Gavin Newsom’s $227 billion budget calls for new spending on schools, vaccines and stimulus

Gov. Gavin Newsom wants to spend more on struggling small businesses, COVID-19 vaccines and school reopenings in his $227.2 billion 2021 budget proposal.

He’s tapping a projected one-time surplus of $15 billion that California expects to see despite the pandemic-driven recession, he announced Friday.

Newsom is asking lawmakers to consider most of his proposal through the traditional budget process, a months-long undertaking during which lawmakers and Newsom will hash out a comprehensive spending plan in time for the July 1 start of the next fiscal year.

But Newsom wants to use some of the surplus funds sooner. As part of what he’s calling an “early action” proposal, Newsom is asking lawmakers to quickly approve several billion dollars for school reopenings, struggling small businesses and direct aid for low-income families.

Newsom’s early action proposals include:

• $2.4 billion to send $600 payments to low-income families
• $2 billion to reopen schools
• Nearly $650 million for businesses hurt by the pandemic
• $250 million for housing infrastructure

Newsom also plans to quickly spend $300 million on COVID-19 vaccine distribution, a proposal that doesn’t need legislative approval because he plans to use money from an emergency fund.

Last year, Newsom and lawmakers cut money from schools and state worker pay to offset an estimated $54 billion deficit brought on by the COVID-19 pandemic and Newsom’s March stay-at-home order, which halted much of the state’s economy. But the budget projections they relied on proved overly pessimistic, leaving them with more money than expected to balance next year’s budget.

The Legislative Analyst’s Office, which advises the Legislature on the budget, predicted in November that California could see $26 billion more than what lawmakers and Newsom expected when they crafted the current $202 billion state budget. That’s because tax revenue has come in consistently higher than expected since the start of the fiscal year in July.

But the Legislative Analyst’s Office warned the temporary windfall will evaporate quickly, and that moving forward the state will see rising deficits.

The higher-than-expected tax revenue is partly due to the state’s uneven recovery from the pandemic-induced recession, with high-income earners continuing to prosper and low-income workers facing the worst consequences.

The limited effect on high wage earners has kept California’s revenue up as those workers have kept their jobs and continued to work from home. California’s budget relies heavily on those high earners because of the state’s progressive income taxes.

Federal stimulus checks for individuals and increased unemployment help also boosted California revenue, along with taxes on 2019 income, when the economy was booming, according to the Department of Finance.

This story was originally published January 8, 2021 at 11:00 AM with the headline "Gavin Newsom’s $227 billion budget calls for new spending on schools, vaccines and stimulus."