Newsom Proposes Expanded California Budget; No Tax Increases

Governor Gavin Newsom proposed a $196.8 billion budget for fiscal year 2021-22, an increase of 19% in spending. Newsom also announced that California is expecting a budget surplus of $75 billion, mainly from increased receipts from capital-gains taxes. Newsom’s budget proposal includes a $100 billion economic recovery package that includes $12 billion in direct payments for qualifying taxpayers, $12 billion for programs for the homeless, $15 billion for K-12 educational spending, and new small business grants.

The governor’s office believes the direct payments satisfy the Gann Limit, which requires the government to refund taxpayers tax revenue that exceeds a formula based on 1978-79 appropriations limits but adjusted for inflation and other economic factors.

The budget outlook is a dramatic turnaround from a year ago, when the state projected a $54 billion budget deficit. In another contrast to a year ago, the budget proposal does not include any tax increases. “When you are enjoying a $76-plus billion, and growing, operating surplus, I don’t think it’s time for new tax increases,” Newsom said.

Dee Dee Myers, director of the Governor’s Office of Business and Economic Development, said in April that tax increases were not on the agenda. “The governor’s made clear, he’s not going to raise taxes. There will be no increase in income tax, no California wealth tax, not interested in raising corporate taxes or capital gains taxes,” she said. “You know, taxes haven’t been increased in California since 2012, when it was done by ballot initiative.”