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How Will California Spend Its $31 Billion Budget Surplus?

Gov. Gavin Newsom has suggested using the extra money on pension debt, budget reserves and, possibly, another round of stimulus checks. The Legislature has until June 15 to pass the final budget.

(TNS) — For the second year in a row, California is poised to avoid economic fallout from the coronavirus pandemic, leaving Gov. Gavin Newsom with a good problem: how to spend a projected $31 billion surplus.

By Monday, Newsom must unveil his proposal for the 2022-23 fiscal year, which starts July 1. His proposal will kick off months of negotiations with lawmakers, who face a June 15 deadline to pass a budget.

Analysts predict the state's highest earners will continue to prosper and pay high taxes, resulting in another big surplus. The budget Newsom signed last summer included a projected $80 billion surplus, which allowed lawmakers to provide COVID-19 relief and send stimulus checks to millions of Californians.

The nonpartisan Legislative Analyst's Office has recommended that lawmakers appropriate no more than $3 to $8 billion in new ongoing spending, and use the rest on one-time expenses that won't force cuts in the future when there's less cash available. The office also advocated for lawmakers to add to reserve accounts in anticipation of leaner budget years in the future.

Newsom has said he wants to use most of the extra money for one-time spending on areas including budget reserves, pension debt and the social safety net. He has also suggested more stimulus checks could be on the table.

"I think that's the approach: fiscally disciplined, recognizing this is not a permanent state, recognizing the one-time nature of most of these dollars," Newsom said in November.

More Police Funding

In November, after a spate of high-profile retail thefts, Newsom announced that his 2022 budget proposal will "substantially" increase funding for cities to crack down on organized retail crime.

Assemblywoman Cristina Garcia, who leads the Assembly Budget Subcommittee on Public Safety, said she thinks addressing retail theft makes sense, but wants to see specifics.

"We need to do something to deter those crimes and hold people accountable," the Bell Gardens Democrat said. "I want to see the details and see that the funding is used effectively and not just padding departments."

She said she also wants to see more money in the budget to change a culture of hazing in California prisons.

Last year, The Bee reported on two California State Prison- Sacramento officers who died after reporting harassment, hazing and corruption by their colleagues. One officer's death was ruled a suicide. The other died of a fentanyl overdose. Since then, the state has moved to fire two officers and discipline 10 other employees at the prison.

Garcia also pointed to the case of a prisoner who was tortured and beheaded by his cellmate, which officers failed to report for hours.

"Breaking the law and being in jail shouldn't be a death sentence," Garcia said. "Being an officer shouldn't be a death sentence either."

More Money for Schools

Newsom intends to steer more money toward screenings for dyslexia and add more funding for early education, he told The Sacramento Bee in an interview last month. Newsom has dyslexia and wrote a book last year inspired by his struggle to read because of the condition.

He said his proposal will aim to help kids who "start behind."

"We did a lot more last year than we did the prior year, and this year's budget's gonna see a hell of a lot more, forgive my language," he said. He also said he wants to expand literacy programs through First 5, a state program for kids under 5.

Kevin Gordon, an education lobbyist whose clients include the state's biggest school districts, said he expects Newsom will put more money toward programs specifically aimed at helping schools deal with COVID and to help students make up learning time lost because of the pandemic.

While targeted education programs like that are important, Gordon said school districts also want more money that isn't committed to specific programs that they can spend on their core needs, including staff and facilities.

Increased Infrastructure Spending

Assemblyman Phil Ting, a San Francisco Democrat who runs the Assembly Budget Committee, has said he wants to spend a "significant portion" of the surplus on infrastructure, including $10 billion for school facilities and $10 billion for transportation projects.

That could reduce the amount Californians might get back in rebate checks this year. That's because the state expects to have so much money it risks exceeding a state spending threshold called the Gann Limit. If that happens, the money that qualifies as "over the limit" has to go to schools and back to taxpayers through rebates.

Money spent on infrastructure doesn't count toward the Gann Limit calculation. That means the more lawmakers spend on roads, bridges and school facilities, the less they will be required to send back to taxpayers.

Republicans have pointed to water storage, road repairs and other infrastructure projects to reduce traffic congestion as priorities. In a letter to Newsom, Assembly Republican Leader Marie Waldron and Assemblyman Vince Fong, the top Republican on the Assembly Budget Committee, also called for tax cuts, paying down unemployment insurance debt, wildfire prevention spending and increased funding for police to crack down on retail theft.

Health Care

Sen. Susan Talamantes Eggman, who leads the Senate Budget Subcommittee on Health and Human Services, said she anticipates the governor will make good on his promise last year to boost funding for public health departments pushed to the limit battling COVID-19. Newsom's Finance Department committed to increase public health department funding by $300 million starting in 2022 after fellow Democrats criticized him for not granting departments' request for a $200 million increase.

Increased public health funding is a priority for consumer advocacy group Health Access, the group's executive director Anthony Wright said. So is expanding Medi-Cal, the government insurance program for low-income Californians, to include more undocumented people, Wright said. Last year, Newsom approved a budget that expanded the program to people over age 50 regardless of immigration status.

Undocumented people between age 26 and 49 are still not covered by the program, however, something lawmakers and Newsom will face pressure to change. Eggman said that will be on the table this year.

"If we can afford to do it, then certainly we should do it," said Eggman, a Stockton Democrat.

(c)2022 The Sacramento Bee (Sacramento, Calif.) Distributed by Tribune Content Agency, LLC.
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