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Gov. Gavin Newsom will have a $97.5 billion surplus to allocate this year, though half of it must be earmarked for education and other purposes. It’s the second year in a row California is facing a substantial surplus driven largely by income tax revenue from the state’s wealthy earners.

In 2019, the budget clocked in at $213 billion.

Newsom wants to use part of the surplus to send rebates to California drivers and $1,500 bonuses to hospital and nursing home employees as part of his proposed $300.6 billion budget plan. It includes $227.4 billion in general fund spending and $73.2 billion from bonds and special funds.

The governor’s administration unveiled the rebate proposals ahead of his revised budget presentation Friday morning. It also includes billions in additional aid for rental assistance and utility bills for Californians affected by the pandemic.

Newsom will provide more details of his proposed spending plan Friday at 10 a.m.

The governor’s revised budget proposal is a refined version of an earlier spending plan he originally released in January, using the most recent tax revenue data. It’s just a wishlist and one part of a lengthy process in which state leaders decide how to spend Californians’ tax dollars. Newsom and top state lawmakers will negotiate the details over the next six weeks.

The Legislature must approve a state budget by June 15, and it must be signed by the governor by June 30 in order to take effect by the next fiscal year on July 1. See a timeline of the process here.

Here are proposals already announced by the governor:

Inflation and financial relief

With gas prices stuck at well over $5 per gallon across most of the state and inflation at a 40-year high, Newsom doubled down on an earlier proposal to send $400 rebates to registered vehicle owners, up to $800 per person. The Department of Finance estimates the rebates would cost $11.5 billion.

For those who do not own a car, Newsom’s plan would also include $750 million in grants for public transit agencies to pause their fare collection for three months and make transit free.

The governor initially floated the idea back in March, but remains in a stalemate with Assembly Speaker Anthony Rendon and Senate President pro Tempore Toni Atkins, who say they would prefer relief targeted to help lower- and middle-income individuals and families.

Other lawmakers, particularly Republicans, have pushed to suspend the 51-cent-per-gallon gas tax for one year, but Newsom and top Democrats have said there’s no way to guarantee oil companies would pass those savings on to consumers.

Newsom’s proposal also includes:

  • $2.7 billion in additional funding for the state’s rental relief program to help those who applied by the March 31 deadline.
  • $1.4 billion to help pay off past-due utility bills for Californians affected by the pandemic. The state approved a similar amount in 2021.
  • $933 million to provide $1,500 “retention bonuses” to workers in hospitals and nursing homes, which were hit hard by the pandemic and continue to face staffing shortages.
  • $439 million to pause the diesel sales tax for one year. Department of Finance officials point out that unlike the gasoline tax, the tax on diesel is also a sales tax. “As the price of diesel goes up, the amount we collect goes up,” said Finance Director Keely Bosler. “In that case, we saw a lot of value in reducing that.”
  • $304 million to boost insurance premium assistance for roughly 700,00 Californians on eligible Covered California plans.
  • $157 million to waive up to $595 in monthly childcare fees for an estimated 40,000 low-income families.

Reproductive Health

Newsom announced Wednesday he would propose $125 million to expand access to reproductive care, including abortion, in California.

That’s more than the $68 million he proposed in January. The funding boost comes after a leaked document showed the U.S. Supreme Court is poised to roll back nationwide abortion protections.

Providers in California expect a flood of new patients traveling in search of an abortion from other states that are planning to crack down on the procedure.

Newsom’s proposal includes $40 million in grants to providers and $1 million to set up a website to connect people with information and services.

Here’s a timeline of California's annual budget adoption process:

  • January: The governor submits a proposed spending plan to the Legislature by a constitutional deadline of Jan. 10. Here's what Newsom proposed.
  • May: The governor refines the budget proposal using clearer revenue numbers provided by the Department of Finance. This is known as the “May Revise.”
  • June: Lawmakers have until June 15 to pass a budget. The spending plan is generally spread out across multiple bills, including “trailer bills,” or smaller appropriations that can be passed after the June 15 deadline. The governor must sign a budget by June 30.

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