California has a record budget surplus as wealthy taxpayers thrive

SACRAMENTO – Backed by the pandemic prosperity of its richest taxpayers, California expects a record $ 97.5 billion surplus, the governor said. Gavin Newsom said on Friday, proposing a state budget of $ 300.6 billion which was also a historic sign.

“No other state in American history has ever experienced such a large surplus,” said Newsom, outlining spending reviews it first proposed in January for the 12 months beginning in July.

Once again, as California moves into government elections, the huge surplus allows Mr. Newsom to spread money across the state. Among the governor’s proposals: discounts for almost all Californians to offset the effects of inflation, which is expected to exceed 7 percent in the state next year; retention bonus of up to $ 1,500 for healthcare professionals; expanded health care, particularly for women seeking abortions; three months of free public transport; and register the scholastic funding per pupil. California also had a substantial surplus last year as governor rejected a Republican-led recall.

Mr. Newsom warned, however, that state budget planners were “keenly aware” of the potential for an economic downturn. California’s progressive tax system is notoriously volatile due to its reliance on the taxation of capital gains on investment income.

“What additional caution do we need in terms of evidence over the past two weeks?” asked the governor. The S&P 500, the benchmark US equity index, has been nearing a 20% decline since January, a threshold known as a bear market. Some other measures, including the Nasdaq Composite, which is heavily weighted towards tech stocks, have already crossed that threshold.

Just over half of the surplus would go to an assortment of budget reserves and debt repayments, with nearly all of the additional spending going to one-time outlays under the governor’s plan, which has yet to be approved by lawmakers.

Legislative leaders have generally supported the notion of reducing inflation, although the method remains the subject of negotiation. Some lawmakers are pushing for income-based cash rebates, while the governor proposes to tie the concession to vehicle ownership because he says it would be quicker and would cover residents whose federal aid isn’t taxed. Mr. Newsom’s Democratic colleagues control the legislature.

“People experience profound stress, profound anxiety,” Newsom said. “You see that reflected in the recent gas prices which are now starting to rise.”

In a statement, the pro tempore president of the state Senate, Toni G. Atkins, and the chair of the committee that oversees the budget in the House, Senator Nancy Skinner, noted that the abortion financing plan, in particular, it was in line with the Democrats’ legislative agenda and called the governor’s proposals “encouraging”.