California is expected to be flush with excess cash in the next budget year, according to a new forecast, and that could potentially trigger more stimulus payments in 2022.
The state is on track to have a $31 billion surplus for the budget year beginning July 1, 2022, the independent Legislative Analyst’s Office predicted in its annual “Fiscal Outlook,” which was released Wednesday.
If the analyst’s office forecast comes to fruition, California could exceed its constitutional limit by $26 billion over three years.
As a result, the state will likely have to give more money back to the taxpayers in order to meet its limit.
That could require Gov. Gavin Newsom and state lawmakers to either cut taxes, spend more money on infrastructure or give rebates to taxpayers and spend more on public schools.
The governor won’t propose a 2022-2023 budget until January, but he signaled some support for the direct payments during a news conference at the Port of Los Angeles on Wednesday.
“How we framed that historic surplus last year, similarly, we will frame our approach this year,” Newsom said. “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 faced the same predicament of what to do with excess money for its last budget, when a projected budget deficit turned into a massive budget windfall.
For the 2021 budget year — which runs until June 30, 2022 — Newsom and state lawmakers approved stimulus checks of up to $1,100 for millions of taxpayers.
To date, the expanded Golden State Stimulus program has resulted in a distribution of more than 6 million payments worth a total value of $4.5 billion, with checks expected to be issued through the beginning of next year, according to the California Franchise Tax Board.
Using the extra funds next year to give more rebates to taxpayers may prove to be the most popular option — especially given that California is holding statewide elections in November 2022.
And stimulus checks are quite popular among Californians.
A newly released economic survey of residents in the Golden State polled adults and likely voters on the federal government’s version of stimulus checks and found there is widespread support for expansion of the payments.
Approximately 72% of adults and 71% of likely voters who participated in the Public Policy Institute of California’s statewide survey approve of expanding the earned income tax credit.
In terms of other benefits, overwhelming majorities — about three-quarters of adults and likely voters who responded — would also like to see more government funding for child care programs, while 77% of respondents are in favor of a government-funded health care option.
However, the survey found there is a wide political gap on the issues: while most Democrats and independent voters supported an expansion of federal stimulus checks and child care programs, about six out of 10 Republicans were in opposition. Likewise, there was a deep partisan divide on the health care issue.
The one area where Democrats and Republicans appear to have found common ground is government funding for job training programs, with both sides supporting an increase of funding, according to the survey. Overall, eight in 10 adults and likely voters approved.
Another key finding relates to economic inequality in the state, with about seven in 10 respondents reporting that they believe the gap between the rich and poor is getting larger.
“Take that news that I received yesterday [about the state’s forecast $31 billion budget] with some of the policy options that we present to people, and that if there’s all this money and there’s the ability to do things that maybe … we’ll see progress on addressing income inequality in some ways,” said Dean Bonner, the PPIC’s associate survey director.
If state lawmakers do decide to dole out tax rebates again, it’s unclear whether the amount and eligibility threshold of the current Golden State Stimulus II payments would hold. The tax board estimates about 9 million Californians will receive a GSS II payment.
But as far as dropping other hints about what he’ll propose for the surplus, the governor says he’d like to put most of it either in the state’s savings account or spend it on one-time items that don’t require ongoing funding “so that we’re not caught flat-footed when the economy contracts, when the markets begin to adjust.”
Newsom specifically singled out infrastructure as one area of focus.
“We are going to substantially increase our one-time investments in infrastructure,” he said. “That’s one (budget) preview you can count on.”
