California taxpayers could get $200 checks from the government: Here's why

California’s budget surplus has soared to a record $68 billion, Senate Democrats said Thursday, fueling a range of new spending proposals that include giving $8 billion back to taxpayers in the form of $200 checks.

In January, Democratic Gov. Gavin Newsom estimated California would have a $29 billion surplus this year. But since then the state has collected a lot more in taxes than it had expected as wealthy people — who pay much higher taxes in California — got richer.

Thursday, Democrats who control a majority of seats in the state Senate revealed how they would spend that money. The package includes a "Better for Families Rebate," which would send a $200 check to every taxpayer who makes less than $125,000 per year, or $250,000 per year for couples who file joint returns. The state would also send $200 checks for each dependent, meaning a family of five would get $1,000.

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That proposal puts Democrats at odds with Newsom, who has proposed sending checks as large as $800 to people who own cars in California to help offset record high gas prices. Newsom says his plan will cost about $9 billion.

Both Newsom and Democratic lawmakers who control the Legislature have said they want to get these checks to taxpayers as soon as possible. But so far, they haven’t been able to agree on how to do it. In general, Democratic lawmakers don’t like Newsom’s plan because it would only benefit car owners. Newsom’s plan also includes $750 million to give people free rides on public transit for three months.

"We stand ready to act as soon as the Governor joins us in supporting a plan that provides stronger relief for California families," the Legislature’s top two leaders, Senate President Pro Tempore Toni Atkins and Assembly Speaker Anthony Rendon, said in a joint statement earlier this week.

The new projected surplus is an estimate based on preliminary numbers from the Legislative Analyst’s Office. The official estimate will be announced next month after April tax collections conclude. But Thursday’s announcement confirms California’s budget surplus will be much larger than previously announced.

The Senate spending plan also proposes billions of dollars in aid for small businesses. It includes $10 billion in rebates over 10 years to businesses with 250 employees or less. This would essentially act as a tax cut for small business owners who are having to pay off a debt in the state’s unemployment trust fund.

The plan would also give about $500 million in grants to businesses with as many as 150 employees to offset the cost of a new law requiring them to give workers up to two weeks off in paid sick leave because of the coronavirus pandemic.

The plan wouldn’t just spend money. It would also put more money into the state’s savings accounts, bringing the state’s reserves to a total of $43.1 billion — the most ever.

Senate Republicans have proposed their own priorities, which include suspending the state’s gas tax — which, at 51.1 cents per gallon is the second highest in the country — and creating a $10 billion "Mental Health Infrastructure Fund" to help pay for care of the state’s homeless population, which includes many people with mental illnesses.

"We’ve ignored the mental health and substance abuse treatment needs of far too many Californians for far too long, mostly because we have failed to invest in the facilities and workforce necessary to provide the needed help," Republican Sen. Patricia Bates said last week when announcing the plan.

Republicans only control nine of the Senate’s 40 seats, meaning they can’t pass their budget priorities on their own.

The proposal from Senate Democrats only represents one side of budget negotiations. Any budget proposal must also be approved by the Democratic-controlled state Assembly and Newsom. Newsom is scheduled to update his budget proposal by May 15.

"With this budget, the Legislature and the Governor will be taking the same responsible and effective path we’ve been on for over a decade now. Only this year, we’re able to help even more people, bolster their ability to achieve their dreams, and ensure there will be both resources and a more equitable system in place now, and for future generations of Californians," Atkins said in a news release.