A year after slashing spending to fill a record-breaking deficit spurred by the pandemic, California Gov. Gavin Newsom is eyeing a massive surplus and hopes to send out a second, larger round of stimulus checks to residents.
"It's a remarkable, remarkable turnaround," Newsom said in an interview with All Things Considered Monday.
California's progressive tax structure means the state budget suffered early in the pandemic but quickly rebounded, bolstered by capital gains taxes and high-income earners who've seen their wealth grow over the past year.
Newsom, who will likely face a recall election later this year, announced a plan to send billions of dollars back to taxpayers. If approved, the state would give $600 checks to workers who earn up to $75,000 annually, with $500 bonuses for tax filers with dependents and undocumented families.
Newsom said 80% of the state's workers and two-thirds of all residents would benefit from the plan.
State law requires that taxpayers get a rebate when a budget surplus hits a certain size, which has only happened once in California in more than 40 years. A spokesperson for the California Department of Finance said the numbers for this year's state budget won't be finalized until 2023.
Newsom said his stimulus proposal, which totals just under $12 billion in relief, goes "well above and beyond what is projected to be required" by the law. He claimed it is "the largest tax relief year-over-year in U.S. history as well, not just California history."
Several Republican lawmakers called Newsom's proposal the "recall refund," noting the governor announced the plan weeks after state officials confirmed the petition to recall him has enough valid signatures to go before voters.
State Sen. Scott Wilk used the hashtag #RecallRebate in a tweet calling out the governor's plan.
Newsom has denied the timing of the stimulus plan is tied to his political future and painted the recall effort as one funded and pushed by Republicans.
"It is a Republican-backed recall period, full stop," he said.
"To the extent that people rightfully and understandably were stressed and anxious over the last year because of this pandemic-induced recession and all the struggle, I completely respect and understand why some may have filled out a petition. But at the end of the day, this is what it is, a Republican-backed recall."
Lawmakers need to sign off on the stimulus plan but leaders of the budget committee attended the announcement in support, signaling it will pass.
AILSA CHANG, HOST:
Everything was supposed to get better in 2021, but this year has already been a long and challenging one for California Governor Gavin Newsom. His state has weathered terrible spikes in COVID-19 cases, stressing hospitals and calling into question his management of the pandemic. And just as the pandemic seemed to get under control in this state, more than a million and a half Californians signed a petition, demanding a recall election. Well, things might be looking up. Governor Newsom is out today with news that instead of a budget shortfall, the state has a hefty surplus, billions of dollars of which will go straight back into the pockets of state residents. We're going to talk more about what that surplus means, as well as this recall election, with Governor Newsom.
Welcome back to ALL THINGS CONSIDERED.
GAVIN NEWSOM: Good to be here. Thank you.
CHANG: So you were on this program just about a year ago talking about a budget shortfall of something like $54 billion. I want to ask you, what changed? How has the state's financial outlook improved so dramatically in such a short period of time?
NEWSOM: Well, we had - 41% of America's jobs came out of the state of California in February, 275,000-plus jobs created in the last - at least publicly recorded months, February and March. And we are seeing a comeback, which we describe as not just a comeback, but we see a state that's roaring back - no longer a $54.3 billion budget shortfall but a projected $75.7 billion budget surplus, which is unprecedented in California history. And no other state, I imagine, in U.S. history has seen a dollar figure like that. It's a remarkable, remarkable turnaround.
CHANG: And yet, the state unemployment rate is still higher than the federal average.
NEWSOM: That's right. And you're seeing that reflected, obviously, in the latest data - that we're going to see that gap begin to close pretty significantly. And fundamentally, that's because the impact on the service and entertainment industry that has been impacted by the nation's first state stay-at-home order. And we were the first to do that over a year ago, which we think saved not only thousands of lives in our state but had an impact across the country. Today we lay claim to 1.0% positivity and among the lowest case rates and positivity rates in the country as well.
CHANG: Well, let me ask you. You say that California has come roaring back. You're announcing a budget surplus just as the Biden administration announced today that California is going to get something like $27 billion from the American Rescue Plan. Well, given the size of this state surplus now, does California still need that scale of federal support?
NEWSOM: Yeah, we're very pleased to be receiving roughly $26-plus million in that federal stimulus, and we're going to put it to good use. And all of the surplus dollars that we're getting back in terms of tax relief, that comes from the state's operating surplus not from the federal government. Issues of broadband, other issues that were spelled out in that relief package from the federal government - those will be kind of investments we'll be announcing later this week.
CHANG: Let me shift you to the recall effort now. You have called this recall effort a Republican recall, and you yourself have pointed out that you've already faced six recall attempts since you took office in 2019. But this time around, this recall effort has gotten enough signatures, so what do you think is different this time?
NEWSOM: Six times - and you get a judge to extend in an unprecedented manner the time to collect signatures, and you combine all of that. It's not a huge challenge to get a very small percentage of the state, particularly Republican voters overwhelmingly, to put something on a ballot. And, you know, look; it's not the first time it's happened in California. It notably happened a few years back. And so we have one of the lowest - in fact, the lowest threshold to get a recall on the ballot in the country. This is, as you noted - I've only been in office 27 months - the sixth effort. This predates the pandemic, by the way. And the grievance - if people actually read what they signed, it goes to the issue of immigration, policy as it relates to Trump and Trumpism. And we haven't been shy in terms of pushing back against that agenda. And when I say it's a Republican-backed recall...
CHANG: But just to be clear, it's not just Republicans who are recalling you. About a third of the signatures were from either Democrats or people who did not identify as Republicans. So is at least some of the anger there legitimate?
NEWSOM: So the principal proponent of the recall and the guy who actually inspired it wants to microchip immigrants. Another member and spokesperson has equated mask-wearing to the Holocaust. Others have been very explicit. In fact, you look at their website, and there's some hate language as it relates to Asian Americans. I mean, this is funded by the RNC. It's backed by Newt Gingrich and Mike Huckabee. It is a Republican-backed recall, period, full stop, to the extent that people rightfully and understandably were stressed and anxious over the last year because of this pandemic-induced recession and all of the struggle. I completely respect and understand why some may have filled out a petition. But at the end of the day, this is what it is - a Republican-backed recall.
CHANG: Well, the recall effort may have started before the pandemic, but it intensified during the pandemic. So let me ask you again, is any of the anger there legitimate? Are there any missteps you regret in your management of the pandemic?
NEWSOM: Well, in hindsight, we're all geniuses not just experts. And if anyone in one's life - personal, professional - suggested that they could go back and fix this or that, of course. I mean, we all are subject to that. But based on the information we had, based on the fact that we really led with science and with data and we were the first in the nation to do the stay-at-home order, we believe that saved lives. We think it changed the tone and tenor of the debate across the country. And the fact is the state of California, because we've been able to tame this pandemic and have among the lowest case rates and positivity rates, we're in a position where we are as resilient as we are and have this surplus that we have. But obviously, we can go back in the margins and look to mend things. I imagine every single governor in the United States can lay claim to that. And if they're not, I don't know that they're being honest.
CHANG: Governor Gavin Newsom of California, thank you very much for your time today.
NEWSOM: Thanks very much. Transcript provided by NPR, Copyright NPR.