Remember the Golden State stimulus checks? Well, more might be landing in your bank account in the near future.
That’s because California is — once again — overflowing with money, and will likely have a $31 billion budget surplus next year, according to a Wednesday report from the independent Legislative Analyst’s Office. And because the state is forbidden from spending more tax dollars per Californian than it did in 1978, once adjusted for inflation, it only has a few options for handling most of the cash windfall: slashing taxes; issuing tax rebates; funneling it to schools and community colleges; or earmarking it for certain purposes, such as infrastructure.
Kern lawmakers have competing notions about how the money should be spent, whether it's handing out checks to individual taxpayers or investing in long-term investments. Meanwhile, Gov. Gavin Newsom has ideas of his own.
While touring the backlogged Los Angeles and Long Beach ports on Wednesday, Newsom said he plans to “substantially increase our one-time investments in infrastructure” in the budget proposal he’ll send to state lawmakers in January. He also suggested that another round — or two — of stimulus checks could be on the way.
“How we framed that historic surplus last year, similarly, we will frame our approach this year,” the governor said.
Newsom and state lawmakers agreed on a record-breaking $262.6 billion spending plan for the fiscal year that began 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 that will receive funding from the $6 billion broadband package.
Much of the extra revenue came from one-time funding sources, which helps explain why many California schools are still facing yawning budget deficits. However, the Legislative Analyst’s Office predicts that California can afford to increase its annual expenses by $3 billion to $8 billion through the 2025-26 fiscal year — a prospect that didn’t appear to sit well with Republicans.
The vice chairman of the Assembly Budget Committee, Bakersfield Republican Vince Fong, emphasized 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 surplus revenue to invest in the critical issues that are impacting all Californians — needed water storage, a reliable supply chain and permanent tax relief — to build a healthy economy and keep Californians and businesses in our state," Fong stated.
But state Sen. Melissa Hurtado, D-Sanger, said Wednesday residents need the money now, especially with prices rising at grocery stores. She said it's "always good to give back to hardworking people of California" and that doing so benefits everyone as the state's economy shows signs of getting back on its feet.
"I think people … are ready to spend money," Hurtado said. "They're 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 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 the cost of living is taken into account. They include massive capital gains for California’s wealthiest residents amid the pandemic, and record consumer spending as residents use state and federal stimulus checks.
California businesses reported a record high of $217 billion in taxable sales during the second quarter of 2021, according to figures released Tuesday by the state Department of Tax and Fee Administration.
Co-owner David Anderson of Moneywise Wealth Management in Bakersfield said by text Wednesday that not everyone in the state truly needs a stimulus check. From his perspective as a financial adviser, there's a simple test for knowing who does and who doesn't.
"If they give out checks to the right people, there won't be much in the way of advice on what to do with it, as ... they'll be spending it on their immediate needs," Anderson stated. "If people need advice on what to do with the money, they probably don't need the stimulus check."