Newsom Wields $100 Billion in Spending as He Fights California Recall
(Bloomberg) -- California Governor Gavin Newsom began the week touting a situation that any governor would envy: He has an extra $100 billion to spend on his priorities.
The Democrat who’s facing a rare recall election later this year then blasted out a fundraising email trumpeting his promise to send $600 checks to millions of Californians in what he has called the biggest state tax rebate in history.
Of all the governors across the country, Newsom arguably stands to win the most politically from President Joe Biden’s $350 billion aid package to state and local governments intended to help ease the costs of the pandemic. With $27 billion of it going directly to California, Newsom has a unique opportunity to invest in his base’s priorities as well as return cash to voters around the same time they may decide whether to remove him from office.
“Politics is about 90% timing, and the timing here is beautiful if you’re the incumbent who’s facing a recall,” said David McCuan, chair of the political science department at Sonoma State University. “This is better than manna from heaven for Newsom.”
On Friday Newsom will officially release his revised budget for the next fiscal year that will offer more details of a $100 billion economic recovery plan he’s been rolling out all week. He said Monday that the state’s operating budget surplus has swelled to more than $75 billion, in addition to the federal money.
Newsom’s spending plans include:
- $8 billion in new direct cash payments to residents
- $5.2 billion for renter assistance
- $2 billion to cover overdue water and utility bills
- $12 billion to address homelessness
- $15 billion for kindergarten to grade 12 schools
Besides the direct payments, which as an expansion of an earlier round would result in checks and grants reaching almost two-thirds of Californians, Newsom wants to earmark billions of dollars for traditional Democratic wish-list items such as aid to schools, renters, and programs tackling homelessness.
“It seems like exactly the kind of thing the governor should be doing with the extra revenues that the state hadn’t anticipated, which is putting those funds directly into the hands of the lower and middle-income households that have been most likely to be harmed by the pandemic,” said Chris Hoene, executive director of the California Budget and Policy Center, a nonprofit think tank.
While it would be “naive” to say the likely recall isn’t a factor, Hoene said, “most of the foundation for the proposals that he’s made was already put in place back in January with his budget.”
This week the U.S. Treasury Department began accepting applications from states and municipalities for the relief funds. While states such as Illinois and New Jersey chafe at the rules barring the aid from paying off debt, California, which in January had already anticipated a surplus, finds itself simply adding to its coffers.
With a progressive tax system that rakes in more revenue when the income of the highest earners rises, California has collected more than it expected from its wealthiest residents. That group has reaped the benefits of rising stock prices and stable employment even as lower-income workers lost their jobs in the pandemic.
Of the $75.7 billion surplus, Newsom and legislators can chose how to spend about $38 billion since the remainder is already earmarked. The legislature must approve the budget by June 15.
“This surplus is a huge opportunity to build infrastructure for the future and to lay the foundation, not just for next year, but really for the next 50 years,” Assembly budget chair Phil Ting said in an interview.
Meanwhile, the slow process of setting a recall election continues. It’s likely to happen in November, according to California Target Book, which tracks state politics. Newsom, who has acknowledged the likelihood of the recall, has tried to paint the effort as a radical right-wing movement by Republicans trying to rally their base after President Donald Trump’s defeat.
Newsom opponents, who had seized on resentment over California’s coronavirus shutdowns and response to the pandemic to successfully collect enough signatures to force an election, said that voters would still want to remove the governor even as they receive checks and as restrictions lift.
Anne Hyde Dunsmore, a campaign manager behind the drive, called Newsom’s direct payments a “recall refund” that showed the governor was “checking political boxes instead of creating solutions.”
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