What California’s massive budget surplus could mean- POLITICO

THE BUZZ — HERE WE GO A-GANN: California’s wealthiest residents are doing well. Like, really well.

On Thursday, Senate Democrats unveiled their updated budget priorities in anticipation of the upcoming May revise, in which they predicted California would have an eye-popping $68 billion in surplus funds, up from the January estimate of $29 billion from the Legislative Analyst’s Office (Those figures don’t include Proposition 98 education funds for you budget wonks). The state’s once-again-overflowing-coffers are thanks to California’s aggressive income taxes and its high-earning residents, who clearly had a good year.

But as they say, more money, more problems. In California, a surplus like this raises concerns that the state may hit the 1979 spending cap known as the Gann limit. The limit is adjusted every year according to inflation and population growth, but any revenues that go over the limit must be spent in specific ways, by either returning that money directly to taxpayers or spending it on education. Lawmakers could also avoid hitting the limit by spending more on things like infrastructure projects.

There have been talks recently of reforming or repealing the Gann limit altogether. The reasoning is that the state needs the flexibility to spend those extra funds on things that aren’t allowed by the limit, like health care or homelessness. Earlier this week the LAO released a report warning that the state is likely to run into a serious budget problem by 2025. Senate Democrats said California needs to pass a constitutional amendment by 2024 in order to ensure core programs can “continue to be funded and not artificially constrained by the out-of-date Gann limit.”

In the meantime, there are other budget priorities that need attention, starting with sending $8 billion back to Californians. Senate President Pro Tem Toni Atkins (D-San Diego) and budget chair Sen. Nancy Skinner (D-Berkeley) have proposed rebates as a way to offset the rising cost of energy and consumer goods. Under the plan, California would send $200 to every taxpayer, with another $200 per dependent. Eligibility would be limited to those making less than $125,000 for individuals and $250,000 for joint filers.

Atkins and Skinner also want to put a huge chunk of that surplus, $8.1 billion, toward building up the state’s budget reserves to a total of $43 billion, which would protect ongoing programs from future economic downturns. POLITICO’s Alexander Nieves has all the details on how the Senate wants to fund education, housing and climate resiliency programs.

And gasoline price relief for taxpayers continues to be a budget priority. Legislative leadership says the best way to do that is with direct payments, and they’re concerned cutting the gas tax would deplete critical funds for road repair. Gov. Gavin Newsom’s suggestion to pause the scheduled gas tax increase never took hold in the Legislature, and now a bipartisan group of lawmakers say they’re prepared to introduce a bill that would completely suspend the state’s $0.51 per gallon tax for a year.

The governor, it seems, isn’t a fan of that idea either. Alex Stack, a spokesperson for Newsom, said there’s no guarantee under the proposal that the benefits will be passed on to Californians and “not just go back to oil companies and corporations.”

BUENOS DÍAS, good Friday morning. Sen. Alex Padilla is heading to the Bay Area today to meet with striking Stanford nurses on the picket line.

Got a tip or story idea for California Playbook? Hit us up [email protected] and [email protected] or follow us on Twitter @JeremyBWhite and @Lara_Korte

QUOTE OF THE DAY — “The pros of it are that it’s good PR… the cons are that there’s no guarantee that the saving – the reduction in the federal tax – that would be passed on to the consumer.” House Speaker Nancy Pelosi taking the air out of a federal gas tax holiday proposed by Democrats. 

TWEET OF THE DAY — “More attacks on abortion rights. This time in Oklahoma. It’s time to think big and protect choice.California is stepping up. Stay tuned.” @GavinNewsom weighs in on a new law in Oklahoma that mimics a Texas law allowing civil enforcement of a six-week abortion ban. 

WHERE’S GAVIN? Nothing official announced.

— “The Camp Fire took their homes. But they had more to lose in the rebuilding process,” by the Sac Bee’s Dale Kasler and Ryan Sabalow: “Just about every year, a California community burns down, leaving hundreds if not thousands of people homeless. … Survivors — desperate to rebuild, clutching insurance payouts that dwarf their life savings — are vulnerable.”

— “First eyewitness account of Sheriff Villanueva lying in a cover-up revealed in filing,” by the LA Times’ Alene Tchekmedyian: “The filing by former Assistant Sheriff Robin Limon, once one of Villanueva’s closest advisors, alleges that she personally brought a DVD containing a video of a deputy kneeling on a handcuffed inmate’s neck to Villanueva — and watched it with him and two others five days after the incident happened.”

ENDORSEMENT — “Endorsement: Marc Levine for state insurance commissioner,” by the LA Times editorial board.

— “Where’s Trump? A campaign fixture in some states, his name is nearly absent in California,” by CalMatters’ Alexei Koseff: “Jim Brulte, a former chairperson for the state party, said GOP candidates have no need to cling to Trump because they have a better message to sell to voters this year about the failures of Democratic President Joe Biden.”

— “DNC seeks to boost California election outreach ahead of anticipated ‘red wave,’” by the Sac Bee’s Gillian Brassil: “Targeted districts are decided on by a team of elected officials, party leadership and data analysts at the local, state and national levels, the DNC spokesperson said.”

