More Californians would get new $600 stimulus checks from the state under Newsom plan

Millions of Californians would get an extra $600 from the state and families with children would receive another $500 under a new plan unveiled Monday morning by Gov. Gavin Newsom.

The proposal represents part of a $100 billion “California Comeback Plan” Newsom says he’ll unveil in pieces over the next few days to help the state bounce back from the COVID-19 pandemic.

The massive stimulus plan relies on an expected $75 billion surplus, a dramatic reversal from a year ago, when the state faced a projected $54 billion deficit.

“It’s a remarkable turnaround,” Newsom said during an event in Oakland. “California is not coming back, California is going to come roaring back.”

The new round of $600 checks would go to people earning between $30,000 and $75,000 a year, said H.D. Palmer, spokesman for the state’s Department of Finance.

It expands on a previous stimulus package that Newsom and lawmakers approved in February. That legislation sent $600 checks to low-income people making less than $30,000. Those who already received checks won’t get another $600, but might get an additional $500 check if they have dependent children, Palmer said.

If Newsom’s proposal becomes law, two-thirds of Californians would receive stimulus checks from the state, including those who have already received checks, Palmer said.

The stimulus plan will be a big chunk of a revised state budget proposal from his office, which is due by the end of the week.

The checks would be in addition to federal stimulus payments. Undocumented immigrant families, who were left out of most federal pandemic aid, will be eligible for $1,000 family checks, double what other California families will receive, to make up for the lack of federal support, Finance Director Keely Bosler said.

Newsom on Monday also proposed spending $7.2 billions to pay back rent and overdue utility bills accrued during the pandemic.

Massive surplus leads to tax rebates

Under California law, lawmakers and Newsom will be obligated to spend a big chunk of the projected $75 billion surplus on schools. They’ll have discretion over how they spend about $38 billion of the total, Bosler said.

California has raked in so much tax revenue, largely from high earners who weren’t hit hard by the pandemic recession, that the state will need to give some of it back to taxpayers under a 1979 law intended to cap government spending.

That law, known as the Gann Limit after the late taxpayer advocate Paul Gann, requires state government to send taxpayers rebates if the state collects revenue above a certain amount. The ceiling changes based on inflation and other factors. It has resulted in taxpayer refunds on only one previous occasion.

Financial analysts believe the state is about $16 billion over the limit. Half of that money will need to go to schools, and the other half to tax rebates.

Newsom wants to send the rebates out this year to help struggling taxpayers, Bosler said, even though the administration believes it can wait because the Gann Limit is calculated over a two-year period.

The governor’s office believes the rebates he’s proposing will satisfy the Gann Limit rebate requirements down the road, meaning those who get checks this year wouldn’t get additional rebates in the future. High earners may never see Gann Limit checks, Palmer said.

The stimulus checks Newsom proposed Monday would cost the state about $8 billion — about what the Department of Finance calculates the state will need to spend to satisfy the Gann Limit requirements based on current tax revenue.

Bosler said analysts predict state revenue will “likely” continue to come in over the Gann Limit, meaning the state may need to propose additional rebates in the future.

Jon Coupal, President of the Howard Jarvis Taxpayers Association, said he thinks sending tax rebates to middle class taxpayers is a good policy, but said he’s skeptical Newsom’s proposal will meet the requirements under the Gann Limit law. It’s something the Newsom administration could be sued over if the proposal passes, but that would depend on the details of how the policy is implemented, Coupal said.

Republicans and Democrats weigh in

Newsom’s revised budget proposal will kick off the home-stretch of budget negotiations with the Legislature ahead of the July 1 start of the 2021-22 fiscal year.

Lawmakers will need to support his stimulus plan for it to become law, and top Democrats signaled Monday that they’re already on board with the spirit and the early details of his proposal. The budget committee chairs from both houses of the Legislature — Sen. Nancy Skinner, D-Berkeley, and Assemblyman Phil Ting, D-San Francisco — both spoke in support of Newsom’s proposal at the Monday press conference.

Ting said he and other California Democrats are proud to use the state’s progressive tax structure, which heavily taxes the highest earners, to redistribute wealth to low-income Californians who bore the brunt of the pandemic’s economic toll.

“Because of our progressive tax policy, we rely on those Californians who have the most, and that very small segment of California has done incredibly well this last year,” Ting said. “Because of that, we have an unprecedented budget surplus, and that budget surplus is going right back to the most vulnerable Californians.”

Meanwhile, former San Diego Mayor Kevin Faulconer criticized the plan, saying Newsom should instead propose tax cuts, and used the announcement to promote his own bid for governor in the upcoming election to recall Newsom from office.

“Californians need permanent, real tax relief, not just one-time stimulus checks,” Faulconer, a Republican, wrote on Twitter. “Our state is unaffordable because of Gavin Newsom’s failed leadership.”

This story was originally published May 10, 2021 at 6:00 AM with the headline "More Californians would get new $600 stimulus checks from the state under Newsom plan."