Do you remember the Golden State incentive checks? Well, more may end up in your bank account in the near future.
That’s because California is – again – overflowing with money and likely to have a budget surplus of $31 billion next year, according to a Wednesday report from the independent Legislative Analyst’s Office. And because the state is prohibited from spending more tax dollars per Californian than it did in 1978, once adjusted for inflation, it has only a few options to absorb most of the windfall: cut taxes; providing tax credits; transferring to schools and community colleges; or earmark it for specific purposes, such as infrastructure.
Core lawmakers have competing views on how the money should be spent, whether it’s handing out checks to individual taxpayers or investing in long-term investments. Meanwhile, Governor Gavin Newsom has his own ideas.
Touring the delinquent ports of Los Angeles and Long Beach on Wednesday, Newsom said he plans to “significantly increase our one-time investments in infrastructure” in the budget proposal he will send to state lawmakers in January. He also suggested that one or two more rounds of stimulus checks could be on the way.
“How we framed that historic surplus last year, we will shape our approach in the same way this year,” the governor said.
Newsom and state lawmakers agreed on a record-breaking $262.6 billion spending plan for fiscal year beginning July 1, which included $12 billion in stimulus payments and unprecedented investments in education, homelessness and the environment. On Wednesday, Newsom unveiled the first 18 projects to be funded from the $6 billion broadband package.
Much of the additional revenue came from one-time funding sources, which helps explain why many California schools still face yawning budget deficits. However, the Legislative Analyst’s Office predicts that California can afford to increase its annual spending by $3 billion to $8 billion in fiscal year 2025-26 — a prospect that didn’t seem to sit well with Republicans.
The vice chair of the Assembly’s Budget Committee, Bakersfield Republican Vince Fong, stressed in a statement last week that the surplus does not mean the state’s economy is doing well. He suggested making long-term investments.
“State leaders must prioritize the excess revenue to invest in the critical issues affecting all Californians — needed water storage, a reliable supply chain, and permanent tax relief — to build a healthy economy and help Californians and businesses in our state. keep,” Fong stated. .
But Senator Melissa Hurtado, D-Sanger, said Wednesday residents need the money now, especially as prices in supermarkets soar. She said it’s “always good to give back to hard-working people in California” and that it benefits everyone as the state’s economy shows signs of recovery.
“I think people… are willing to spend money,” Hurtado said. “They are ready to move forward, and I think additional stimulus funds will help with that.”
According to the Legislative Analyst’s Office, there are several main reasons why California is swimming in the money, even though a whopping 26 percent of residents are functionally unemployed and the state’s poverty rate is the highest in the nation when cost of living is taken into account. They include huge capital gains for California’s wealthiest residents during the pandemic, and record consumer spending as residents use state and federal incentives.
California companies reported a record $217 billion in taxable sales in the second quarter of 2021, according to figures released Tuesday by the State Department of Tax and Fee Administration.
Moneywise Wealth Management co-owner David Anderson in Bakersfield said by text Wednesday that not everyone in the state really needs a stimulus check. From his perspective as a financial advisor, there is a simple test to know who is and who is not.
“If they’re handing out checks to the right people, there won’t be a lot of advice on what to do with them because they’ll spend it on their immediate needs,” Anderson said. “If people need advice on what to do with the money, they probably don’t need the stimulus check.”