Surplus in hand, Newsom unveils its spending plan

SACRAMENTO, Calif. (AP) – California Governor Gavin Newsom will tell everyone on Monday how he wants to spend more than $ 200 billion in taxpayer dollars over the next year as he presents the first version of its annual budget proposal to the state legislature.

The Democratic governor’s budget proposal is the first step in the complex process of spending the hundreds of billions of dollars in taxes Californians and businesses pay every year.

Newsom sometimes gives multiple previews of what’s in its plan before it is presented. This year it pledged to spend $ 300 million to bolster law enforcement efforts to tackle retail theft and an additional $ 2.7 billion to spend on things like testing. coronavirus disease and hospital staff. But that’s only a tiny fraction of the state budget, which last year exceeded $ 260 billion. Newsom has said little about what else he wants to do.

But one thing is certain: California has a lot of money. In November, the Office of Non-Partisan Legislative Analysts predicted that California would have at least one $ 31 billion surplus This year. Newsom’s budget proposal will likely show a much larger surplus as its administration often uses a different definition of what counts as a surplus.

Regardless, it’s a lot of money. And it’s a far cry from the gloom of 2020, when Newsom and state lawmakers cut spending, raised taxes, and took money out of state savings accounts to cover what they feared. a $ 54 billion deficit fueled by a pandemic.

This deficit never happened. Instead, state revenues have soared like never before. In September, collections of the three biggest taxes in the state – personal income, sales and corporations – were 40% higher than in September 2020 and almost 60% higher than in September 2019, before that the pandemic does not strike, according to the Office of the Legislative Analyst.

The surge in incomes is despite California having consistently one of the highest unemployment rates in the country for much of the past year. One of the main reasons for this is that the state has many wealthy people whose assets have continued to rise in value.

Last fall, stock prices were worth more than double what they were at their pandemic lows. California has also seen many private companies go public by selling stocks on the stock exchange, providing a bargain for people who own or work for those companies. These people then have to pay capital gains taxes which, in California, unlike most other states, are taxed in the same way as income.

All of this is a lot of tax dollars that the government can spend. Last year, Newsom and the state legislature returned billions of dollars to some low-income taxpayers in the form of stimulus checks. He might want to do it again this year.

Newsom also pledged to dramatically increase spending on infrastructure, including roads and bridges. These types of projects are good ways to spend the excess money – which is only available for one year – as they don’t have recurring costs that need to be funded each year. Another benefit is that infrastructure spending does not count towards the spending limit set by the state constitution, which means it can offset other spending to help legislators stay below that limit.

Nationally, people will be watching closely to see how Newsom wants to spend money to increase access to abortion. The United States Supreme Court is considering striking down or significantly weakening Roe v. Wade, the landmark ruling that bans states from banning abortion. If that happens, as many as two dozen other states could pass laws banning or restricting access to abortion.

Last year, Newsom brought together a group of more than 40 abortion providers and advocacy groups to ask for their ideas on what to do if this happens. In December, the group released 45 recommendations. They include spending to help clinics hire more workers and funds to reimburse abortion providers for patients who cannot afford to pay, including those who travel to California from other states.

In an interview with The Associated Press last month, Newsom said some of the report’s recommendations will be included in its budget proposal.

Democrats control the majority of seats in the state legislature, which means they can pass the budget without Republican votes. Newsom’s budget proposal will change as he negotiates with Democratic leaders, but for the most part both sides share the same goals.

Republicans, meanwhile, are urging Newsom and Democrats to do things like suspend taxes on gasoline and cars reduce the cost of living in California. They also want Newsom to spend nearly $ 3.3 billion on water storage projects amid severe drought affecting the western United States.

“California is entering its third year of bone dryness. There has to be a sense of urgency, ”wrote MP Vince Fong and State Senator Jim Nielsen, both prominent Republicans on their respective legislative budget committees.

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