With $76B surplus, state proposes rebates for millions

SACRAMENTO (AP) — Aided by an astonishing nearly $76 billion budget surplus, California Gov. Gavin Newsom on Monday proposed tax rebates of up to $1,100 for millions of households and more than $7 billion to help people affected by the pandemic cover rent and utilities.

It was Newsom’s first in a weeklong roll out of pandemic recovery proposals totaling $100 billion, which could boost his political fortunes as he faces a likely recall election later this year. His opponents accused him of pandering and said the state would be better served by broader tax reforms.

“Direct stimulus checks going into people’s pockets and direct relief — that’s meaningful,” Newsom said from a community organization in a disadvantaged Oakland neighborhood.

Under his plan, roughly 11 million low- and middle-income Californians would see direct, one-time payments. Taxpayers making between $30,000 and $75,000 a year would get a $600 payment. Households making up to $75,000 with at least one child would get an extra $500 payment. It builds on an earlier payments to the lowest-income Californians and immigrants who pay taxes but did not get federal stimulus payments, including those living in the country illegally.

The projected $75.7 billion budget surplus is largely due to taxes paid by rich Californians who generally did well during the pandemic, and marks a major turnaround after officials last year said they feared a deficit of more than $50 billion. Officials from the state Department of Finance said multiple rounds of federal Coronavirus bills boosted the state’s budget by putting money back into the economy. The stock market also did well, helping California’s tax collections. The state relies heavily on income taxes from the wealthiest people.

The state will also get $27 billion from the latest federal Coronavirus spending plan, the US Treasury Department announced Monday.

Under Newsom’s plan, the direct payments would total an estimated $8.1 billion, said H.D. Palmer, a finance spokesman. The proposal also includes $5.2 billion to help with back rent and future payments and $2 billion for overdue utility bills for people who fell behind during the pandemic, though Newsom’s office provided few details.

A law passed by voters in the 1970s requires the state to give some money back to taxpayers if the surplus hits a certain limit. The state estimates it will be $16 billion over that threshold.