This marks a great turnaround from last summer when California was facing a budget deficit of $54 billion and Newsom proposed cutting the state budget by 9% and cutting state workers' pay by one-tenth in order to balance the budget.
The budget surplus this year will give Newsom and the state government $38 billion in extra funds to spend on new projects and initiatives. Part of the surplus included the $26 billion the state is expected to receive from President Joe Biden's stimulus package from earlier this year.
“California is not coming back, California is going to come roaring back,” Newsom said at a press conference on Monday.
“California’s recovery is well underway, but we can’t be satisfied with simply going back to the way things were,” Newsom said in a statement. His office called the payments the largest tax rebate any state has ever given.
The excess is more than twice what the state finance department estimated at the start of the year, following a strong economy that has bounced back from the pandemic-induced recession, especially for wealthier residents who pay higher taxes.
The governor offered using more than $8 billion of the surplus to expand the $600 state stimulus checks intended for millions of low- and middle-income Californians as well as give an additional $500 more to those families with children. The payments would go to families with less than $75,000 a year in income, which would benefit almost 80% of all people in the state.
Newsom will be required to put forth a revised budget plan later this week, and the final balanced budget plan must pass the state Legislature by June 15.
“We were scared, all of us,” state Assemblyman Chad Mayes (I) told The Hill last month. “We all agreed, 'Hey, we’re going to take a hit because we’re heavily dependent on high-income earners.'”
But the stock market’s rebound, and its yearlong demonstration, have helped fix the gap. California is unusually dependent on receipts from capital gains tax, so a strong year in the market is good news for state government. Initial public offerings from companies like DoorDash and Airbnb helped, while sales tax revenues also came in in greater amounts than expected.
Newsom said in an address Monday that he would propose using much of the money to fund what he said would be the biggest economic recovery package in state history.