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California reports staggering budget surplus of $97.5B
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California reports staggering budget surplus of $97.5B 

SACRAMENTO — The continued prosperity of California’s richest taxpayers is filling state coffers with a $97.5 billion surplus, bringing the state’s next budget to a record $300 billion, Gov. Gavin Newsom announced Friday.

It’s California’s largest budget and biggest surplus ever.

“No other state in American history has ever experienced a surplus as large as this,” Newsom said at a press conference in downtown Sacramento.

The surplus highlights the chasm between the rich and poor in California, which is both the nation’s wealthiest state and home to the highest share of residents living in poverty. The state taxes its richest residents and businesses heavily, meaning their prosperity through the pandemic has filled state coffers to the brim, even as millions of Californians struggle to afford groceries and gas as inflation drives prices up.

Newsom said he sees the high revenue not as a sign taxes should be lowered, but as evidence of that divide.

“It’s a sign of what’s happening, in some respects, across this nation and around the world: concentration of wealth and success in the hands of a few that are enjoying abundance in historic and unprecedented ways,” he said. “I am proud of California’s progressive tax system.”

The money gives the Democratic governor and state lawmakers yet another opportunity to spend big on their top priorities. Much of the surplus will go to education and other dedicated funds, while the rest, about $49.2 billion, can be spent at their discretion.

On Friday, Newsom unveiled his updated budget plan that would provide cash relief for Californians to counteract the effects of inflation and expand abortion care. His budget would also fund transportation projects and spend $2.3 billion to fight the ongoing COVID-19 pandemic.

During his two-hour press conference laying out the plan, he contrasted California with other states and highlighted how the windfall of cash will help him and lawmakers pursue their liberal goals.

Newsom, a staunchly pro-abortion rights governor, co-opted the language of the anti-abortion movement, describing his proposed spending on fighting COVID, improving education and expanding health care as a “pro-life agenda.”

He highlighted the pandemic death rates of other populous states, noting that others were far higher than California’s. He said his administration’s efforts to vaccinate its population against COVID, fight climate change and provide prenatal care are saving lives.

With the surplus, California’s education funding will swell to an unprecedented $128.3 billion. Meanwhile, Newsom said, conservative states are focused on banning books or restricting teaching about race and sexual orientation.

“If you’re pro-life, you would actually support common-sense gun safety laws, you would be expanding after-school programs,” he said. “The same folks that claim to be pro-life are cutting those programs.”

But California still faces major problems, Newsom acknowledged, pointing to homelessness as the state’s top issue. His May budget adds $700 million to aid homeless people, and $500 million to convert malls and office buildings into housing. Those proposals build on billions more in housing and homelessness funding that Newsom approved in last year’s budget and proposed in his initial budget 2022-23 budget plan, which he announced in January.

The centerpiece of Newsom’s plan to combat inflation and high gas prices remains his proposal to send up to $800 to vehicle owners. The plan would give $400 per vehicle, with a limit of two per owner. Cars worth over a certain value would not be eligible for the payments, although Department of Finance spokesperson H.D. Palmer said that amount is to be determined.

Newsom unveiled the gas rebate plan earlier this year, but it has stalled amid opposition from some lawmakers who argue it would be more appropriate to send cash to people based on income, not car ownership.

Newsom also wants to add billions to cover rent and utility bills that people have missed during the pandemic, and to send bonus payments of up to $1,500 for hospital and nursing home workers for their work fighting COVID-19. His budget would also add health care subsidies for middle-income people and more spending to cover child care for low-income families.

His plan would also add $8 billion in energy spending, mostly to build an electricity reserve to stave off future blackouts, and $1.3 billion for drought response as the state faces a water shortage. After complaints from counties that his proposal for a new court process to compel severely mentally ill people into treatment didn’t have adequate funding, he’s proposing to add $65 million to support its implementation.

To become law, Newsom’s plan would need approval from the Legislature, which even members of Newsom’s own party say won’t be automatic.

While some of the governor’s proposals, like his funding for abortion care, align with the Legislature’s priorities, not all do, said Senate President Pro Tem Toni Atkins.

“Others, as happens every year, will require more discussion and negotiation,” the San Diego Democrat wrote in a statement. She did not specify which proposals she meant, but earlier this month endorsed a different plan for sending relief funds to residents.

Republican leaders criticized Newsom’s plan much more bluntly, although they are so outnumbered by Democrats in the Legislature that the governor and legislative leaders don’t need their support.

Senate Republican Leader Scott Wilk of Santa Clarita took aim in particular at the governor’s plan to send payments to vehicle owners, saying it will take too long.

“Suspending the gas tax would be the quickest way to give families immediate relief from soaring gas prices,” he wrote in a statement.

Newsom and lawmakers must agree on a budget framework by mid-June, although they could continue to hash out details after the fiscal year begins on July 1, as they have in recent years.

Newsom alluded to the looming negotiations, noting that he and legislative leaders don’t agree on everything.

“I want to reinforce that none of this is possible without their partnership,” he said. “We have differences, and that’s wonderful … I look forward to working with the Legislature on many of these issues.”

Sophia Bollag is a San Francisco Chronicle staff writer. Email: sophia.bollag@sfchronicle.com Twitter: @SophiaBollag

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