By MADISON HIRNEISEN
THE CENTER SQUARE STAFF REPORTER
(The Center Square) — California is projected to have a $31 billion operating surplus in the 2022-2023 financial year, according to a report released Wednesday by the Legislative Analyst’s Office.
Despite the economic impact of the ongoing COVID-19 pandemic on Californians, the LAO reported Wednesday that the state’s revenues are “growing at historic rates.” The revenue growth is attributable to multiple factors, the LAO said, such as income and sales tax.
According to the report, tax collections grew at an annual rate of 30% in the 12-month period ending in September, representing the fastest rate in at least 40 years.
While the surplus is welcome news for state lawmakers, it will not be under the full discretion of the Legislature, the report says.
In 1979, voters adopted Proposition 4, which places an appropriations limit on the state and most types of local governments. Wednesday’s report estimates that the state will likely exceed the specified limits in the 2022-2023 budget year.
With this in mind, the report estimates that in order to meet the State Appropriations Limit, the state would need to divert roughly $14 billion to meet constitutional requirements across fiscal years 2020-2021 and 2021-2022.
To meet this requirement, the state legislature could move to do one of three things — lower tax revenues, issue tax rebates or spend the funds on things excluded from SAL, which includes infrastructure.
Last year, the state had a budget surplus of nearly $80 billion during a time when the state and nation remained in the throes of the pandemic. Taking a portion of this surplus, Gov. Gavin Newsom and legislators decided to issue about $12 billion in tax rebates, which was dubbed the “Golden State Stimulus.”
When speaking to reporters in Los Angeles on Wednesday, Gov. Newsom said a portion of the $31 billion surplus would be used to fund further investments in infrastructure, while also indicating he wants to continue to build up reserves, as the state has done with surplus dollars in the past.
While the surplus is welcome news for state lawmakers, it will not be under the full discretion of the Legislature, the report says.
In 1979, voters adopted Proposition 4, which places an appropriations limit on the state and most types of local governments. Wednesday’s report estimates that the state will likely exceed the specified limits in the 2022-2023 budget year.
With this in mind, the report estimates that in order to meet the State Appropriations Limit, the state would need to divert roughly $14 billion to meet constitutional requirements across fiscal years 2020-2021 and 2021-2022.
To meet this requirement, the state legislature could move to do one of three things: lower tax revenues, issue tax rebates or spend the funds on things excluded from SAL, which includes infrastructure.
Last year, the state had a budget surplus of nearly $80 billion during a time when the state and nation remained in the throes of the pandemic. Taking a portion of this surplus, Gov. Gavin Newsom and legislators decided to issue about $12 billion in tax rebates, which was dubbed the “Golden State Stimulus.”
When speaking to reporters in Los Angeles on Wednesday, Gov. Newsom said a portion of the $31 billion surplus would be used to fund further investments in infrastructure, while also indicating he wants to continue to build up reserves, as the state has done with surplus dollars in the past.
State Senate President pro Tempore Toni Atkins, D-San Diego, said the state’s fiscal health is the “direct result of responsible budgeting by Democratic legislators and governors” that helped the state weather the pandemic. She noted, however, that work remains to help struggling families.
“As economically wealthy as our state is, we see everyday that too many have been left behind and too many families struggle to get by,” Sen. Atkins said in a statement. “The Fiscal Outlook provides valuable guidance to the Senate’s ongoing budget work to craft transformative priorities that put California’s wealth to work building a more equitable economy and a stronger middle class.”
Some Republican lawmakers said Wednesday they were in favor of using the surplus to bring down the cost of living in the state.
“There’s something wrong when the state is flush with extra cash — $750 for every man, woman and child — while ordinary people have to choose between putting food on the table and filling their gas tank,” Assembly Republican Leader Marie Waldron, R-Escondido, said in a statement. “If California won’t give this money back, let’s at least spend it in a way that brings down the cost of living and improves the quality of people’s lives.”
Madison Hirneisen covers California for The Center Square.
