California analyst predicts $31 billion budget surplus
SACRAMENTO >> California will have so much money next year that state officials will likely have to give some of it back to taxpayers to meet constitutional limits on state spending, according to a new forecast from the state’s independent Legislative Analyst’s Office.
The state’s annual “Fiscal Outlook,” released Wednesday, predicts a $31 billion surplus for the 2022 budget year that begins July 1. The analyst’s office says that will exceed a constitutional limit on state spending by more than $14 billion. That could require Gov. Gavin Newsom and state lawmakers to either cut taxes, spend more money on schools and infrastructure or — perhaps the most popular choice in an election year — give rebates to taxpayers.
Newsom won’t reveal his budget proposal until January. But on Wednesday, the governor indicated his preferred choice is to give the money back to taxpayers. That’s what he and the state Legislature did earlier this year, approving rebates totaling $12 billion for some taxpayers in a state budget that was also projected to exceed the spending limit because of a large surplus.
“How we framed that historic surplus last year, similarly, we will frame our approach this year,” Newsom said during a news conference at the Port of Long Beach. “I’m very proud of the historic tax rebate last year, and I look forward to making the decision that I think is in the best interests of 40 million Californians.”
California’s tax collections have continued to soar despite the pandemic. From April through June of this year, California businesses reported a record
high $216.8 billion in taxable sales — a 38.8% increase over the same period in 2020 and a 17.4% increase over those months in prepandemic 2019. Nick Maduros, director of the California Department of Tax and Fee Administration, said it is “a sign that business owners found creative ways to adapt during a difficult year.”
In September, collections from taxes on income, sales and corporations were 40% higher than September of last year and almost 60%
higher than September 2019. That’s because retail sales have seen double digitgrowth this year and stock prices have doubled from their low point at the start of the pandemic last spring.
But the LAO said it’s impossible to know whether these gains are sustainable. Prices for goods and services are going up because of inflation. In October, the nationwide growth in retail sales of 1.7% was mostly because prices rose 0.9% during that same time period, according to new data from the U.S. Census Bureau. Gas prices grew even faster.
While most of the state’s wealthier workers kept their jobs and kept paying taxes during the pandemic, the state’s lower-wage workers were hit hard by government-ordered closures of restaurants and other public spaces. More than 18 months into the pandemic, California is tied for the highest unemployment rate in the nation at 7.5%.
“There’s something wrong when the state is flush with extra cash — $750 for every man, woman and child — while ordinary people have to choose between putting food on the table and filling their gas tank,” Assembly Republican Leader Marie Waldron said.
While most of the state’s wealthier workers kept their jobs and kept paying taxes during the pandemic, the state’s lowerwage workers were hit hard by governmentordered closures of restaurants and other public spaces.