SACRAMENTO, Calif. — State lawmakers want to use a projected $31 billion surplus to fuel an infrastructure boom, a tactic that could reduce the amount Californians might see in any rebate checks this year — if they happen at all.
The state expects to have so much money it risks exceeding a state spending threshold called the Gann Limit. If it does, it must send more money to schools and some money back to taxpayers through rebates.
Top Democratic lawmakers who control the budget process in Sacramento said they intend to reduce the amount they exceed the limit in part by spending a big chunk of the projected surplus on infrastructure.
Assemblyman Phil Ting, who runs the Assembly Budget Committee, 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 would, in theory, mean lawmakers wouldn't have to send as much money back to taxpayers in the form of rebate checks, though they could still send stimulus checks anyway, regardless of whether they exceed the state spending limit. Stimulus checks are still on the table, said Ting, D-San Francisco, depending on feedback lawmakers receive from their constituents.
Although he expects rebates to be discussed in budget negotiations, Sen. Scott Wiener said he thinks the state needs to prioritize infrastructure spending.
"We'll have some critical needs around infrastructure that need to be prioritized," the San Francisco Democrat said. "If you're sending rebates back instead of bolstering water systems and addressing sea level rise ... you're still shortchanging taxpayers."
Assemblyman Vince Fong, the top Republican on the Assembly Budget Committee, said he supports spending surplus money on infrastructure, but said the budget should also include tax relief.
"There needs to be infrastructure investment in water storage and at our ports, but we have to realize our businesses are overtaxed," the Bakersfield Republican said. "We have to look at providing permanent tax relief."
State budget spending on infrastructure will be on top of billions in federal infrastructure money recently approved by President Joe Biden, which U.S. Transportation Secretary Pete Buttigieg told the Sacramento Press Club on Thursday will fund a range of different projects.
"We're talking about roads and bridges, we're talking about rail, transit, buses, talking about ports, and airports, talking about water and internet access," Buttigieg said.
Ting said he wants lawmakers to use the state surplus for drought resilience projects and broadband expansion to communities without reliable internet access. He also called for more spending on housing and homeless aid.
Wiener, who chairs the Senate's Housing Committee, said he also supports spending more on housing and homeless programs.
Senate leaders say they hope to build on targeted tax relief programs such as the California Earned Income Tax Credit, known as CalEITC, the Child Tax Credit, and Small Business Relief.
This is the second year in a row California revenues have come close to triggering Gann Limit requirements. Senate Democrats have yet to name specific proposals for next year's budget, but in a set of early goals said they'd like to consider reforms to "modernize the Gann Limit while respecting original intent."
In a statement, state Sen. Nancy Skinner, D-Berkeley and chair of the Senate Budget Committee, said the state's surplus should be used to built a more equitable economy.
"Moving toward an equitable economy for all requires increased investments in affordable housing, our essential workforce, infrastructure at schools and colleges and protecting the climate," Skinner said. "Fortunately, we have the opportunity to make such investments while we continue supporting small businesses and those Californians still struggling."
State Sen. Jim Nielsen, R-Red Bluff, criticized what he said were Democratic efforts to evade rebates under the Gann Limit in the past.
Nielsen, vice chair of the Senate Budget Committee, expressed skepticism about Democrats' plans to "modernize" the Gann Limit.
"Their intent is not to revise and reform it," he said. "Their intent is to destroy it."
Nielsen said the state's surplus should be spent on infrastructure to prevent forest fires and the Sites Reservoir in Colusa County to supply water during droughts. Lawmakers also need to make public safety a priority in next year's budget, he said, noting recent "smash-and-grab" robberies affecting retail.
Expanding the state's low-income health insurance program to more undocumented immigrants will also be up for consideration. Currently, the program excludes undocumented people ages 27-49. Ting said he supports expanding it to everyone, but it isn't clear yet that there will be enough money to do it in the next budget.
Lawmakers' overarching goal is to ensure regular people feel the benefits of the strong economy that has netted the state such a windfall of cash, Ting told reporters at a news conference.
"The budget remains strong, yet if you talk to individual Californians they are very pessimistic and don't feel the benefits," he said.
Concerns over inflation have prompted U.S. Rep. Josh Harder, D-Turlock, to ask Democratic Gov. Gavin Newsom to cut gas taxes, which fund improvements to the state's roads and bridges.
"It's time for the gas tax to be reevaluated," Harder wrote last week in a letter to Newsom. "This budget surplus and the federal resources on their way far exceeds the annual revenue of the gas tax and should allow the state to conduct infrastructure repairs without working families footing the bill."
Budget negotiations will kick off in earnest in January, when Newsom must present his state spending plan. Last month, Newsom pointed to last year's budget as a preview of how he wants to spend the next surplus, highlighting stimulus checks sent to Californians, building reserves, paying down pension debt, funding small business grants and increasing spending on social safety net programs.
Newsom also said he supports using surplus money on infrastructure.
"We are going to substantially increase our one-time investments in infrastructure." he said. "That's one preview you can count on."
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