal government. All told, the state would give back nearly $12 billion this year if state lawmakers approve Newsom’s plan.

“We believe people are better suited than we are to make determinations for themselves on how best to use these dollars,” Newsom said in a line more often expressed by Republicans.

It didn’t take long for the eye-popping surplus figure to get notice from congressional Republicans, who argued for a smaller federal stimulus package this winter and pointed to California as a poster child for why some states don’t need assistance. California is due to receive $26 billion in direct federal aid, and Newsom has included that amount in a $100 billion package he’s dubbing the “California Comeback Plan” as he campaigns against the recall.

“This is one more reason why borrowing and sending tens of billions to California was a crying shame — and why every Republican in Congress opposed it,” Sen. Mitt Romney (R-Utah) said on Twitter.

Newsom officials said they are not using any of their $26 billion in federal dollars to provide tax rebates. The American Rescue Plan Act of 2021 generally forbid states from cutting taxes, but the Biden administration on Monday cleared the way for California to do so with new guidance that said states could as long as they could prove they were relying on their own revenues driven by economic growth.

Newsom is touring the state ahead of his May budget revision later this week, which will set in motion negotiations with state lawmakers before a June 15 deadline. The governor’s budget will show a $75.7 billion general fund surplus across two fiscal years — the current one plus the year that starts July 1. That’s equal to nearly half of the $164.5 billion general fund budget that Newsom proposed in January.

The governor said nearly $27 billion of the surplus will go to K-12 schools and community colleges under state requirements, while $11 billion will go toward reserves and debt payments. He is proposing that the remaining $38 billion boost other programs. Legislative Democrats are calling for Newsom to provide Medicaid for all undocumented immigrants, increase support for homeless residents, expand child care and bolster social services that were cut in the Great Recession.

“People were talking last year about a $54 billion shortfall; to then go to a $75 billion surplus is surreal,” said Anthony Wright, executive director for Health Access California, which has called on Newsom to support health care for undocumented residents. “It’s even more surreal for those of us who have been around for a couple of decades and have experienced a lot more lows than highs with regard to the budget cycles.”

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