Governor Gavin Newsom this morning proposed a $300.7 billion revised state budget for 2022-23 and pegged the state’s operating surplus at $97.5 billion – a dramatic increase from the $45.7 billion projection in his January budget proposal.
Newsom’s revised budget includes what a Governor’s Office press release described as $2.1 billion in new “incentive opportunities for businesses to relocate to California or grow jobs and their economic footprint here from states with anti-abortion and anti-LGBTQ+ laws.”
“Califoria values make us competitive globally,” Newsom said during today’s press conference.
The budget proposes to “incentivize projects that manufacture, process, or recover lithium through a sales and use tax exclusion, making $45 million available over three years for these incentives.”
The budget also features an $18.1 billion “inflation relief package” that includes:
- $11.5 billion for “tax refunds to help address inflation.” The “tax refunds” would be in the form of $400 checks to every eligible registered vehicle owner, likely sent in September, capped at two checks per individual. This is the governor’s response to proposals to reduce gas taxes to help Californians who are struggling with record high costs at the pump. Under recent action by the California Department of Tax and Fee Adminstration, California’s excise tax on gasoline will increase from 51.1 cents per gallon to 53.9 cents per gallon effective July 1, and the tax on diesel fuel will increase from 38.9 cents per gallon to 41 cents per gallon.
- $439 million to cover a 12-month pause in collection of the diesel fuel sales tax.
- $2.7 billion for “emergency rental assistance” for qualified low-income tenants who requested rental assistance before March 31.
- $1.4 billion to help Californians pay past-due utility bills – comprised of $1.2 billion for electricity bills and $200 million for water bills.
- $933 million for hospital and nursing home staff, providing up to $1,500 to hospital and skilled nursing facility workers.
- $750 million in incentive grants to provide three months of free public transportation in communities throughout the state.
- $304 million to “make health coverage more affordable for middle-class families.” The governor said this plan would extend health insurance premium assistance under Covered California for families of four earning up to $166,500 annually – a population estimated at more than 700,000 people.
- $157 million to “waive child care fees for low-income families” to make state-subsidized preschool and child care more affordable.
The budget also accounts for the projected increase in California’s minimum wage to $15.50 per hour for all workers on January 1, 2023. “The accelerated increase is required by a provision in the state’s existing minimum wage law when inflation exceeds 7 percent,” the Governor’s Office stated.
Newsom’s proposed budget for the fiscal year that begins July 1 represents an increase of $14.3 billion from the plan he presented in January. Total spending would be $38.1 billion more than in the $262.6 billion budget enacted last summer for the current fiscal year.
The proposal does not include any broad-based tax increases.
Newsom said 94 percent of the spending of surplus dollars is one-time spending. He said he will stress the “imperative of caution” as he negotiates with the Legislature.
Key provisions of the governor’s proposal:
Surplus. The Governor’s Office said the revenue surplus – the total projected revenue above the amount of projected spending for the fiscal year – is now $97.5 billion, largely thanks to personal income taxes on high-income earners. The discretionary amount of the surplus, not restricted by various legal requirements, is $49.2 billion, the administration said.
Reserves. The total in the state’s various reserve funds would be $37.1 billion, a new record. The January proposal projected $34 billion in reserves.
Unemployment Insurance Fund. The budget revision does not change the governor’s January proposal to spend $3 billion over two years to pay down a portion of the state’s debt to the federal government for a loan that allowed California to continue paying unemployment insurance benefits after pandemic-related business closures decimated the fund. By reducing the debt owed to the federal government, the repayment would reduce employer taxes that otherwise would be triggered, but the proposed payment is only a fraction of the more than $20 billion in debt.
Education Spending. Public education spending would total $128.3 billion, and per-pupil spending would increase to $16,991 per pupil (from $15,261 in the current year) from the general fund, establishing a new record high. The spending increases to $22,850 per pupil when accounting for all funding sources.uni
The May revision of the budget accounts for revenue collections as well as updated spending projections based on caseload growth, public school attendance, inflation, employment costs, and other changes that have occurred since the January budget was prepared. The release of the “May revise” typically kicks the governor’s negotiations with legislative leaders into high gear.
The Legislature has until June 15 to send a budget bill to the governor or forfeit pay.