Gov. Gavin Newsom unveiled an unprecedented $100 billion economic recovery package for California that taps state and federal money, while providing a new round of $600 stimulus checks to most Californians and covering missed payments for millions of renters.
The Democratic governor’s plan, floating on multibillion-dollar tax revenues despite the economic impact of the COVID-19 pandemic, depends in part on revenues money flowing in from California’s wealthiest taxpayers. It is all but certain to be approved the Legislature — both houses are overwhelmingly controlled by Democrats.
In part, the governor’s proposal responds to a law approved by voters 42 years ago, which requires the state to return money to taxpayers if the budget surplus exceeds certain limits?
Newsom proposed $8 billion for the second round of checks, and sought $5.2 billion for renters’ relief.
“Two in three Californians will receive a check from the state and more than $5 billion in aid will be made available to those who need help paying their rent or utility bills,” the governor said in a written statement. He also said further details of his proposal would be released during the week.
In part, the governor’s proposal responds to a law approved by voters 42 years ago, Proposition 4, which requires the state to return money to taxpayers if the budget surplus exceeds certain limits.
The 1979 initiative, known as the “Spirit of 13” after the property-tax cutting Proposition 13 that was approved the year before, also orders the state to compensate local governments for their costs of paying for state-ordered programs — a provision that has been often ignored.
The excess incoming revenue has been a moving target: During a briefing Monday, Newsom put the figure at more than $75 billion.
Families earning less than $75,000 annually will be eligible for the direct payment. Families with children will receive an extra $500, if they meet the income criteria.
Despite the grim early, pandemic-fueled warnings of economists and the governor’s own administration, California is now sitting on fat cash surpluses provided in large measure by tax revenues from the state’s wealthiest taxpayers and corporations. The surprise uptick includes capital gains from the sales of stock, transactions that traditionally are dominated by the most affluent Californians.
The excess incoming revenue is a moving target: During a briefing Monday, Newsom estimated put the figure at more than $75 billion.
But that number is a compilation of several funds, and reflects the increase from an earlier estimate that may have been low-balled.
“It’s the global figure for the amount of revenue that came in the state did not anticipate,” said Chris Hoene of the California California Budget & Policy Center, a nonprofit group that analyzes state spending.
“One reason the number is so large is that they enacted a budget about $30 billion smaller than it would have been otherwise. It’s still a big number, but perhaps it would have been about $40 billion or $45 billion,” he added.
Earlier estimates put the excess funds at $38 billion, $26 billion, $18 billion and $11.9 billion, to name just a few.
Last spring, in the depths of the COVID-19 pandemic, officials were predicting a $54 billion estimated shortage.
The state budget for the 2020-21 fiscal year runs through June 30. The budget containing much of Newsom’s latest package — if approved — would be contained in the budget for the 2021-22 fiscal year, which begins July 1.
The state is also expected to receive $26 billion in federal money, as part of a national stimulus package.
The administration is expected to release details of the new budget, revised to reflect the latest tax revenues, later this week.