— “G.O.P. Concocts Fake Threat: Voter Fraud by Undocumented Immigrants,” by NYT’s Jazmine Ulloa: “Political scientists and historians say Republicans’ harnessing of the unease stirred by demographic shifts and a two-year-old pandemic could mobilize their most ardent voters.”

NEXT BIG CASE? — “State accuses Exxon Mobil of deceiving public, perpetuating ‘myth’ of plastics recycling,” by the LA Times’ Susanne Rust and Rosanna Xia: “Atty. Gen. Rob Bonta said Thursday that his office has subpoenaed Exxon Mobil Corp. seeking information related to the company’s “historic and ongoing efforts” to minimize the public’s understanding of the harmful consequences of plastic.”

— “Lower cost, slower gains: California prepares controversial new climate strategy,” by CalMatters’ Nadia Lopez: “The plan, which aims for an 80% reduction of greenhouse gases below 1990 levels by 2050, would cost an estimated $18 billion in 2035 and $27 billion in 2045.”

— “Southern California braces for less water and a browner landscape,” by the LA Times’ Hayley Smith, Ian James and Jaimie Ding: “For some Californians, the sight of brown lawns may harken back to to the previous drought, when then-Gov. Jerry Brown imposed mandatory water cuts across the state. But after the driest-ever start to the year in California history, conditions today are far more critical than they’ve ever been, officials said.”

HE SAID, HE SAID — “Ron DeSantis’ feud with Gavin Newsom ramps up amid San Francisco ‘dumpster fire’ insult,” by the SF Chronicle’s Sophia Bollag: “DeSantis made the comments several days after Newsom criticized him on Twitter for punishing Disney over its opposition to Florida’s new law banning discussion of sexual orientation in early grades.”

— “Bias, far-right sympathies among California law enforcement going unchecked, audit finds,” by the LA Times’ Kevin Rector: “In California, a recent Times investigation found that police agencies across the state upheld just 49 racial profiling complaints from 2016 to 2019, or less than 2% of the roughly 3,500 allegations filed.”

— “Debate Heats Up Over Effort to Pilot Safe Injection Sites in California,” by KQED’s Lesley McClurg: “The last time supervised injection facilities were on the table in California, in 2018, a bill progressed all the way to Governor Jerry Brown’s desk. He vetoed it. [State Sen. Scott] Wiener is trying again.”

— “​​New S.F. supervisor districts get final approval over Tenderloin and SoMa objections,” by the SF Chronicle’s J.D. Morris: “The new boundaries have already been strongly resisted by some of the city’s leading progressives who said it would break up like-minded communities and dilute their influence.”

RAIN CHECK?Biden Promised Harris Lunch ‘Once a Week.’ They’ve Had Two This Year,” by RealClearPolitics’ Philip Wegmann: “ Biden has tried to duplicate the dynamic with Harris that he enjoyed with Obama, but he reportedly hasn’t been able to recreate the same sense of camaraderie.”

— “The mean tweets are coming from inside the House? Twitter incivility up among politicians, study says,” by the LA Times’ Melanie Mason: “To some degree, the increasingly antagonistic tone is due to more civil members of Congress being replaced by less civil ones, the study says. But the findings attribute more of the shift to members themselves changing over time and posting more provocative tweets.”

HEEERE WE GO — “Elon Musk Sells About $4 Billion in Tesla Stock After Agreeing to Buy Twitter,” by WSJ’s Rebecca Elliott. 

BOARDROOM DRAMAS — “How TV Got So Obsessed With Tech Downfalls,” by Vanity Fair’s David Canfield: “The new explosion of rise-and-fall tales about tech moguls and entrepreneurs … speaks just as powerfully to our own moment in time — the gig economy, the start-up fantasies, and the virtual world in which new kings and queens are crowned, only to be taken down.”

— “California bill allowing pot farmers to sell directly at farmers markets advances,” by the Sac Bee’s Randy Diamond: “The bill only allows farmers to sell at eight cannabis farmers markets a year but Callahan and other farmers see ii as a way to add to their profits in difficult times by allowing them to collect the fees normally paid to distributor middlemen and dispensaries.”

— “San Diego County immigrant legal defense program launches,” by inewsource’s Sofía Mejías-Pascoe. 

— “San Francisco is one of the ‘rattiest cities in America.’ Will rat birth control help?” by the SF Chronicle’s Carolyn Said.

— “Pornography and racist messages disrupt online Sacramento City Council debate,” by the Sac Bee’s Alexandra Yoon-Hendricks. 

NEAT! — “Interactive: Inside DA Chesa Boudin’s Office,” via the SF Standard.

FIRST IN PLAYBOOK — Uber is deepening its bench in California. Seth Smith, most recently of Charlie Mike, a Santa Cruz-based veteran organization, joins the rideshare giant as public policy manager. John Finley, previously with ValorUS, a national anti-sexual violence group, will join as senior policy associate.

CALIFORNIA POLICY IS ALWAYS CHANGING: Know your next move. From Sacramento to Silicon Valley, POLITICO California Pro provides policy professionals with the in-depth reporting and tools they need to get ahead of policy trends and political developments shaping the Golden State.  To learn more about the exclusive insight and analysis this subscriber-only service offers, click here.

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CORRECTION: An earlier version of California Playbook misstated how much of the budget surplus Senate leaders want to put into reserve funds. It is $8.1 billion.

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