What another multibillion-dollar budget surplus says about California’s rampant inequality

The bean counters who work in state government are predicting yet another massive budget surplus in California next year, this time to the tune of $31 billion. To have another enormous windfall after this year’s record $76 billion excess is an encouraging symbol of the state’s continued economic might. But while it gives the Democratic supermajority another chance to fund their agenda, it doubles as a reminder of the rampant inequality afflicting California.

State Senate President Pro Tem Toni Atkins was right to react to the Legislative Analyst’s Office projection by saying that “as economically wealthy as our state is, we see every day that too many have been left behind and too many families struggle just to get by.”

Nearly 26% of Californians are “functionally unemployed,” a more inclusive joblessness measure that accounts for how many people are seeking but unable to find work that pays enough to put them above the poverty level. While California’s jobless rate is 7.3%, the Ludwig Institute for Shared Economic Prosperity’s functional metric breaks from the traditional definition of unemployment, which categorizes those working just one hour a week as employed.

Sixty-two percent of Californians say their finances haven’t changed since last year, a new Public Policy Institute of California survey found. A third of households do not earn the $84,076 a year required to cover basic necessities, falling short of that benchmark by an average of nearly $32,000, according to United Ways of California. Nonwhite communities are struggling most.

It’s clear that California’s sustained growth and historic revenues — gains state fiscal experts say are primarily from sales and income taxes — capture only a narrow segment of our economic reality. Widespread labor strikes, a job exodus and inflation panic should be viewed as symptoms of simmering discontent in a nation grappling with pernicious inequality.

Indeed, the rising tide is not lifting all boats, and most residents expect the wealth gap to get wider, the Public Policy Institute of California reported.

If the state’s leaders remain unwilling to back an extreme wealth tax and more equitably redistribute income to address systemic inequality, it’s imperative that Gov. Gavin Newsom and the Legislature use the next surplus to back popular initiatives that help ordinary Californians. An estimated $8 billion could be spent on new continuing commitments, the nonpartisan LAO found.

State policymakers could and should make a difference in access to higher education by revisiting the Cal Grant overhaul Newsom vetoed this year or exploring legislation to eliminate crippling student debts — ideas backed by 65% of residents.

If partisan gridlock prevents the U.S. Senate from passing the Build Back Better Framework, California should pursue its middle-class proposals by broadening earned income tax credit eligibility, expanding the age limit on the state’s young child tax credit and hastening the implementation of Assembly Bill 131 so child care access is boosted sooner to help working families.

Until the supply of affordable housing is significantly increased, antipoverty measures such as guaranteed income could help the state’s 4.1 million households spending at least 30% of their monthly budgets on housing. This year’s budget included $35 million to help fund guaranteed-income pilot programs, but ongoing commitments could help sustain a program shown to improve health, increase civic engagement and prevent homelessness.

California lawmakers are required to return money to taxpayers under the Gann limit spending cap voters approved in 1979. Compliance could result in reduced taxes, extra spending on infrastructure or schools, and tax rebates similar to Newsom’s $12 billion “Golden State Stimulus” checks.

The governor has already signaled support for infrastructure, paying down pension obligations and strengthening the state’s reserves. Those are wise investments to stabilize the state’s financial future. But when the ultra-rich are insulated from the economic upheaval affecting Californians of all ages and political leanings, spending to address systemic inequities is also a form of financial prudence.