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Newsom floats $300.6 billion revised California budget

“No other state in American history has ever experienced a surplus as large as this,” Newsom told reporters at a press conference Friday, while warning that it may not last.

SACRAMENTO, Calif. (CN) — Governor Gavin Newsom unveiled a $300.6 billion revised spending plan Friday that provides more money for Californians pinched by rampant inflation, bolstered by a $97.5 billion surplus from high-income taxpayers.

The constraints of Proposition 98, passed by voters in 1988, means about half of that surplus must be spent on K-12 education, so the discretionary surplus looks more like $49.2 billion.

Newsom delivered the news to reporters with a hint of caution, noting the volatility of California’s fiscal health with income from capital gains contributing 9.7% to the state’s coffers. This reflects the largest portion of personal income taxes collected since 2000 when the share was 10.4%. Newsom said those who recall the dot-com boom and bust of the late 90s are right to be wary.

“What would they have done in the state of California knowing what was going to come in late 2000, if they knew the volatility that was going to ensue and all the cuts that were going to have come from that? So we’ve been very mindful of that,” he said.

But he also plugged his massive spending plan, which includes billions in tax cuts and grants, as a fiscally prudent way of addressing a combination of crises facing Californians — from the staggeringly high price of food, gas, energy, and child care, to wildfires and the persistent housing shortage. Newsom said 94% of this year’s budget plan, combined with what he proposed in January, will be invested in one-time projects.

This includes an extra $18.1 billion to offset inflation, including $2.7 billion for rent relief, $1.4 billion to help with utility bills, $933 million in bonuses for nurses and health care workers; and $11.5 billion in tax cuts in the form of $400 cash payments for car owners, capped at two vehicles, for a possible total of $800.

State Democrats have pushed back on the $400 plan as unfair to people who don’t own cars, and as the Los Angeles Times reported, are promoting their own plan to send every taxpaying household making less than $250,000 a year a check for $200.

Newsom said the two ideas are not that far apart. “I have all the confidence in the world we’ll be able to square those modest differences and we’ll come around to a number and a strategy that’s in the best interests of Californians,” he said.

He added, “As to the broader question of who is included and who is not, there’s free transit for people who don't even own cars — $750 million to be exact.”

Meanwhile, Republicans want California’s gas tax of 51 cents per gallon suspended, an idea the governor pooh-poohed as assistance for corporations with no guarantee the savings would be passed on to individuals.

“Why would we suspend a gas tax and allow corporate interests to pocket those dollars? I’m not interested in the political platitudes from the other side and more interested in providing real relief," he said.

He also preemptively blasted critics who would object to pumping more money into the economy as actually exacerbating the inflation problem.

"Investing and putting money in people's pockets to absorb the spikes and increases in costs of things like eggs, milk, bread, gas and child care is something that should be imperative for every elected official in every state across this country,” he said. “Providing rebates to taxpayers is something wise and noble and something that should be celebrated, not criticized.”

He went on to say that he doesn’t believe the funding will have a long-term effect. “Inflation is nonetheless deeply impacting our thinking in other ways in terms of our medium and long term investments, but doesn’t impact our short-term thinking of providing immediate relief," he said.

Newsom’s budget also provides $1.2 million in ongoing funding for the Judicial Council to set up a training unit to provide judges with education and subject-matter expertise on climate change, environmental issues, and complex water rights cases.

It also sets aside $39.5 million from the general fund in 2022-23 and $37.7 million ongoing for a new diversionary court to help Californians struggling with drug abuse and untreated mental illness. The Community Assistance, Recovery, and Empowerment (CARE) Court will hold hearings and set up individualized “care plans” to help these people avoid incarceration and exit homelessness.

California Supreme Court Chief Justice Tani Cantil-Sakauye lauded these new investments in a statement Friday. “We thank the governor for his continuing commitment to sustainable funding for the judicial branch and the major investments necessary to ensure that all Californians can access their justice system,” she said.

Newsom's revision next heads to the Legislature, which has until June 15 to pass a budget.

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