Claim: California Gov. Gavin Newsom announced the state had an estimated $76 billion budget surplus when he introduced his May budget revision last week. But on Monday, the Legislative Analyst’s Office released a report that estimated the surplus at $38 billion, much lower than the administration’s figure.
The difference in estimates led his critics on social media to deride the governor, alleging he misled Californians about the state’s surplus.
So is it true that California has an extra $76 billion?
Ruling: Yes, with some technical caveats.
Details: The reason the governor’s surplus estimate is nearly double the LAO estimate is based on differing definitions — but neither is wrong.
The governor’s estimate includes constitutionally required spending on schools and community colleges, reserves, and debt payments. The LAO says it does not consider these spending amounts part of the surplus because they must be allocated to specified purposes.
For example, the governor’s estimate includes $27 billion in constitutionally required spending on schools and community colleges, nearly $8 billion in required reserve deposits, and $3 billion in required debt payments in his calculation of the surplus.
“After excluding these amounts, our surplus estimates are nearly the same,” the LAO wrote.
Neither the LAO nor the governor included federal funds in their surplus estimates.
H.D. Palmer, spokesman for the Newsom administration’s Department of Finance, said the $76 billion estimate represents the universe of resources that weren’t available to the state at this time last year.
While California has a constitutional requirement to allocate a certain percentage of revenue to K-14 education, it does not prescribe how those dollars are spent, he said, which is why Newsom included those dollars in the surplus figure.
Regardless of surplus estimates, experts agree that California is in an advantageous financial position coming out of the pandemic. Newsom’s May revision proposes spending more than $268 billion on stimulus checks, college savings accounts, and grants for struggling businesses.
California’s current situation is in stark contrast to a year ago, when the state slashed spending in anticipation of a severe recession in the coronavirus pandemic. But even as many lower-income Californians struggled, the state’s wealthy residents continued to work and generate income, buoying the state’s income tax revenue.