SACRAMENTO — Buoyed by the pandemic prosperity of its richest taxpayers, California expects a record $97.5 billion surplus, Gov. Gavin Newsom said Friday, as he proposed a $300.6 billion state budget that also was a historic mark.
“No other state in American history has ever experienced a surplus as large as this,” Mr. Newsom said, outlining revisions to spending he first proposed in January for the 12 months starting in July.
Once again, as California heads into a gubernatorial election, the massive surplus allows Mr. Newsom to sprinkle cash across the state. Among the governor’s proposals: rebates for nearly all Californians to offset the effects of inflation, which is expected to exceed 7 percent in the state next year; retention bonuses of up to $1,500 for health care workers; expanded health care, in particular for women seeking abortions; three months of free public transit; and record per-pupil school funding. California also had a substantial surplus last year as the governor fended off a Republican-led recall.
Mr. Newsom warned, however, that state budget planners have been “deeply mindful” of the potential for an economic downturn. California’s progressive tax system is famously volatile because of its reliance on the taxation of capital gains on investment income.
“What more caution do we need in terms of evidence than the last two weeks?” the governor asked. The S&P 500, the benchmark U.S. stock index, has been nearing a drop of 20 percent since January, a threshold known as a bear market. Some other measures, including the Nasdaq composite, which is weighted heavily toward tech stocks, have already passed that marker.
A little more than half of the surplus would go to an assortment of budgetary reserves and debt repayments, with almost all of the additional spending devoted to one-time outlays under the governor’s plan, which still needs to be approved by lawmakers.
Legislative leaders have generally supported the notion of inflation relief, although the method remains a matter for negotiations. Some lawmakers are pushing for income-based cash rebates, while the governor is proposing to tie the relief to vehicle ownership because he says it would be faster and would cover residents whose federal aid is untaxed. Mr. Newsom’s fellow Democrats control the Legislature.
“People are feeling deep stress, deep anxiety,” Mr. Newsom said. “You see that reflected in recent gas prices now beginning to go back up.”
In a statement, the president pro tempore of the State Senate, Toni G. Atkins, and the chair of the committee that oversees budgeting in the chamber, Senator Nancy Skinner, noted that the plan for abortion funding, in particular, was in line with Democrats’ legislative agenda and called the governor’s proposals “encouraging.”
Source: NY Times