How should California spend its big budget surplus?

California’s broader system is simply a spot sluggish, but definite sectors person been booming, acknowledgment to grounds debased involvement rates and galore billions of stimulus dollars from Uncle Sam.

Retail sales, lodging and the banal market, 3 sectors that are precise delicate to national fiscal and monetary policies, are soaring, adjacent arsenic the authorities grapples with the nation’s highest unemployment and poorness rates.

The authorities treasury has seen a bumper harvest of taxation revenues from the high-flying sectors, giving Gov. Gavin Newsom and authorities legislators tens of billions of other dollars to spend.

The authorities fund enacted successful June spent the bounty connected a wide assortment of caller and expanded programs, including currency payments to low-income Californians, but revenues are continuing to outpace the budget’s estimates by billions of dollars.

It means, the Legislature’s fund analyst, Gabe Petek, said past week, that the 2022-23 fund could person a $31 cardinal surplus — truthful overmuch that it volition collide with the state’s seldom invoked Gann spending limit.

Newsom besides says the authorities volition person an “historic fund surplus,” though helium won’t enactment his fig connected it until January, erstwhile helium releases his archetypal draught of the adjacent budget.

It could beryllium a overmuch antithetic fig due to the fact that Newsom’s Department of Finance is often astatine likelihood with Petek’s staff, but immoderate it is, Newsom and lawmakers volition person a batch of other dollars, and those who privation immoderate of them are opening to enactment up.

The Gann Limit, primitively enacted by voters successful 1979 and modified a decennary later, will, Petek warns, beryllium a complicating factor, though determination volition beryllium disagreement implicit what it is. Once revenues transcend the limit, the surplus indispensable beryllium utilized for a fewer designated purposes, including, potentially, taxation rebates.

In 1987, then-Gov. George Deukmejian and legislators rebated $1.1 cardinal to taxpayers — a important sum successful those days — aft revenues exceeded the Gann Limit. The rebate led to a loosening of the bounds to marque rebates little apt successful the future.

The 2021-22 budget’s currency payments to assistance those financially impacted by the pandemic were framed arsenic taxation rebates to fulfill the Gann Limit’s restrictions. Assembly Speaker Anthony Rendon says helium wants much “one-time investments allowed nether the Gann Limit,” seemingly a hint astir extending the payments.

Newsom has said helium wants to perpetrate immoderate other wealth to paying down pension debts and/or infrastructure. The overwhelmingly Democratic and left-leaning Legislature would similar to grow adjacent much social, acquisition and aesculapian benefits.

Since it’s the play for proposing ways to walk the state’s embarrassment of riches, let’s adhd 1 much — doing thing astir the state’s $20-plus cardinal indebtedness to the national authorities for unemployment security payments during the recession.

California’s unemployment security system, financed by taxes connected employers, provided basal enactment for much than 2 cardinal abruptly unemployed workers and rapidly exhausted what were already scant reserves. The authorities past began borrowing from the national authorities to support checks rolling out.

The indebtedness is expected to apical $20 cardinal by the extremity of the twelvemonth and if not repaid, the national authorities volition rise payroll taxes connected California employers until it is paid, with interest. That’s what happened aft California borrowed astir $10 cardinal during the 2007-12 recession.

In this case, however, the recession resulted from Newsom’s bid to unopen down businesses to conflict COVID-19. Therefore, the indebtedness should beryllium reasonably shouldered by the authorities arsenic a outgo of warring the pandemic, alternatively than by employers inactive struggling to retrieve from recession.

It whitethorn deficiency governmental enactment appeal, but it’s the close happening to do.

CalMatters is simply a nationalist involvement journalism task committed to explaining however California’s authorities Capitol works and wherefore it matters. For much stories by Dan Walters, spell to calmatters.org/commentary